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, 1998

                                       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: 19
                                                          Exhibit Index Page: 17

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

     State issuer's revenues for its most recent fiscal year.       $ 229,000 
                                                                    ----------

     As of March 26,  1999,  there were  10,670,602  shares of the  Registrant's
common stock,  par value $0.01,  issued and  outstanding.  The aggregate  market
value of the Registrant's  voting stock held by non-affiliates of the Registrant
was approximately  $14,406,169 computed at the average bid and asked price as of
March 26, 1999.


                       DOCUMENTS INCORPORATED BY REFERENCE

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

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














                                        2

<PAGE>





                                                          TABLE OF CONTENTS


Item Number and Caption                                                     Page
PART I

Item 1      Description of Business .......................................    4

Item 2      Description of Property .......................................    4

Item 3      Legal Proceedings .............................................    5

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


PART II

Item 5      Market for Common Equity and Related Stockholder Matters ......    7

Item 6      Management's Discussion and Analysis or Plan of Operations ....    9

Item 7      Financial Statements ..........................................   12

Item 8      Changes in and Disagreements With Accountants on Accounting and
           Financial Disclosure                                               12

PART III

Item 9      Directors, Executive Officers, Promoters and Control Persons;
           Compliance with Section 16(a) of the Exchange Act                  13

Item 10     Executive Compensation ........................................   14

Item 11     Security Ownership of Certain Beneficial Owners and Management    15

Item 12     Certain Relationships and Related Transactions ................   17

Item 13     Exhibits and Reports on Form 8-K ..............................   17





                                        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 was in the
development stage during the period from July 5, 1996 to June 30, 1998.


                         ITEM 2 DESCRIPTION OF PROPERTY



     On June 1, 1994 the Company  entered  into a six year  commercial  lease of
office  space  with  Tree  of  Stars,  Inc./P.D.O.  (major  shareholders  of the
Company).  The office space is used as the Corporate headquarters and is located
at 350 West 300 South,  Suite 201, Salt Lake City,  Utah. The lease provides for
rental  payments  of  $22,428  for  two  years,  increasing  to  $25,726  for an
additional  two years with a  provision  for the  review of the  rental  payment
requirements every two years thereafter.

     In January  1998 the parties  agreed to modify the June 1, 1994 lease.  The
Company's  lease  commitments  for office space with Tree of Stars,  Inc./P.D.O.
consist of two leases with payments of $26,743 and $10,496 per year.  Both lease
commitments expire December 31, 1998.




                                        4

<PAGE>




                            ITEM 3 LEGAL PROCEEDINGS



NONE


                        ITEM 4 SUBMISSION OF MATTERS TO A
                            VOTE OF SECURITY HOLDERS



     The annual  Shareholder's  meeting was held November 13, 1998.  The matters
submitted to a vote of shareholders and the results of the vote are as follows:

1.         Election of Directors.

     The following  directors  were elected,  by majority  vote, to serve on the
board:
<TABLE>
<CAPTION>

Director's Name       Votes             Office            Term Expires

<S>                       <C>           <C>               <C>                                                   
Paul G. Begum         for 8,357,931     CEO               Next annual shareholder meeting
                      against 1
                      abstain 833

William Bailey        for 8,337,925     Director          Next annual shareholder meeting
                      against 20,007
                      abstain 833

Peter D. Olsen        for 8,357,932     Chairman          Next annual shareholder meeting
                      against 1                          (Deceased)
                      abstain 833

Gerard C. Coelsch     for 8,357,932     President/COO     Next annual shareholder meeting
                      against 1
                      abstain 833

</TABLE>






                                        5

<PAGE>



2.         1998 Stock Incentive Plan.

     On November 13, 1998,  the  shareholders  approved,  by a majority  vote of
8,301,854 to 28,886, the adoption of the 1998 Stock Incentive Plan (the "Plan").
Under the Plan,  1,000,000 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.



































                                        6

<PAGE>



                                     PART II


                       ITEM 5 MARKET FOR COMMON EQUITY AND
                           RELATED STOCKHOLDER MATTERS


     The stock is traded OTCBB with the trading symbol KLMK.

     The following table set forth the high and low bid of the Company's  Common
Stock for each  quarter  within the past two years.  The  information  below was
provided by S & P Comstock  and reflects  inter-dealer  prices,  without  retail
mark-up, mark-down or commission and may not represent actual transactions:


                     1997:                             High               Low
First Quarter                                        $   0.01          $   0.01
Second Quarter                                       $   2.50          $   2.25
Third Quarter                                        $   3.75          $   3.00
Fourth Quarter                                       $   3.50          $   3.00

                     1998:
First Quarter                                        $   3.63          $   2.38
Second Quarter                                       $   3.50          $   2.38
Third Quarter                                        $   3.38          $   1.75
Fourth Quarter                                       $   2.88          $   1.56


     The number of  shareholders  of record of the Company's  common stock as of
March 26, 1999 was 803.

     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 666,998  shares of common stock during 1998. The stock was
not sold  through an  underwriter  and was not sold  through a public  offer.  A
summary of the transactions follows:


                                                            Common Stock
                                                      Shares             Amount
January 1998 shares issued to
   individuals for cash at
$1.50 per share                                       86,666            $114,999


                                        7

<PAGE>




January 1998 shares issued for
   1,500 shares of Avtel stock at
   $3.00 per share                                           4,125        12,375
January 1998 shares issued to
   companies for services at
   $2.82 - $7.80 per share                                   2,930        13,878
February 1998 shares issued to
   company for research and
   development contract                                     46,366             0
February 1998 shares issued to
   individual for cash at
   $2.50 per share                                         100,000       250,000
April 1998 shares issued to
   employee for compensation at
   $2.63 per share                                           1,426         3,750
April 1998 shares issued to
   company for legal services at
   $3.00 per share                                           1,620         4,860
June 1998 to individual for
   consulting services at
   $2.79 per share                                           3,763        10,500
July 1998 shares issued to officer
   for patent purchase at
   $2.94 per share                                         175,000       513,813
July 1998 shares issued for accounts
   receivable at $1.50 per share                            25,000        37,500
July 1998 shares issued to employee
   for compensation at
   $3.06 per share                                           1,225         3,748
July 1998 shares issued to individuals
   for cash at $2.50-$3.00 per share                        33,000        90,000
September 1998 shares issued to
   company for accounts receivable                          86,937       137,265
September 1998 for shares issued to
   individuals for cash at
   $2.00 - $2.25 per share                                  30,900        62,650
September 1998 shares issued to
   individual for consulting services
   at $3.00 per share                                        3,818        11,454
September 1998 shares issued to
   individuals for accounts receivable
   at $2.00 per share                                        7,500        15,000


                                        8

<PAGE>




October 1998 shares issued to
   individuals for cash at
   $2.00 per share                                        1,000            2,000
October 1998 shares issued to
   employees for accounts
   receivable at $2.12 per share                         10,000           21,200
October 1998 shares issued to
   company for legal services at
   $2.00 per share                                        1,517            3,035
December 1998 shares issued to
   individuals for cash at
   $2.25 per share                                       42,493           95,609
December 1998 shares issued to
   employee for compensation at
   $2.19 per share                                        1,712            3,749
                                                     ----------       ----------

Total                                                   666,998       $1,407,385
                                                     ==========       ==========


     These sales are exempt under Regulation D Rule 506 of the Securities Act of
1933.


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


Plan of  Operations  - 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
electronic  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.  The  commercialization  process is divided into
five phases as follows:

Phase I:             System Development and Product Movement Test.

     The product movement test was completed during third quarter 1997. The test
took  place in a Smith's  Food and Drug store  located in Salt Lake City,  Utah.
Information  Resources,  Inc., an independent company audited the results of the
test and reported an average 46.84% incremental product movement.





                                        9

<PAGE>



Phase II:            Cost Reduction & Enhancement.

     In  January  1998,  the  Company  commenced  development  of the  Phase  II
functional   specification   that  will  encompass  cost  reduction  and  system
enhancements.  Improvements that are in the process of design and development of
the Klever-Kart(R) system include: a significantly smaller and more sleek design
in the  appearance  and size of the display  unit,  smaller  trigger  units with
improved sensitivity, more durable plastics, and improved sound fidelity.

Phase III:           Installation of 115 Stores.

     During 1999 the Company plans to place  Klever-Kart(R)  units in 115 stores
in targeted  retail  chains.  Target stores  include major national and regional
chains.

Phase IV:            Electronic Coupon Integration.

     Final definition of the Electronic  Coupon system is scheduled to begin the
fourth  quarter of 1999.  This process  consists of working with  retailers  and
Point-of-Sale   transaction   processing  system   manufactures  to  ensure  the
appropriate  degree of interface  and  integration  necessary  to implement  the
Electronic Coupon system.  Because the  Klever-Kart(R)  system was designed with
the eventual  implementation of Electronic Coupons in mind, the Company does not
expect  significant  hardware  modifications  will be necessary.  The Electronic
Coupon system design and initial  manufacture is scheduled for completion during
the second  quarter of 2000,  with a minimum three month in-store test of system
operation to take place in the third quarter of 2000.

Phase V:             Future Development.

     The Klever-KardTM frequent shopper program is scheduled for introduction in
early  2000.  This  dynamic  micro-marketing  capability  will be  added  to the
Klever-Kart(R)  system,  allowing  targeted  promotions to individual  customers
according to demographics and personal buying history.

     In order to satisfy its cash  requirements,  the company will have to raise
additional funds through the sale of restricted  stock,  joint ventures or short
term borrowings..

Results of  Operations  - The Company was  inactive  until July 5, 1996 when the
Company  merged with Klever Kart,  Inc. in a reverse merger and changed its name
to Klever  Marketing,  Inc. The Company was in the development  stage until June
30, 1998.

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  common stock.  There are no formal  commitments  from banks or other
lending sources for lines of credit or similar  short-term  borrowings,  but the
Company has been able to borrow any  additional  working  capital  that has been
required.  From time to time in the past,  required  short-term  borrowings have
been obtained from a principal shareholder or other related entities.


                                       10

<PAGE>



     Cash flows.  Operating  activities  used cash of $574,000  and $593,000 for
1998 and 1997, respectively. The decrease in the use of cash is due primarily to
a reduction in general and administrative costs.

     Investing  activities  have used cash of $34,000  and  $28,000 for 1998 and
1997,  respectively.  Investing  activities  primarily  represent  purchases  of
patents relating to the electronic  in-store  advertising,  directory and coupon
devices, and purchases of office equipment.

     Financing  activities  provided  cash of $643,000 and $602,000 for 1998 and
1997,  respectively.  Financing  activities  primarily  represent  sales  of the
Company's restricted stock.

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

Year 2000 Date Conversion - In general, the Year 2000 issue relates to computers
and other  systems being unable to  distinguish  between the years 1900 and 2000
because they use two digits,  rather than four, to define the  applicable  year.
Systems that fail to properly  recognize such  information  will likely generate
erroneous data or cause a system to fail to properly  recognize such information
will likely generate erroneous data or cause a system to fail possibly resulting
in a disruption of operations.  The Company's  products do incorporate such date
coding  but the  Company  believes  all of its  product  systems  are Year  2000
compliant.  The  Company  has also  undertaken  efforts to address the Year 2000
issue in the following  three areas:  (i) the Company's  information  technology
("IT") systems;  (ii) the Company's non-IT systems (i.e.,  machinery,  equipment
and  devices  which  utilize  technology  which is "built  in" such as  embedded
microcontrollers); and (iii) third-party suppliers.

     The Company is  currently  working to resolve the  potential  impact of the
Year  2000  issue on the  processing  of  date-sensitive  data by the  Company's
computerized information systems.  Specifically, the Company is analyzing all of
its accounting and financial software to ensure no interruption in the Company's
financial  systems.  The Company is analyzing all other IT and non-IT systems to
determine if any other  modification  or upgrades are  necessary to be Year 2000
compliant.  The  Company  believes  it will be Year 2000  compliant.  The amount
charged to expense during the three and nine months ended September 30, 1998, as
well as the  amounts  anticipated  to be charged to expense  related to the Year
2000 computer  modifications,  have not been and are not expected to be material
to the Company's financial position, results of operations or cash flows.

     The  Company  is also  evaluating  and taking  steps to  resolve  Year 2000
compliance  issues that may be created by suppliers and  financial  institutions
with whom the  Company  does  business.  The  Company  is  examining  third part
suppliers and may send out  confirmation  letters of Year 2000 compliance if the
Company determines such action is necessary. In the event the Company determines
that any third  party  presents  a risk  arising  from  failure  to be Year 2000
compliant,  then the Company will seek to replace such third party.  The Company
cannot, however, guarantee that

                                       11

<PAGE>



the systems of other  entities will be converted on a timely  basis.  Failure of
such third party entities to be Year 2000 compliant may cause  interruptions  in
the Company's 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.
























                                       12

<PAGE>



                                    PART III


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


Executive Officers and Directors

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

Director's Name     Age       Office            Term Expires


Paul G. Begum       60        CEO                Next annual shareholder meeting

William Bailey      64        Director           Next annual shareholder meeting

Gerard C. Coelsch   55        President/COO      Next annual shareholder meeting

Michael L Mills     36        Director           Next annual shareholder meeting


     Paul G. Begum, age 60, has been the President/CEO of Klever Marketing, Inc.
for the past five  years  through  the  merger  date,  and is now the CEO of the
Company  after the merger.  Mr.  Begum was also the  President/CEO  of Hi, Tiger
International  from February 14, 1995 through October 1996, and the President of
Tree of Stars,  Inc.,  a private  company,  PSF,  Inc., a private  company,  and
Maktoob Inc., a private company, for all of the past five years to the present

     William Bailey,  age 64, has been a Director of Klever Marketing,  Inc. for
the past five years  through  the  merger  date,  and is now a  Director  of the
Company after the merger.  Mr. Bailey has also been the  President/CEO  of Mount
Olympus Water, a private company, during all of the past five years to present.

     Gerard C,  Coelsch,  age 55,  began as  President/COO,  Director  of Klever
Marketing,  Inc. in July,  1998. Mr. Coelsch was the  President/COO  of National
Xpress Systems, Inc for four years prior to July 1998.

     Michael L.  Mills,  age 36, has been a Director of Klever  Marketing,  Inc.
since  November  1998. For the past five years prior to November 1998, Mr. Mills
was President/COO of Olson Farms, a private company. On November 1998, Mr. Mills
became Chairman/CEO of Olson Farms.



                                       13

<PAGE>




                         ITEM 10 EXECUTIVE COMPENSATION


Summary Compensation

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

<TABLE>
<CAPTION>

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

<S>                          <C>         <C>          <C>        <C>          <C>             <C>            <C>          <C>   
Paul G. Begum                1998        $77,700        -           -              -               -            -             -
CEO                          1997        $72,000        -           -              -               -            -             -
                             1996        $72,000        -           -              -               -            -             -

Gerard C. Coelsch            1998        $109,000       -           -              -               -            -             -
President/COO
</TABLE>

Options/SAR Grants in Last Fiscal Year

     The following table sets forth information respecting all individual grants
of options  and SARs made  during the last  completed  fiscal  year by the chief
executive officer and chief operations officer of the Company.
<TABLE>
<CAPTION>

     (a)              (b)             (c)                (d)              (e)
                   Number of       % of Total
                   Securities      Options/SARs
                   Underlying       Granted to
                  Options/SAR's  Employees During  Exercise of Base
     Name          Granted (no.)    Fiscal Year     Price ($/share)  Expiration Date

<S>               <C>            <C>               <C>               <C>
Paul G. Begum           None            --                --                     --
CEO

Gerard C. Coelsch    400,000            90%             $3.12           July 6, 2003
President/COO
</TABLE>

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

                                       14

<PAGE>




     The  following  table sets forth  information  respecting  the  exercise of
options and SARs during the last  completed  fiscal year by the chief  executive
officer and the chief operations  officer of the Company and the fiscal year end
valued of unexercised options and SARs.
<TABLE>
<CAPTION>

    (a)                  (b)                   (c)                (d)                (e)
                                                               Number of
                                                               Securities     Value of Unexercised
                                                               Underlying         In-the-Money
                                                               Unexercised     Options/SARs at FY
                                                              Options/SARs at       End ($)
                                                               FY End (no.)
                    Shares Acquired                            Exercisable/        Exercisable/
    Name            On Exercise (no.)    Value Realized ($)    Unexercised         Unexercised

<S>                 <C>                  <C>                  <C>             <C>
Paul G. Begum              --                    --               613,564         $ 1,457,000(1)
CEO

Gerard C. Coelsch          --                    --               400,000         $   950,000(1)
President/COO

(1)        Based on recent sales of the company's stock at $2.375 per share.
</TABLE>

Executive Compensation and Benefits

     The Company provides to all of its full time employees, including executive
officers and directors, health insurance and miscellaneous other benefits.

     On July 7, 1992,  the board of  directors  approved a  resolution  that the
Company  will  obtain an  automobile  for Paul G.  Begum  once the  Company  has
received $2,000,000 in financing from investors introduced to the company by Mr.
Begum, the Company will incur monthly  lease/payment costs of approximately $500
for an  automobile  for Mr.  Begum.  On May  20,  1998  the  Company  leased  an
automobile  for Mr.  Begum at $621 per month.  In  addition  PSF,  Inc.  (As Mr.
Begum's assign) will receive cash of $50,000 in consideration for the assignment
of the electronic  coupon patent.  In 1998 the Company paid $10,000  towards the
electronic coupon patent.


                 ITEM 11 SECURITY OWNERSHIP OF BENEFICIAL OWNERS
                                 AND MANAGEMENT


Principal Shareholders

     The table below sets forth  information  as to each person owning of record
or who  was  known  by the  Company  to own  beneficially  more  than  5% of the
10,670,602 shares of issued and outstanding  Common Stock,  including options to
acquire stock of the Company as of March 26 1999

                                       15

<PAGE>



and  information  as to the  ownership  of the  Company's  Stock  by each of its
directors and executive  officers and by the directors and executive officers as
a group. Except as otherwise indicated,  all shares are owned directly,  and the
persons named in the table have sole voting and investment power with respect to
shares shown as beneficially owned by them.

                                                         # of
Name and Address                   Nature of             Shares
of Beneficial Owners               Ownership             Owned          Percent
Directors

Principal Shareholders

Tree of Stars, Inc.                Direct                2,582,058       25.42%

Peter D. Olson, Trust              Direct(1)             1,529,897       15.06%
                                   Options                 265,813        2.62%
                                                        ----------       -----
                                        Total            1,795,710       17.68%
                                                         =========       =====

C. Terry Warner                    Direct                1,007,051       09.91%

Directors and Executive Officers

Paul G. Begum                      Direct(2)             2,673,892       26.33%
                                   Options(2)              613,564        6.04%
                                                        ----------       -----
                                        Total            3,287,456       32.37%
                                                        ==========       =====

William Bailey                     Direct(3)               215,822        2.12%
                                   Options                  33,979         .33%
                                                        ----------       -----
                                        Total              249,801        2.46%
                                                        ==========       ======

Gerard C. Coelsch                  Options                 400,000        3.94%
                                                        ==========       =====

Michael L. Mills                   Direct                   98,182         .97%
                                                        ==========       =====


All Executive Officers and
Directors as a Group (3
persons)                           Direct                2,987,896       29.42%
                                   Options               1,047,543       10.31%
                                                         ---------       -----
                                        Total            4,035,440       39.73%
                                                         =========       =====

(1)        The Olson  Trust  ownership  includes  749,765  shares  held by Olson
           Farms, Inc., a family owned  corporation,  and 150,000 shares held by
           the Olson Foundaton.


                                       16

<PAGE>



(2)        Mr.  Begum's  ownership  includes  2,582,058  shares  held by Tree of
           Stars, Inc., a corporation of which Mr. Begum is a director, officer,
           and principal  shareholder,  and 60,000  shares held by PSF,  Inc., a
           private  company,  of which  Mr.  Begum is  President  and  principal
           shareholder.

(3)        Mr. Bailey's  ownership  includes  20,285  shares  held by William C.
           Bailey Family Partnership.



             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


     During 1998 and 1997 various officers and directors have loaned the Company
$347,100 and $56,500,  respectively.  The notes are payable within one year plus
interest at 10% and 12% per annum.  During 1998 and 1997  principle  payments of
$12,500 and $21,738 were paid toward these loans. The balance due as of December
31, 1998 is $291,250.


                   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, 1998, and 1997................................................F-2

Statements of Loss
  For the Years Ended December 31, 1998, and 1997............................F-4

Statement of Stockholders' Equity
  For the Years Ended December 31, 1998, and 1997............................F-5

Statements of Cash Flows
  For the Years Ended December 31, 1998, and 1997...........................F-10

Notes to Financial Statements
  December 31, 1998 and 1997................................................F-14




                                       17

<PAGE>



2.     Financial Statement Schedules

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


3.     Exhibits

     The following exhibits are included as part of this report:

Exhibit
Number           Title of Document

3.01     Articles of Incorporation of Klever Marketing, Inc. a Delaware 
         Corporation(1)

3.02     Bylaws(1)

10.01    Employment Agreement for Gerard C. Coelsch

23.01    Consent of Accountants(1)

           (1) Incorporated by Reference

     (b) No reports on Form 8-K were filed.


















                                       18

<PAGE>



                                   SIGNATURES



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

                             KLEVER MARKETING, INC.


Dated: March 31, 1999                         By  /S/     Paul G. Begum     
                                              ----------------------------------
                                              Paul G. Begum
                                              C.E.O., Director

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 31th day of March 1999.

Signatures                                    Title

/S/     Paul G. Begum                                     
Paul G. Begum                                 C.E.O., Director
                                              (Principal Executive, Financial
                                               and Accounting Officer)

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


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


/S/     Gerard C. Coelsch                                 
Gerard C. Coelsch                             President, C.O.O., Director


                                       19

<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.
(formerly a development stage company) as of December 31, 1998 and 1997, 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.,
(formerly a development  stage  company),  as of December 31, 1998 and 1997, 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 15, 1999

                                      F-1
<PAGE>

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


                                                            DECEMBER 31,
                                                   ----------------------------
ASSETS                                                 1998             1997
------                                             -----------      -----------
Current Assets
  Cash .......................................     $    45,371      $    10,536
 Shareholder Receivables .....................         136,821           27,200
                                                   -----------      -----------

     Total Current Assets ....................         182,192           37,736
                                                   -----------      -----------
Fixed Assets
  Equipment ..................................          64,269           57,549
  Leasehold Improvements .....................           2,550             --
  Less Accumulated Depreciation ..............         (47,301)         (38,469)
                                                   -----------      -----------

     Net Fixed Assets ........................          19,518           19,080
                                                   -----------      -----------

Other Assets
  Patents ....................................       2,198,110        1,646,097
  Organization Costs .........................         152,662          152,662
  Less Accumulated Amortization ..............      (1,210,906)      (1,004,422)
                                                   -----------      -----------

     Net Other Assets ........................       1,139,866          794,337
                                                   -----------      -----------

     Total Assets ............................     $ 1,341,576      $   851,153
                                                   ===========      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
  Accounts Payable, Trade ....................     $   613,080      $    97,467
 Accrued Liabilities .........................          65,058           34,822
 Related Party Payables ......................         347,100           15,031
  Lease Obligation ...........................            --                862
                                                   -----------      -----------

     Total Current Liabilities ...............       1,025,238          148,182
                                                   -----------      -----------

Other Liabilities
  Deferred Income ............................            --            229,000
                                                   -----------      -----------

     Total Liabilities .......................       1,025,238          377,182
                                                   -----------      -----------


                                      F-2
<PAGE>

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



                                                            DECEMBER 31,
                                                     --------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY                     1998          1997
------------------------------------                 -----------   ------------
(Continued)

Stockholders' Equity
  Preferred stock (par value $.01),
    2,000,000 shares authorized ..................
    -0- issued and outstanding ...................   $      --      $      --
  Common Stock (Par Value $.01),
    20,000,000 shares authorized .................
    10,394,819 shares issued and
    outstanding December 31, 1998
    and 9,795,314 shares issued and
    outstanding December 31, 1997 ................       103,948         97,953
 Common Stock to be issued .......................         4,589          4,903

 Paid in Capital in Excess of Par
    Value ........................................     6,625,919      5,292,308
 Retained Deficit ................................    (6,418,119)    (4,921,193)
                                                     -----------    -----------

     Total Stockholders' Equity ..................       316,337        473,971
                                                     -----------    -----------

     Total Liabilities and Stockholders' Equity ..   $ 1,341,576    $   851,153
                                                     ===========    ===========













   The accompanying notes are an integral part of these financial statements.
                                      F-3
<PAGE>

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





                                                       For the Year Ended
                                                          December 31,
                                                     1998              1997
                                                 ------------      ------------
Revenue ....................................     $    229,000      $       --
                                                 ------------      ------------

Expenses
  General and administrative ...............          866,106           433,220
  Research and development .................          854,786           317,403
                                                 ------------      ------------

     Total Expenses ........................        1,720,892           750,623
                                                 ------------      ------------

Other income (expense)
  Interest income ..........................            1,182                76
  Interest expense .........................           (7,350)           (5,351)
  Sale of assets ...........................             --                 404
  Capital gain on sale of investment .......            1,234              --
                                                 ------------      ------------

     Total Other Income (Expense) ..........           (4,934)           (4,871)
                                                 ------------      ------------

Income (Loss) Before Taxes .................       (1,496,826)         (755,494)

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

Net Income (Loss) After Taxes ..............     $ (1,496,926)     $   (755,594)
                                                 ============      ============

Weighted Average Shares
  Outstanding ..............................       10,156,672         9,446,981
                                                 ============      ============

Loss Per Share .............................     $       (.15)     $       (.08)
                                                 ============      ============







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

                                      F-4
<PAGE>


                             KLEVER MARKETING, INC.
                     (Formerly a Development Stage Company)
                        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
December 31, 1996 .........   -   $  --       8,884,613   $    88,846       771,673    $     7,716    $ 4,658,555   $(4,165,599)

January 1997 shares
issued to individuals
for cash at par ...........   -      --               1          --            --             --             --            --

January 1997 shares
issued to an officer
as payment on Loan
at $1.82 per share ........   -      --           6,000            60          --             --           10,843          --

February 1997 shares
issued to officers
for Electronic Coupon
Patent ....................   -      --         260,813         2,608      (225,000)        (2,250)         1,892          --

February 1997 shares
issued to individuals
for cash at $1.00 -
1.25 per share ............   -      --          58,979           590       (28,229)          (282)        37,941          --

February 1997 shares
issued to officers
for payment on Loan
at $0.08 per share ........   -      --         190,000         1,900          --             --           12,350          --

April 1997 shares
issued to individuals
for cash at $3.00 per
share .....................   -      --          20,795           208        (5,000)           (50)        44,842          --

May 1997 shares issued
to an individual and an
officer for cash at
$1.75-$3.00 per share .....   -      --          64,375           644          --             --          118,263          --

May 1997 shares issued
to individuals for
services at $2.59 per
share .....................   -      --             732             7          --             --            1,888          --

June 1997 shares issued
to individuals for cash
at $1.75 - 3.00 per share .   -      --          15,000           150        10,000            100         70,000          --

July 1997 shares issued
to employees and
individuals for cash and
receivables at $1.75 - 2.00   -      --          58,286           583       (10,000)          (100)        85,267          --
</TABLE>

                                      F-5
<PAGE>


                             KLEVER MARKETING, INC.
                     (Formerly a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' 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
                            ------ --------   ---------   -----------    ----------    -----------    -----------   ------------
<S>                         <C>    <C>        <C>         <C>            <C>           <C>            <C>           <C>
August 1997 shares issued
to individuals for cash at
$2.75 - $3.00 per share .....    -   $  --        10,000   $     100            --      $      --     $    27,900   $      --

October 1997 shares issued
to an individual for cash at
$3.00 per share .............    -      --         4,000          40            --             --          11,960          --

October 1997 shares issued
to VideOcart creditors
see Note 8) .................    -      --        97,610         976         (97,610)         (976)          --            --

November 1997 shares issued
to individuals for services
for $0.95 per share .........    -      --         1,666          17            --             --           1,558          --

December 1997 shares issued
to individual for cash at
$1.50 - $2.00 per share .....    -      --        55,000         550         28,084            281        139,070          --

December 1997 shares issued
to officers for loan payment
$0.86 - $1.02 per share .....    -      --        53,444         534            --             --          51,094          --

December 1997 shares issued
to a company for services at
$0.50 per share .............    -      --         8,000          80            --             --           3,945          --

December 1997 shares issued
to a company for research and
development at par ..........    -      --          --          --            46,364           464            --           --

December 1997 shares issued
to Employee for compensation
at $2.50 per share ..........    -      --         6,000          60            --             --          14,940          --

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



</TABLE>
                                      F-6

<PAGE>



                             KLEVER MARKETING, INC.
                     (Formerly a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' 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
                            ------ --------   ---------   -----------    ----------    -----------    -----------   ------------
<S>                         <C>    <C>        <C>         <C>            <C>           <C>            <C>           <C>
Balance at
December 31, 1997 ......   --    $  --       9,795,314   $    97,953       490,282    $     4,903    $ 5,292,308    $(4,921,193)

January 1998 shares
issued to individuals
for cash at $1.50 per
share ..................   --       --          86,666           867       (10,000)          (100)       114,232           --

January 1998 shares
issued for 1,500 shares
of Avtel stock at $3.00
per share ..............   --       --           4,125            41          --             --           12,334           --

January 1998 shares
issued to companies
for services at $2.82
- $7.80 per share ......   --       --           2,930            29          --             --           13,848           --

February 1998 shares
issued to company for
research and development
contract ...............   --       --          46,366           464       (46,364)          (464)          --             --

February 1998 shares
issued to individual
for cash at $2.50 per
share ..................   --       --         100,000         1,000          --             --          249,000           --

April 1998 shares
issued to employee
for compensation at
$2.63 per share ........   --       --           1,426            14          --             --            3,736           --

April 1998 shares
issued to company for
legal services at
$3.00 per share ........   --       --           1,620            16          --             --            4,844           --

June 1998 to
individual for
consulting services
at $2.79 per share .....   --       --           3,763            38          --             --           10,462           --

June 1998 reduction
of stock price on
employee's stock .......   --       --            --            --            --             --           (1,250)          --

</TABLE>

                                      F-7
<PAGE>





                             KLEVER MARKETING, INC.
                     (Formerly a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' 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
                            ------ --------   ---------   -----------    ----------    -----------    -----------   ------------
<S>                         <C>    <C>        <C>         <C>            <C>           <C>            <C>           <C>
July 1998 shares
issued to officer
for patent purchase at
$2.94 per share ...........   --   $  --        150,000   $     1,500        25,000    $       250    $   512,313   $      --

July 1998 shares
issued for accounts
receivable at $1.50
per share .................   --      --         25,000           250          --             --           37,250          --

July 1998 shares
issued to employee
for compensation at
$3.06 per share ...........   --      --          1,225            12          --             --            3,736          --

July 1998 shares
issued to individuals
for cash at $2.50-$3.00
per share .................   --      --         33,000           330          --             --           89,670          --

September 1998 shares
issued to company for
accounts receivable .......   --      --         86,937           870          --             --          136,396          --

September 1998 shares
issued to individuals
for cash at $2.00
- $2.25 per share .........   --      --         30,900           309          --             --           62,341          --

September 1998 shares
issued to individual
for consulting services
at $3.00 per share ........   --      --          3,818            38          --             --           11,416          --

September 1998 shares
issued to individuals
for accounts receivable
at $2.00 per share ........   --      --          7,500            75          --             --           14,925          --

October 1998 shares
issued to individuals
for cash at $2.00 per
share .....................   --      --          1,000            10          --             --            1,990          --

October 1998 shares
issued to employees
for accounts receivable
at $2.12 per share ........   --      --         10,000           100          --             --           21,100          --


</TABLE>
                                      F-8
<PAGE>


                                              KLEVER MARKETING, INC.
                                      (Formerly a Development Stage Company)
                                         STATEMENT OF STOCKHOLDERS' 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
                            ------ --------   ---------   -----------    ----------    -----------    -----------   ------------
<S>                         <C>    <C>        <C>         <C>            <C>           <C>            <C>           <C>
October 1998 shares
issued to company
for legal services
at $2.00 per share .........   --  $   --         1,517    $       15          --      $     --       $     3,020    $      --

December 1998 shares
returned at $1.58
per share ..................   --      --       (42,493)         (425)         --            --           (66,667)          --

December 1998 shares
issued to individuals
for cash at $2.25 per
share ......................   --      --        42,493           425          --            --            95,183           --

December 1998 shares
issued to employee
for compensation at
$2.19 per share ............   --      --         1,712            17          --            --             3,732           --

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

Balance at December 31, 1998   --  $   --    10,394,819    $  103,948       458,918    $    4,589     $ 6,625,919    $(6,418,119)
                            ======  =======  ==========    ==========     =========    ==========     ===========    =========== 


</TABLE>



                                      F-9
<PAGE>




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


                                                         For the Year ended
                                                            December 31,
                                                     --------------------------
                                                        1998            1997
                                                     -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES:

Net Loss .........................................   $(1,496,926)   $  (755,594)
                                                     -----------    -----------

Adjustments used to reconcile net loss to net
cash provided by (used in) operating activities:

    Non cash general and administrative ..........        48,529          7,495

    Compensation expense from stock options ......        11,247         15,000

     Stock issued for interest expense ...........          --            3,885

    Increase (decrease) in accounts payable ......       515,613         (4,132)

    Increase (decrease) in accrued liabilities ...        30,237            622

    Increase (decrease) in related party payables        332,069        (35,135)

    Deferred income ..............................      (229,000)          --

     Gain on sale of stock investment ............        (1,234)          --

    Depreciation and amortization ................       215,317        175,024
                                                     -----------    -----------

Net Adjustment ...................................       936,104        162,759
                                                     -----------    -----------

Net Cash Used in Operating Activities ............      (574,148)      (592,835)
                                                     ===========    =========== 






                                      F-10
<PAGE>




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

                                                           For the Year ended
                                                              December 31,
                                                         ----------------------
                                                            1998          1997
                                                         ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition/Sale of equipment, net ...................   $  (9,270)   $  (5,287)
Acquisition of patents ...............................     (37,952)     (22,711)
Acquisition/Sale of stock investment, net ............      13,609         --
                                                         ---------    ---------

Net Cash Used by Investing Activities ................     (33,613)     (27,998)
                                                         ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds From capital stock issued ...................     655,958      570,772
Proceeds from loans ..................................        --         56,500
Principle payments on lease obligations ..............        (862)      (3,617)
Cash payments on notes payable .......................     (12,500)     (21,738)
                                                         ---------    ---------

Net Cash Provided by Financing Activities ............     642,596      601,917
                                                         ---------    ---------

Net Increase (Decrease) in Cash and Cash Equivalents .      34,835      (18,916)

Cash and Cash Equivalents at Beginning of the Year ...   $  10,536    $  29,452
                                                         ---------    ---------

Cash and Cash Equivalents at End of the Year .........   $  45,371    $  10,536
                                                         =========    =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Interest .............................................   $   7,350    $   5,351
Income Taxes .........................................   $     100    $     100


                                      F-11
<PAGE>


                             KLEVER MARKETING, INC.
                     (Formerly A Development Stage Company)
                             STATEMENT OF CASH FLOWS
                                   (Continued)


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

On January 15, 1997 the Company issued 6,000 shares in exchange for payment on a
loan payable of $10,930.

On February 26, 1997 the Company  issued  190,000 shares in exchange for payment
on a loan payable of $14,250.

On May 27, 1997 the Company issued 732 shares for legal services of $1,895.

On July 9,  1997 the  Company  issued  15,000  shares  for notes  receivable  of
$27,500.

On October 30, 1997 the Company  issued  97,610  shares to VideOcart  creditors,
(see note 7)

On November 12, 1997 the Company issued 1,666 shares for consulting  services of
$1,575.

On  December 4, 1997 the  Company  issued  6,000 for  employee  compensation  of
$15,000.

On December 8, 1997 the Company  issued 8,000  shares for services  amounting to
$4,025.

On  December  16,  1997 the Company  issued  50,625  shares for payment on loans
payable of $49,821.

On December  22, 1997 the Company  issued  2,819 shares for interest on loans of
$1,807.

On January 28, 1998 the Company  issued  4,125  shares of stock in exchange  for
1,500 shares of Avtel stock.

On January 28, 1998 the Company  issued  2,930  shares of stock in exchange  for
legal and consulting services of $13,878.

On February 23, 1998 the Company  issued 46,366 shares of stock as final payment
on a contract.

On  April 1,  1998 the  Company  issued  1,426  shares  of  stock  for  employee
compensation of $3,750.

On April 30, 1998 the Company issued 1,620 shares of stock for legal services of
$4,860.

On June 3, 1998 the Company issued 3,763 shares of stock for consulting services
of $10,500.

                                      F-12
<PAGE>

                             KLEVER MARKETING, INC.
                     (Formerly A Development Stage Company)
                             STATEMENT OF CASH FLOWS
                                   (Continued)


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

On July 1, 1998 the Company  issued 150,000 shares of stock and 25,000 shares of
stock to be issued for patent of $514,063.

On July 1, 1998 the  Company  issued  25,000  shares  of stock  for an  accounts
receivable of $37,500.

On  July 7,  1998  the  Company  issued  1,225  shares  of  stock  for  employee
compensation of $3,748.

On September  17, 1998 the Company  issued  86,937  shares of stock for accounts
receivable of $137,265.

On September  18, 1998 the Company  issued 3,818 shares of stock for  consulting
services of $11,454.

On  September  28, 1998 the Company  issued  7,500  shares of stock for accounts
receivable of $15,000.

On October 28,  1998 the  Company  issued  10,000  shares of stock for  accounts
receivable from employees of $21,200.

On October 22, 1998 the Company  issued 1,517 shares of stock for legal services
of $3,035.

On December 3, 1998 20,271 shares of stock were returned to the Company.

On December 8, 1998 22,222 shares of stock were returned to the Company.

On December 16, 1998 1,712 shares of stock were issued for employee compensation
of $3,749.









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

                                      F-13
<PAGE>

                             KLEVER MARKETING, INC.
                     (Formerly a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997


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-14
<PAGE>


                             KLEVER MARKETING, INC.
                     (Formerly a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997
                                   (Continued)


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

Reclassifications

     Certain  reclassifications  have been made in the 1997 financial statements
to conform with the 1998 presentation.

Loss per Share

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

                                                                       Per-Share
                                                Loss         Shares      Amount

                                            For the year ended December 31, 1997

Basic Earnings per Share
Income available to common shareholders ....  $(755,594)    9,446,981   $  (.08)
                                              =========     =========   ======= 


                                            For the year ended December 31, 1998

Basic Earnings per Share
Income available to common shareholders ... $(1,496,926)   10,156,672   $  (.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, 1998 and 1997
are not presented as it would be anti-dilutive.





                                      F-15
<PAGE>

                             KLEVER MARKETING, INC.
                     (Formerly a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997
                                   (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
         Leasehold Improvements                      40 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.

NOTE 2 - INCOME TAXES

     The Company has accumulated tax losses estimated at $6,500,000  expiring in
years 2007 through 2013.  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's  lease  commitments  for  office  space  with Tree of Stars,
Inc./P.D.O. consist of two leases with payments of $26,743 and $10,496 per year.
Both lease commitments expired December 31, 1998.

                                      F-16
<PAGE>

                             KLEVER MARKETING, INC.
                     (Formerly a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997
                                   (Continued)


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, 1998 and 1997,  the Company  expended
$854,786  and  $317,403,  respectively  for  research  and  development  of  the
technology involved with its patents.

     On February  1, 1997 the Company  entered  into an  agreement  with ETC and
Digital  Radio  Communications  Corp.  ("DRCC")where  by the  Company  exchanged
electronic components for a promissory note of $97,093 together with interest at
eight  percent  calculated on the basis of the actual number of days elapsed but
computed  on a 360 day year.  The  principal  balance,  together  with  interest
thereon will be amortized  over 18 monthly  installments,  commencing on the day
the "cost reduction and manufacturing" ("Commercial Service Agreement") contract
is  executed  and the first  payment  is made by the  Company  to  ETC/DRCC  and
continuing on the last day of each month thereafter until paid in full.

     On February  13,  1998 the  Company  entered  into the  Commercial  Service
Agreement  (see  above) with World  Wireless  Communications  ("WWC")  where WWC
agrees to provide consulting and engineering services related to the development
of a wireless  shopping  data  display  system.  WWC may also offer  alternative
approaches to design, construct and performance of the product.

     The  Company is required to pay a $10,000  deposit in  connection  with the
agreement, retained by WWC, which will be credited during final billing received
from WWC. The Company has agreed to provide WWC a bonus of $2,000 if the project
is  completed  by March 31,  1998.  If the project  duration is beyond April 15,
1998, WWC will be required to pay the Company a penalty of $2,000.

     On February 13, 1998 the Company  entered into a settlement  agreement with
WWC (formerly  Electronic  Technology  Corp.) pursuant to which the company paid
$30,000 and issued 46,364 shares of common stock to WWC in  satisfaction  of any
and all claims in connection with the September 26, 1994 contract. The agreement
also provides for 10,000 shares of WWC restricted common stock in exchange for a
promissory note in the amount of $97,093.

                                      F-17
<PAGE>

                             KLEVER MARKETING, INC.
                     (Formerly a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997
                                   (Continued)


NOTE 5- RELATED PARTY TRANSACTIONS

     During  1998,  and  1997  various  shareholders  have  loaned  the  Company
$347,100, and $56,500,  respectively. The notes are payable within one year plus
interest at 10% and 12% per annum.  During 1998 and 1997  principle  payments of
$12,500 and $21,738 were paid toward these loans. The balance due as of December
31, 1998 is $291,250.

NOTE 6- STOCK OPTIONS

     The  shareholders  approved,  by a majority  vote, the adoption of the 1998
Stock Incentive Plan (the "Plan").  Under the Plan,  1,000,000  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 have been
granted under the Plan.  Compensation  expense  charged to operations in 1998 is
$11,247. The following is a summary of transactions:

                                                        Shares Under Option  
                                                             December 31,     
                                                         1998            1997
                                                       ---------      ---------
   
Outstanding, beginning of year                         1,172,355      1,328,500
Granted during the year                                  542,500        140,500
Canceled during the year                                 (29,500)       (59,000)
Exercised during the year                                (10,000)      (365,000)
Adjustment for stock split                                     -        127,355
                                                       ---------      ---------

Outstanding, end of year (at prices
ranging from $.86 to $3.12 per share)                  1,675,355      1,172,355
                                                       =========      =========

Eligible, end of year for exercise currently (at prices
ranging from $.86 to $3.12 per share)                  1,400,355      1,172,355
                                                       =========      =========




                                      F-18
<PAGE>

                             KLEVER MARKETING, INC.
                     (Formerly a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997
                                   (Continued)


NOTE 7 - CONTINGENCIES

     On May 24, 1996, in  consideration  of the  assignment in September 1993 to
the  company,  certain  technologies  and  patents  relating  to the  electronic
couponing  ("Electronic Coupon Patent") by Mr. Paul G. Begum,  President/CEO and
Mr. Mark Geiger, V.P. Operations, the Board of Directors agreed to pay Mr. Begum
and Mr. Geiger  200,000 and 25,000 shares,  respectively  at a price of $.01 per
share for the  electronic  coupon  patent.  $132,750 was  capitalized in 1996 as
patents.  The  shares  are  valued  at $.60 per  share as this was the value the
Company's  stock was selling for when the assignment was made in September 1993.
As additional  consideration  for the  Electronic  Coupon  Patent,  the Board of
Directors  has agreed to pay PSF,  Inc.(as Mr.  Begum's  assign) and Mr.  Geiger
$50,000 and $10,000,  respectively  upon receipt by the Company of $2,000,000 in
equity  funding and when the Company has the necessary  financing to conduct its
operations.

     On February 25, 1997 Mr. Begum and Mr. Geiger  received  200,000 and 25,000
respectively.  On December  22, 1997  pursuant to the merger,  Mr. Begum and Mr.
Geiger  received  an  additional  31,834 and 3,979  shares  respectively.  As of
December 31, 1998 the Company owes Mr. Begum and Mr. Geiger  $40,000 and $8,000,
respectively.









                                      F-19