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, 2001

                                       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)



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     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:     18
                                                                           -----

     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.        $0
                                                                     ---

     As of March 14,  2002,  there were  12,674,807  (1 vote per share)  Common,
53,014 (10 votes per share)  Class A,  41,177 (10 votes per share)  Class B, and
74,243 (10 votes per share) Class C Convertible  Preferred Series 1, for a total
of 14,359,147 shares of the Registrant's  voting 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  $5,600,853  computed
at the closing price as of March 14, 2002.


                       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
















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

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

Item 2.     Description of Property                                                          4

Item 3.     Legal Proceedings                                                                5

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


PART II

Item 5.     Market for Common Equity and Related Stockholder Matters                         6

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                           12

Item 10.   Executive Compensation                                                           14

Item 11.   Security Ownership of Certain Beneficial Owners and Management                   16

Item 12.   Certain Relationships and Related Transactions                                   18

Item 13.   Exhibits and Reports on Form 8-K                                                 18
</TABLE>





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                                     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


        The Company currently leases  approximately  1,620 square feet of office
space from Four Cabo's  Enterprises,  Ltd. on a month to month basis.  The lease
payments  are  approximately  $2,025 per month.  The office space is used as the
Corporate  headquarters.  It is located at 350 West 300 South,  Suite 203,  Salt
Lake City, Utah.

        The Company has also  entered  into lease  agreements  for the rental of
computer equipment. These leases expire between September 2003 and May 2004. The
total monthly lease payments due on the above leases is approximately $210.

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



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<PAGE>





                            ITEM 3 LEGAL PROCEEDINGS


        On September  18, 2001, a Complaint  was filed in Superior  Court of the
State of  California,  County of San  Francisco,  by eiKart,  L.L.C.  ("eiKart")
against the Company. The Complaint arises out of a written agreement between the
Company and eiKart dated May 11, 2001. Pursuant to the agreement,  eiKart was to
pursue  certain  financing  sources for the Company.  The Complaint also alleges
that eiKart was requested by and performed  for the Company  certain  additional
financing  consulting  services.  The  Complaint  also  claims  that the Company
defrauded  eiKart by  stating  that it was  seeking  interim  financing  when in
reality,  the Company was not seeking financing,  but trying to "go private" and
that the Company  defrauded  eiKart by not executing an amendment to the written
agreement.  eiKart  seeks  payment  in the  form of  stock  options  and cash as
required pursuant to said written agreement as if all benchmarks were satisfied,
payment  for the fair value of  financing  services  rendered  (alleged to be in
excess  of  $300,000)  and  recovery  of  damages  suffered  as a result  of the
fraudulent  misrepresentations  in the amount to be proven at trial. The Company
disputes  all claims as invalid and intends to  vigorously  defend this  action.
Management  believes that the Company will prevail in this matter,  therefore no
provision has been made in the financial statements related to this claim.



                        ITEM 4 SUBMISSION OF MATTERS TO A
                            VOTE OF SECURITY HOLDERS


        On September 27, 2001, the Company held its annual shareholder  meeting.
The following matters were voted on:

     Proposal 1: Election of the following nominees as directors of the Company,
to serve a term until the next Annual  Meeting of  Stockholders  and until their
successors  shall  be duly  elected  and  qualified:  D.  Paul  Smith,  Corey A.
Hamilton,  Michael L. Mills,  Richard J. Trout,  William C.  Bailey,  Leonard D.
Southwick, and C. Terry Warner.

        Proposal  2:  Approval  of  amendment  to  Article  V,  Section 6 of the
Company's  Bylaws  with  regard to a single  person  holding  the offices of the
Company's  President  and  Chief  Executive  Officer  as set  forth in the Proxy
Statement.

        Proposal  3: To  ratify  the  selection  of  Robison,  Hill & Co. as the
Company's independent public accountants for the fiscal year ending December 31,
2001.






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<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:




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

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

         The number of shareholders  of record of the Company's  common stock as
of March 14, 2001 was 689.

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

Recent Sales of Unregistered Securities.

        The Company  sold 526,733  shares of common  stock and 74,243  shares of
preferred  stock during 2001. The stock was not sold through an underwriter  and
was not sold through a public offer.  These sales are exempt under  Regulation D
Rule 506 of the  Securities  Act of 1933.  (See  Item &.  Financial  Statements,
Statement of Stockholders' Equity, pages F - 7 through F - 9)

        On 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

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<PAGE>



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
Share dividends shall be adjusted as if a similar split or dividend had occurred
with respect to the Class A Shares.

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

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

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

        On September 24, 2000 the Board of Directors  authorized and established
"Class B Voting  Preferred  Stock" ("Class B Shares") as a class of its $.01 par
value,  2,000,000 shares authorized,  preferred stock. Class B Shares consist of
250,000, 125,000 shares thereof are designated as Series 1 shares.

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

        Holders  of Class B Shares  shall be  entitled  to  receive  when and as
declared by the Board of  Directors of the  Corporation  out of any funds at the
time legally  available  therefore  dividends at the rate of the Original  Issue
Price divided by 11.8181818 per share per annum,  payable  semi-annually  on the
first day of January and July of each year.  Such dividends shall accrue on each
such share from the date of its  original  issuance and shall accrue from day to
day,  whether or not earned or declared.  Such dividends shall be cumulative and
may be paid in cash or in kind through the

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

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

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

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

        On January 2, 2001 the Board of  Directors  authorized  and  established
"Class C Voting  Preferred  Stock" ("Class C Shares") as a class of its $.01 par
value,  2,000,000 shares authorized,  preferred stock. Class C Shares consist of
500,000,  125,000  shares  thereof are designated as Series 1 shares and 125,000
shares thereof are designated as Series 2 shares.

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

        Holders  of Class C Shares  shall be  entitled  to  receive  when and as
declared by the Board of  Directors of the  Corporation  out of any funds at the
time legally  available  therefore  dividends at the rate of the Original  Issue
Price divided by 11.8181818 per share per annum,  payable  semi-annually  on the
first day of January and July of each year.  Such dividends shall accrue on each
such share from the date of its  original  issuance and shall accrue from day to
day,  whether or not earned or declared.  Such dividends shall be cumulative and
may be paid in cash or in kind through the distribution of .0425 Class C Shares,
of the same Series for which the dividend is accrued, for each

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

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

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

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

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


Plan of  Operations - The  Company's  goal is to become the leading  supplier of
in-store   promotions   and   advertising   technology  for  grocery  and  other
mass-merchandise  retailers.  To accomplish  this goal,  the Company  intends to
expand its product  offerings to include:  (i)  electronic  couponing  (2003) to
eliminate the need for and reduce the costs related to paper coupons  (including
fraud, mis- redemption and  mal-redemption);  (ii) the establishment of targeted
Internet-type   content   to   enhance   customer   loyalty;   (iii)   capturing
Point-of-Selection  data in the  aggregate for providing  data  warehousing  and
mining  services to various  interested  parties;  (iv) certain  other  in-store
services.  Additionally,  the Company intends to expand the Klever-Kart System's
application to other  retailers  including  superstores,  discount  stores,  toy
stores and warehouse stores.  Following is a description of the Company's growth
strategy, which is dependent upon the Company securing additional financing:

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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 which concluded an average 46.8% incremental product movement.

Phase II:      Cost Reduction & Enhancement.

In January 1998,  the Company  commenced  development of the Phase II functional
specification   that  encompassed  cost  reductions  and  system   enhancements.
Improvements on the Klever-Kart(R)  system included: 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.  Upon completion of the Phase II functional  specification,  the
Company began phase II engineering  design and  development.  In September 1999,
the Company began parts procurement and other manufacturing processes.

In early third quarter  2000,  the Company  installed  stores for testing of the
Phase II system. In November 2000, the Company commenced  engineering design and
development  of Phase III.  Phase III focused on improved  consumer  ergonomics,
enhanced user interface,  modular design,  improved graphics, and longer battery
life.  The Company  intends to complete  this phase and proceed  with a roll out
into stores.

Future Business Development

1.  Technological Innovation and Expanded Product Offerings

The Company is in the process of developing various product enhancements for its
retail grocer and consumer goods manufacturer clients and expects to offer these
enhancements  throughout 2003.  These product  enhancements  include  electronic
coupons,  the Klever-Kard*  enhancement to existing  frequent  shopping programs
("Klever-Kard Program").

Electronic Couponing

The Company  expects to complete the  development  and testing of the electronic
coupon  feature of the  Klever-Kart  System in 2003.  The  Company  expects  the
electronic  coupon feature to be well received by the consumer goods  companies,
retailers  and  consumers  because it (i)  reduces  handling  costs for both the
retailer  and  consumer  goods  manufacturer;  (ii)  virtually  eliminates  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,  seasonal  trends  or to alter its value or  expiration  based  upon
predetermined redemption rates.


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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 virtual  elimination of mis-redemption,
mal- redemption and fraud associated with paper coupons.

Klever-Kard Program

The  Company  expects  to  introduce  the  Klever-Kard   Program  in  2003.  The
Klever-Kard  Program is a frequent shopper program  enhancement that is expected
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 Program is expected to include
targeted  Internet  tie-ins,   direct  mail,   rebates,   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  shopping  behavior  information to consumer  research  companies,
consumer goods companies and retailers.

2.  Expand Retailer Base

The Company  expects to expand the  Klever-Kart  System's  orientation  to other
store formats 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 at two or more key retailers across the U.S. The Company
believes that the existing  Klever-Kart System can be easily adapted to meet the
requirements of retailers operating in a variety of environments.

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.  For the years ended  December 31, 2001 and 2000,  the Company had net
losses of $2,342,405 and 4,066,283,  respectively.  This decrease in the loss is
primarily due to a decrease in operations.

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.

        Cash flows.  Operating activities used cash of $1,382,000 and $3,397,000
for 2001 and 2000 respectively. The decrease in the use of cash is due primarily
to a decrease in operations.

     Investing  activities  have used cash of $122,000 and $112,000 for 2001 and
2000,

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<PAGE>



respectively.  Investing  activities  primarily  represent  purchases of phase 2
equipment,  patents relating to the electronic in-store  advertising,  directory
and coupon devices, and purchases of office equipment.

        Financing activities provided cash of $1,501,000 and $3,309,000 for 2001
and 2000,  respectively.  Financing  activities primarily represent sales of the
Company's restricted stock, and short term borrowings.

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

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




                           ITEM 7 FINANCIAL STATEMENTS


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




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


     There are not and have not been any  disagreements  between the Company and
its accountants on any matter of accounting  principles,  practices or financial
statements disclosure.


                                    PART III


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


Executive Officers and Directors

                                       12

<PAGE>




     The  following  table  sets  forth  the name,  age,  and  position  of each
executive officer and director of the Company:
<TABLE>
<CAPTION>
Director's Name             Age     Office                Term Expires


<S>                          <C>                          <C>
Richard J. Trout             45     President             Next annual shareholder meeting
D. Paul Smith                55     CFO/Vice-President
                                    Secretary/Chairman    Next annual shareholder meeting
William C. Bailey            67     Director              Next annual shareholder meeting
Michael L. Mills             39     Director              Next annual shareholder meeting
Leonard D. Southwick         48     Director              Next annual shareholder meeting
C. Terry Warner              65     Director              Next annual shareholder meeting
</TABLE>
        Richard J. Trout, age 45, became the Company's President in October 2001
and a director of the Board in September  2000. In the capacity of the Company's
President,  Mr. Trout will work  side-by-side  with Mr. Smith to facilitate  the
company's plans for funding, M & A activity,  strategic  positioning and various
other  financial  planning and  reporting  functions.  Mr. Trout comes to Klever
Marketing with a strong financial  background working for Western Financial Bank
in California as a vice president for 12 years.  For the past three years he has
been the CFO and an active board member for Olson Farms Inc.

     D. Paul Smith,  age 55, became  Chairman of the Board in January 2001,  and
CFO, Vice- President,  and Secretary in October 2001, and has served as director
of the Company  since  November  2000.  Mr. Smith has been an ongoing  financial
advisor to the  Company for the past five years and has played an active part in
the  development of the Company's  business  plan. Mr. Smith is Chief  Financial
Officer for the Arbinger Institute.

        William C.  Bailey,  age 67, was elected as a director of the Company in
June 1994. Mr. Bailey is President and owner of Mount Olympus  Waters,  Inc. and
founder  of Water  and Power  Technologies.  Mr.  Bailey  served on the Board of
Directors  for the American  Bottled  Water  Association  and the  International
Bottled Water Association from 1975 to 1996, and was the Association's President
in 1978 and again in 1990. He received the industry's  first award of Excellence
from IWBA in 1987 and was  elected to the  Beverage  World Water Hall of Fame in
1989.  He serves as a member of the Board of Trustees for the Utah Food Industry
Associations  Insurance  Trust.  He is a member of the Board of Trustees for the
Utah Opera,  currently serving as Chairman of the Board. He has been a member of
the Board of  Directors  for KUED 1990- 1996,  University  of Utah Alumni  Board
1990-1994,  and a member of the University of Utah's Fine Art's Advisory  Board.
He is also a member of the Salt Lake Rotary and served as Secretary 1999-2000.

     Michael L.  Mills,  age 39, was  elected  as a director  of the  Company in
December 1998. Mr. Mills is  President/CEO  of Olson Farms,  Inc., a diversified
agricultural  and real estate  holding  company with  operations  throughout the
western  United  States.   The  company  deals   primarily  in  the  production,
processing, and distribution of eggs, with headquarters in Ontario,  California.
Mr. Mills

                                       13

<PAGE>



has been with the company since 1989. Mr. Mills began his career with Deloitte &
Touche in Los Angeles  after  graduating  from the  University of Utah summa cum
laude in accounting and math.

     Leonard D.  Southwick,  age 48, became a member of the  Company's  Board in
January 2001. Mr.  Southwick is currently Vice President and General  Manager of
the Metro Auto Group in  Southern  California  and also a director  on the Olson
Farms  Board.  Mr.  Southwick   provides  a  successful  history  of  managerial
experience in the planning and execution of high growth operations.

     C. Terry Warner,  Ph.D.,  age 65, became a member of the Company's Board in
September 2001. Mr. Warner is a longtime  shareholder in the Company. Mr. Warner
is the founder of The Arbinger Company. He received his Ph.D. in philosophy from
Yale  University,  and has been a senior  teacher at Oxford  University.  He has
taught at the university level for over  twenty-five  years and has been Dean of
the College of General Studies at Brigham Young University. His area of focus is
moral  and  social   philosophy,   and  his  ideas  and  writings   about  human
relationships have been adopted and propagated by business  consultants,  family
therapists,  social  psychologists,  counselors and doctors of medicine all over
the world.  He has been a consultant,  advisor and teacher to executives of many
Fortune 500 companies for over fifteen years.



                         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>     <C>
Corey A. Hamilton    2001   112,500   (2)      -        -         -          -       -       -
President/CEO        2000   126,875            -        -         -    200,000       -       -
                     1999    23,538   (1)      -        -         -    100,000       -       -
</TABLE>

(1)Corey A. Hamilton  joined the Company in September 1999 as the Vice President
of Sales and Marketing.  In May of 2000, Mr. Hamilton was named  President,  and
later was named Chief  Executive  Officer  upon Paul G. Begum's  resignation  in
December 2000.
(2)Corey A.  Hamilton  resigned  from the Company as President and CEO effective
September 30, 2001.


                                       14

<PAGE>




OPTION/SAR GRANTS IN LAST FISCAL YEAR

        The following  table sets forth  information  respecting  all individual
grants of options  and SARs made  during the last  completed  fiscal year by the
chief executive officer and chief financial officer of the Company.
<TABLE>
<CAPTION>
                        Number of     % of Total    Exercise     Expiration   Potential Realizable
                        Securities      Option      Price ($)       Date        Value at assumed
                        Underlying    Granted to                                 annual rates of
                        ----------    ----------                                 ---------------
                         Options       Employees                                   stock price
                         Granted                                                appreciation for
                                                                                 option term ($)
--------------------- -------------- ------------- ----------- -------------- ---------------------
                                                                                   5%         10%
--------------------- -------------- ------------ ------------ -------------- ----------- ----------

<S>                   <C>            <C>          <C>          <C>            <C>         <C>
Richard J. Trout          25,000         2.4%         1.00       09/07/2002
--------------------- -------------- ------------ ------------ -------------- ----------- ----------
Richard J. Trout         100,000         9.4%         1.00       01/26/2004
--------------------- -------------- ------------ ------------ -------------- ----------- ----------
D. Paul Smith            100,000         9.4%         1.00       01/26/2004
--------------------- -------------- ------------ ------------ -------------- ----------- ----------
</TABLE>

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

        The following  table sets forth  information  respecting  all individual
grants of options  and SARs made  during the last  completed  fiscal year by the
chief executive officer, chief financial officer, and directors of the Company.
<TABLE>
<CAPTION>
                                                                       At Fiscal Year End
--------------------- --------------- ----------- ------------------------------------------------------------
                          Shares         Value         Number of Securities         Value of Unexercised in-
                        Acquired on    Realized       Underlying Unexercised       the-money options ($) (a)
                         exercise         ($)                  Options
--------------------- --------------- ----------- ------------------------------ ------------------------------
                                                   Exercisable    Unexercisable    Exercisable    Unexercisable
--------------------- --------------- ----------- -------------- ---------------- -------------- ----------------
<S>                   <C>             <C>         <C>            <C>             <C>             <C>
Richard J. Trout             0            $0          25,000         100,000         $12,750         $51,000
--------------------- --------------- ----------- -------------- ---------------- -------------- ----------------
Michael L. Mills             0            $0          45,455         100,000         $23,182         $51,000
--------------------- --------------- ----------- -------------- ---------------- -------------- ----------------
D. Paul Smith                0            $0            0            100,000            $0           $51,000
--------------------- --------------- ----------- -------------- ---------------- -------------- ----------------
William C. Bailey            0            $0            0            100,000            $0           $51,000
--------------------- --------------- ----------- -------------- ---------------- -------------- ----------------
Leonard Southwick            0            $0            0            100,000            $0           $51,000
--------------------- --------------- ----------- -------------- ---------------- -------------- ----------------
</TABLE>
(a)  Based on the closing price of the Company's  Common Stock on March 14, 2002
     at $.51 per share


Executive Compensation and Benefits

                                       15

<PAGE>




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




                 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
14,359,147  shares of voting  securities  that are issued and  outstanding as of
March 14,  2002,  including  options to acquire  stock of the  Company  that are
currently  exercisable or will be within the next 60 days, and information as to
the  ownership of the  Company's  Stock by each of its  directors  and executive
officers  and by the  directors  and  executive  officers as a group.  Except as
otherwise indicated, all shares are owned directly, and the persons named in the
table have sole  voting and  investment  power with  respect to shares  shown as
beneficially owned by them.
<TABLE>
<CAPTION>
                                                              # of
Name and Address                  Nature of                   Shares
of Beneficial Owners              Ownership                   Owned            Percent
Directors

Principal Shareholders

<S>                               <C>                        <C>                <C>
Paul G. Begum                     Direct(2)                  3,203,660          22.31%
                                  Preferred Shares(2)(3)          15,380          0.11%
                                                             -----------        -------
                                    Total                    3,219,040          22.42%
                                                             =========          ======

Michael L. Mills                  Direct(1)                  2,029,809          14.14%
                                  Preferred Shares(1)(4)        908,860           6.33%
                                                             ----------         -------
                                    Total(6)                 2,938,669          20.47%
                                                             =========          ======

C. Terry Warner                   Direct(6)                     902,540           6.29%

Seabury Entities                  Preferred Shares(5)(6)        717,790           5.00%
</TABLE>





                                       16

<PAGE>

<TABLE>
<CAPTION>
                                                              # of
Name and Address                  Nature of                   Shares
of Beneficial Owners              Ownership                   Owned            Percent
Directors

Directors and Executive Officers
<S>                               <C>                        <C>                <C>
Michael L. Mills                  Direct(1)                  2,029,809          14.14%
                                  Preferred Shares(1)(4)        908,860           6.33%
                                                             ----------         -------
                                    Total(6)                 2,938,669          20.47%
                                                             =========          ======

C. Terry Warner                   Direct(6)                     902,540           6.29%

All Executive Officers and
Directors as a Group (6
persons)                          Direct                     4,279,622          29.80%
                                  Preferred Shares(4)           908,860           6.33%
                                                             ----------         -------
                                    Total(6)                 5,188,482          36.13%
                                                             =========          ======
</TABLE>
(1)     Because Mr. Mills is president of Olson Farms, executor of the Estate of
        Peter Dean  Olson,  trustee of the Olson  Foundation,  he has voting and
        investment control but disclaims any pecuniary  interest.  For The Olson
        Foundation,  Mr. Mills is one of four  trustees and does not have voting
        or  investment  power  because of a  majority-vote  rule relation to the
        Foundation.  The Olson Trust ownership  includes  759,765 shares held by
        Olson  Farms,  20,000  shares held by the Olson  Family  Trust,  150,000
        shares held by the Olson  Foundation,  960,945 shares held by the Estate
        of Peter D. Olson,  and 115,917  shares held by Peter D. Olson IRA.  The
        Olson Trust  ownership also includes  908,860  shares (90,886  preferred
        shares,  convertible to common shares at a conversion  ratio of 10 to 1)
        held by Olson  Farms  (790,560  shares)  and Olson  Foundation  (118,300
        shares).

(2)     Mr.  Begum's  ownership  includes  31,834  shares  held  by  Mr.  Begum,
        2,542,967 shares held by Tree of Stars, Inc., a corporation of which Mr.
        Begum is a director, officer, and principal shareholder,  538,859 shares
        held by PSF,  Inc., a private  company,  of which Mr. Begum is President
        and  principal  shareholder,  and  90,000  shares  held  by the  Reed H.
        Bradford Center for Christian  Living,  a 509(a)(1)  publicly  supported
        organization.  Mr. Begum's  ownership also includes 15,380 shares (1,538
        preferred shares,  convertible to common shares at a conversion ratio of
        10 to 1) held by Tree of Stars.

(3)     These shares are Class A Convertible Preferred.  The conversion ratio is
        10 to 1. Preferred Shares shown in this table are converted to common.

(4)     These shares  consist of 5,769 Class A, 41,177 Class B, and 43,940 Class
        C Convertible  Preferred.  The  conversion  ratio is 10 to 1.  Preferred
        Shares shown in this table are converted to common.


                                       17

<PAGE>



(5)     These shares  consist of 41,476  Class A and 30,303 Class C  Convertible
        Preferred.  The conversion  ratio is 10 to 1. Preferred  Shares shown in
        this table are converted to common.

(6)     Total  does not  include  1,223,600  stock  options  that are  currently
        exercisable  or will be  exercisable  in the next 60 days. Mr. Mills has
        229,720 options,  Mr. Warner has 100,000  options,  Seabury Entities has
        413,880  options,  and the  remaining  officers and directors as a group
        have 480,000 options.



             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED 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.

   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 10% per annum.

   During the year ended  December  31,  2001,  shareholders  loaned the Company
$1,017,323.  These  loans  are  secured  by the  Company's  inventory,  accounts
receivable,  equipment, patents, and any proceeds related to these assets. These
notes are  payable  within one year plus  interest  at 10% per annum.  The total
balance of notes payable due as of December 31, 2001 is $2,246,073.

   During the year ended  December  31,  2001,  the Company  accrued  additional
related party liabilities.  These liabilities  resulted from an agreement with a
shareholder and interest due on accrued compensation.  The total amount of these
liabilities at December 31, 2001 is $85,409.

   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 July 31, 2001, the total balance on the note receivable was
$98,375.  On July 31, 2001, the Company forgave the remaining amount owed on the
receivable in exchange for 100,000  shares of common stock that were returned to
the Company.


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


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



                                       18

<PAGE>


<TABLE>
<CAPTION>
1.     Financial Statements
                                                                                         Page

<S>                                                                                       <C>
Report of Robison, Hill & Co., Independent Certified Public Accountants....................F-1
Balance Sheets
  December 31, 2001, and 2000..............................................................F-2
Statements of Loss
  For the Years Ended December 31, 2001, and 2000..........................................F-4
Statement of Stockholders' Equity
  For the Years Ended December 31, 2001, and 2000..........................................F-5
Statements of Cash Flows
  For the Years Ended December 31, 2001, and 2000.........................................F-10
Notes to Financial Statements
  December 31, 2001, and 2000.............................................................F-12
</TABLE>

2.     Financial Statement Schedules

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

3.     Exhibits
<TABLE>
<CAPTION>
                        The  following  exhibits  are  included  as part of this
report:
Exhibit
Number           Title of Document

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

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

3.03                Bylaws, as amended (2)

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

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

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

                                       19

<PAGE>

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

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

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

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

10.04          Intercreditor Agreement between Seabury Investors III, Limited Partnership, The
               Olson Foundation, Presidio Investments, LLC, and the Registrant dated August
               27, 2001.
</TABLE>

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


     (b)On October 1, 2001,  the Company  filed a report on 8K  reporting  as of
        September 28, 2001 a reduction of work force under Item 9.

        On October 11,  2001,  the Company  filed a report on 8K  reporting  the
resignation  of Paul G.  Begum as a director  prior to the annual  Stockholders'
Meeting on  September  27, 2001,  under Item 9. Also  reported on the 8K was the
October 1, 2001  resignation of Corey A. Hamilton as President and C.E.O. and as
a director, under Item 9.


                                   SIGNATURES


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


                                                    KLEVER MARKETING, INC.


Dated: May 10, 2002                         By  /S/     Richard J. Trout
                                            ------------------------------------
                                            Richard J. Trout
                                            President, Director

   Pursuant to the  requirements  of the  Securities  Exchange  Act of 1934,  as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 10th day of May 2002.

                                       20

<PAGE>



Signatures                                    Title

/S/     Richard J. Trout
------------------------------------------------------------
Richard J. Trout                            President


/S/     D. Paul Smith
-------------------------------------------------------------
D. Paul Smith                               C.F.O., Vice-President, Secretary,
                                            Chairman


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


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






                                       21

<PAGE>


                             KLEVER MARKETING, INC.

                                       -:-

                              FINANCIAL STATEMENTS

                           DECEMBER 31, 2001 AND 2000




<PAGE>







                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                           Page

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

Balance Sheets
   December 31, 2001 and 2000..............................................................F-2

Statements of Loss
   For the Years Ended December 31, 2001 and 2000..........................................F-4

Statement of Stockholders' Equity
   For the Years Ended December 31, 2001 and 2000..........................................F-5

Statements of Cash flows
   For the Years Ended December 31, 2001 and 2000.........................................F-10

Notes to the Financial Statements
   December 31, 2001 and 2000.............................................................F-12
</TABLE>

<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, 2001 and 2000, 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 auditing standards  generally
accepted in the United States of America.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

        In our  opinion,  the  financial  statements  referred to above  present
fairly, in all material  respects,  the financial  position of Klever Marketing,
Inc., as of December 31, 2001 and 2000,  and the results of its  operations  and
its cash  flows for the two  years  then  ended in  conformity  with  accounting
principles generally accepted in the United States of America.

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

                                                   Respectfully submitted,


                                                   /S/ ROBISON, HILL & CO.
                                                   Certified Public Accountants
Salt Lake City, Utah
May 6, 2002


                                      F - 1

<PAGE>


                             KLEVER MARKETING, INC.
                                  BALANCE SHEET

<TABLE>
<CAPTION>
                                                                        December 31,
                                                               -------------------------------
ASSETS                                                              2001             2000
------
                                                               ---------------  --------------
Current Assets
<S>                                                            <C>              <C>
     Cash                                                      $             -  $        2,870
     Accounts Receivable                                                     -           8,631
     Prepaid Expense                                                   226,272           5,000
     Shareholder Receivables                                             7,964         103,854
     Other Assets                                                            -          92,339
                                                               ---------------  --------------
          Total Current Assets                                         234,236         212,694
                                                               ---------------  --------------
Fixed Assets
     Office Equipment                                                  155,876         155,298
     Phase 2 Equipment                                                  66,690               -
     Less Accumulated Depreciation                                    (105,145)        (78,663)
                                                               ---------------  --------------
          Net Fixed Assets                                             117,421          76,635
                                                               ---------------  --------------
Other Assets
     Patents                                                         2,303,380       2,247,153
     Less Accumulated Amortization                                  (1,694,599)     (1,477,349)
                                                               ---------------  --------------
          Net Other Assets                                             608,781         769,804
                                                               ---------------  --------------

          Total Assets                                         $       960,438  $    1,059,133
                                                               ===============  ==============
</TABLE>




                                      F - 2

<PAGE>


                             KLEVER MARKETING, INC.
                                  BALANCE SHEET
                                   (Continued)

<TABLE>
<CAPTION>
                                                                        December 31,
                                                               -------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY                                2001             2000
------------------------------------
                                                               ---------------  --------------
Current Liabilities
<S>                                                            <C>              <C>
     Accounts Payable, Trade                                   $       420,945  $      192,510
     Liability for Overdrawn Cash                                        3,903               -
     Accrued Liabilities                                               346,011         166,078
     Related Party Payables                                          2,331,482       1,228,750
     Short-term Notes Payable                                            4,828           8,478
                                                               ---------------  --------------
          Total Current Liabilities                                  3,107,169       1,595,816

Non-Current Liabilities
     Lease Obligation Payable                                            6,246           9,057
                                                               ---------------  --------------


          Total Liabilities                                          3,113,415       1,604,873
                                                               ---------------  --------------


Stockholders' Equity
     Preferred stock (par  value $.01), 2,000,000 shares authorized
          168,434 issued and outstanding December 31, 2001
          and 94,191 issued and outstanding December 31, 2000            1,684             942
     Common Stock (Par Value $.01),  20,000,000  shares
          authorized.  12,674,807 shares issued and outstanding
          December 31, 2001 and 12,152,768 shares issued and
          outstanding December 31, 2000                                126,748         121,528
     Common Stock to be issued, 435,584 shares at
          December 31, 2001 and 2000                                     4,356           4,356
     Treasury Stock, 1,000 shares at December 31, 2001
          and -0- shares at December 31, 2000                           (1,000)              -
     Paid in Capital in Excess of Par Value                         12,276,665      11,546,459
     Retained Deficit                                              (14,561,430)    (12,219,025)
                                                               ---------------  --------------
          Total Stockholders' Equity                                (2,152,977)       (545,740)
                                                               ---------------  --------------

          Total Liabilities and Stockholders' Equity           $       960,438  $    1,059,133
                                                               ===============  ==============
</TABLE>

    The accompanying notes are an integral part of these financial statements



                                      F - 3

<PAGE>


                             KLEVER MARKETING, INC.
                                STATEMENT OF LOSS
<TABLE>
<CAPTION>
                                                                      For the Year Ended
                                                                         December 31,
                                                                 -----------------------------
                                                                      2001           2000
                                                                 --------------  -------------

<S>                                                              <C>             <C>
Revenue                                                          $            -  $      27,000
                                                                 --------------  -------------

Expenses
  Sales and marketing                                                    33,929         83,617
  General and administrative                                          1,607,942      2,312,875
  Research and development                                              486,958      1,830,349
                                                                 --------------  -------------

     Total Expenses                                                   2,128,829      4,226,841
                                                                 --------------  -------------

Other income (expense)
  Interest income                                                         4,504         11,764
  Interest expense                                                     (217,939)       (68,364)
  Loss on sale of assets                                                    (41)       190,258
                                                                 --------------  -------------

     Total Other Income (Expense)                                      (213,476)       133,658
                                                                 --------------  -------------

Income (Loss) Before Taxes                                           (2,342,305)    (4,066,183)

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

Net Income (Loss) After Taxes                                    $   (2,342,405) $  (4,066,283)
                                                                 ==============  =============

Weighted Average Shares
  Outstanding                                                        12,557,378     11,978,017
                                                                 ==============  =============

Loss Per Share                                                   $       (0.19)  $      (0.34)
                                                                 ==============  =============
</TABLE>







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

                                      F - 4

<PAGE>

                             KLEVER MARKETING, INC.
                        STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                            Common       Paid in
                                                                                             Stock     Capital in
                                      Preferred Stock      Common Stock         Treasury     to be      Excess of      Retained
                                      ---------------  --------------------
                                      Shares  Amount     Shares    Amount         Stock      Issued     Par Value       Deficit
                                       ----- --------  ---------- ---------    ------------  -------   -----------    -----------

<S>                                    <C>   <C>       <C>        <C>          <C>            <C>      <C>            <C>
Balance at January 1, 2000 ..........      - $   --    11,275,121 $ 112,751    $       --     $4,589   $ 8,375,350    $(8,152,742)

January 2000 shares to company
   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 - 5
<PAGE>

                                           KLEVER MARKETING, INC.
                                     STATEMENT OF STOCKHOLDERS' EQUITY
                                                (continued)
<TABLE>
<CAPTION>

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

<S>                                      <C>   <C>       <C>        <C>          <C>          <C>      <C>            <C>
March 2000 shares issued to
   company for accounts payable
   at $3.00 per share ..................      - $   --     2,603 $         26    $ --          $--     $     7,783    $      --
March 2000 shares issued to
   individual for cash at $2.75
   per share ...........................     --     --      10,909        109      --           --          29,891           --
April 2000 exercise of stock option
   by individual for cash at $1.07
   per share ...........................     --     --      18,193        182      --           --          19,285           --
April 2000 shares issued to
   company for cash at $2.50 per
   share ...............................     --     --      40,312        403      --           --         100,377           --
May 2000 shares issued to
   company for cash at $2.75 per
   share ...............................     --     --      54,546        546      --           --         149,455           --
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)         --             --
</TABLE>

                                                   F - 6

<PAGE>



                                           KLEVER MARKETING, INC.
                                     STATEMENT OF STOCKHOLDERS' EQUITY
                                                (continued)
<TABLE>
<CAPTION>

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

<S>                                      <C>   <C>       <C>        <C>          <C>        <C>       <C>            <C>
May 2000 shares issued to
   company for cash at $26 per
   share ...............................   5,769 $   58        - $       --      $ --       $   --     $   149,942    $      --
July 2000 shares issued to
   individuals for cash at $1.07
   per share ...........................     --     --      68,744        687      --           --          72,869           --
July 2000 paid-in capital from
   treasury stock transaction ..........     --     --        --         --        --           --          10,200           --
September 2000 stock issued to
   company for cash at $17.00 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      --          4,356    11,546,459    (12,219,025)
</TABLE>

                                                   F - 7

<PAGE>



                                           KLEVER MARKETING, INC.
                                     STATEMENT OF STOCKHOLDERS' EQUITY
                                                (continued)
<TABLE>
<CAPTION>

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

<S>                                      <C>   <C>       <C>        <C>          <C>        <C>       <C>            <C>
January 2001 shares issued for
   payment of note payable at
   $6.60 per share .....................   37,879 $ 379        - $       --      $ --       $   --     $   249,621    $      --
January 2001 shares cancelled for
   nonpayment ..........................     --     --      (4,694)       (47)     --           --          (9,903)          --
March 2001 shares issued for
   payment of note payable at
   $6.60 per share .....................    6,061    60       --         --        --           --          39,940           --
March 2001 shares issued for
   research and development
   expenses at $1.00 per share .........     --     --      15,000        150      --           --          14,850           --
May 2001 shares issued to
   company for cash at $6.60
   per share ...........................   30,303   303       --         --        --           --         199,697           --
June 2001 shares issued to
   company for cash at $.82
   per share ...........................     --     --       1,219         12      --           --             988           --
August 2001 shares issued to
   company for cash at $.82
   per share ...........................     --     --       3,466         35      --           --           2,807           --
August 2001 shares issued for
   general and administrative
   expenses at $.66 per share ..........     --     --     507,048      5,070      --           --         329,581           --
</TABLE>

                                                   F - 8

<PAGE>



                                           KLEVER MARKETING, INC.
                                     STATEMENT OF STOCKHOLDERS' EQUITY
                                                (continued)
<TABLE>
<CAPTION>
                                                                                           Common     Paid in
                                                                                           Stock    Capital in
                                         Preferred Stock      Common Stock      Treasury   to be     Excess of  Retained
                                         ---------------  --------------------
                                         Shares  Amount     Shares    Amount     Stock    Issued     Par Value   Deficit
                                         ------ --------  ---------- ---------  --------  -------   -----------   -----------

<S>                                      <C>    <C>       <C>        <C>        <C>       <C>       <C>          <C>
September 2001 shares returned
   to Company for accounts
   receivable of $98,375                  --    $   --          --   $     --   $(1,000)  $  --     $ (97,375)   $        --

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

Balance December 31, 2001               168,434 $ 1,684   12,674,807 $ 126,748  $(1,000)  $ 4,356   $12,276,665  $ (14,561,430)
                                        ======= =======   ========== =========  ========  =======   ===========  =============
</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,
                                                               -------------------------------
                                                                    2001             2000
                                                               ---------------  --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                            <C>              <C>
Net Loss                                                       $    (2,342,405) $   (4,066,283)
Adjustments used to reconcile net loss to net cash provided
   by (used in) operating activities:
     Stock issued for general and administrative                       139,438         603,777
     Stock issued for research and development                          15,000               -
     Stock issued for patents and equipment                                  -          16,189
     Write-off of assets                                                81,388         445,330
     Stock issued for account payable                                        -          18,935
     Stock issued for interest expense                                       -          20,400
     Depreciation and amortization                                     246,558         233,404
     (Increase) decrease in accounts receivable                          8,218          (8,631)
     (Increase) decrease in shareholder receivable                      (2,486)        (69,712)
     (Increase) decrease in other assets & prepaid expense             (14,695)        (97,339)
     Increase (decrease) in accounts payable                           228,435        (209,197)
     Increase (decrease) in lease obligation payable                    (2,811)          9,057
     Increase (decrease) in related party payables                      85,409               -
     Increase (decrease) in accrued liabilities                        176,283        (293,122)
                                                               ---------------  --------------
Net Cash Used in Operating Activities                               (1,381,668)     (3,397,192)
                                                               ---------------  --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition/Sale of equipment, net                                     (66,190)        (78,019)
Acquisition of patents                                                 (56,227)        (34,303)
                                                               ---------------  --------------
Net Cash Used by Investing Activities                                 (122,417)       (112,322)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds capital stock issued                                          483,892       2,521,652
Proceeds from loans                                                  1,307,323       1,062,500
Conversion of note payable to preferred stock                         (290,000)       (250,000)
Stock issued for note payable                                                -         (25,000)
Principle payments on lease obligations                                      -               -
Cash payments on notes payable                                               -               -
                                                               ---------------  --------------
Net Cash Provided by Financing Activities                            1,501,215       3,309,152
                                                               ---------------  --------------

Net Increase (Decrease) in Cash and Cash Equivalents                    (2,870)       (200,362)
Cash and Cash Equivalents at Beginning of the Year                       2,870         203,232
                                                               ---------------  --------------
Cash and Cash Equivalents at End of the Year                   $             -  $        2,870
                                                               ===============  ==============
</TABLE>



                                      F - 10

<PAGE>

                             KLEVER MARKETING, INC.
                             STATEMENT OF CASH FLOWS
                                   (Continued)
<TABLE>
<CAPTION>
                                                                     For the Year ended
                                                                        December 31,
                                                               -------------------------------
                                                                    2001             2000
                                                               ---------------  --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
<S>                                                            <C>              <C>
Interest                                                       $        10,142  $       14,731
Income Taxes                                                   $           100  $          100
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:

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

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

                                     F - 11

<PAGE>



                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000

NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN

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

        Several  conditions and events cast doubt about the Company's ability to
continue  as  a  "going  concern".  The  Company  has  incurred  net  losses  of
approximately  $2,316,000  for the year ended  December  31,  2001 and losses of
approximately  $4,066,000  for the year ended December 31, 2000, has a liquidity
problem,  and  requires  additional  financing  in order to finance its business
activities on an ongoing  basis.  The Company is actively  pursuing  alternative
financing and has had discussions  with various third parties,  although no firm
commitments have been obtained.

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

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

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

Organization and Basis of Presentation

        The  Company  was  organized  under the laws of the State of Delaware in
December 1989. The Company was in the  Development  stage from 1989 to 1991. The
Company  was an  operating  company  from 1992 to December 8, 1993 when it filed
petitions for relief under Chapter 11 bankruptcy. The Company was inactive until
July 5, 1996 when the Company merged with Klever Kart,  Inc. in a reverse merger
and  changed  its  name  to  Klever  Marketing,  Inc.  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.

                                     F - 12

<PAGE>



                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                   (Continued)

NOTE 2 - SUMMARY OF ACCOUNTING POLICIES

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

Cash Equivalents

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

Pervasiveness of Estimates

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

Reclassifications

        Certain   reclassifications   have  been  made  in  the  2000  financial
statements to conform with the 2001 presentation.
















                                     F - 13

<PAGE>



                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                   (Continued)

NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (continued)

Loss per Share

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

                                                    For the year ended December 31, 2001

Basic Loss per Share
<S>                                            <C>                  <C>         <C>
Loss available to common shareholders          $    (2,342,405)     12,557,378  $       (0.19)
                                               =============== ===============  ==============

                                                    For the year ended December 31, 2000
Basic Loss per Share
Loss available to common shareholders          $    (4,068,905)     11,978,017  $       (0.34)
                                               =============== ===============  ==============
</TABLE>
        Basic  earnings per common  share were  computed by dividing net loss by
the weighted  average  number of shares of common stock  outstanding  during the
year.  Diluted loss per common  share for the years ended  December 31, 2001 and
2000 are not presented as it would be anti-dilutive.

Concentration of Credit Risk

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

Fixed Assets

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

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

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


                                     F - 14

<PAGE>


                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                   (Continued)

NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (continued)

determination of income or loss.

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

Intangibles

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

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. The batteries were written-off and expensed during 2001.

NOTE 3 - INCOME TAXES

        The Company has accumulated tax losses estimated at $15,000,000 expiring
in years 2007 through 2021.  Current tax laws limit the amount of loss available
to be  offset  against  future  taxable  income  when a  substantial  change  in
ownership  occurs.  The amount of net operating loss  carryforward  available to
offset future taxable income may be limited if there is a substantial  change in
ownership.

NOTE 4 - LEASE COMMITMENT

        The Company currently leases  approximately  1,620 square feet of office
space from Four Cabo's  Enterprises,  Ltd. on a month to month basis.  The lease
payments are approximately $2,025 per month.

        The Company has also  entered  into lease  agreements  for the rental of
computer equipment. These leases expire between September 2003 and May 2004. The
total monthly lease payments due on the above leases is approximately $210.

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



                                     F - 15

<PAGE>

                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                   (Continued)

NOTE 4 - LEASE COMMITMENT (continued)

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


      Year Ended December 31,
------------------------------------
        2002                                   $      8,289
        2003                                          5,774
        2004                                            890
        2005                                              -
        2006                                              -
                                               ------------
        Total minimum future lease payments    $     14,953
                                               ============

NOTE 5 - RESEARCH AND DEVELOPMENT

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

        During the years ended December 31, 2001 and 2000, the Company  expended
$516,606  and  $1,830,349,  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 6- 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.

        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 10% per annum.

        During the year ended December 31, 2001, shareholders loaned the Company
$1,017,323.  These  loans  are  secured  by the  Company's  inventory,  accounts
receivable, equipment and any

                                     F - 16

<PAGE>

                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                   (Continued)

NOTE 6- RELATED PARTY TRANSACTIONS (continued)

proceeds  related to these assets.  These notes are payable within one year plus
interest at 10% per annum. The total balance of notes payable due as of December
31, 2001 is $2,246,073.

        During the year ended December 31, 2001, the Company accrued  additional
related party liabilities.  These liabilities  resulted from an agreement with a
shareholder and interest due on accrued compensation.  The total amount of these
liabilities at December 31, 2001 is $85,409.

        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 July 31, 2001, the total balance on the note
receivable  was $98,375.  On July 31, 2001,  the Company  forgave the  remaining
amount owed on the  receivable  in exchange  for 100,000  shares of common stock
that were returned to the Company.

NOTE 7- STOCK OPTIONS

        The shareholders  approved, by a majority vote, the adoption of the 1998
Stock Incentive Plan (the "Plan").  Under the Plan,  3,500,000  shares of common
stock are  reserved  for  issuance  upon the  exercise  of options  which may be
granted from  time-to-time  to officers,  directors  and certain  employees  and
consultants  of the Company or its  subsidiaries.  The Plan permits the award of
both qualified and  non-qualified  incentive  stock options.  Under the Plan, an
additional  500,000 shares of common stock are reserved for issuance in the form
of restricted stock grants. As of December 31, 1998, no options had been granted
under the Plan.  Compensation  expense charged to operations in 2001 and 2000 is
$0 and $297,686. The following is a summary of transactions:
<TABLE>
<CAPTION>
                                                                     Shares Under Option
                                                               -------------------------------
                                                                        December 31,
                                                               -------------------------------
                                                                    2001             2000
                                                               ---------------  --------------
<S>                                                                  <C>             <C>
Outstanding, beginning of year                                       2,685,049       2,898,098
Granted during the year                                              2,299,367         864,151
Canceled during the year                                            (2,860,024)       (361,699)
Exercised during the year                                                    -        (715,501)
                                                               ---------------  --------------

Outstanding, end of year (at prices
ranging from $.01 to $3.00 per share)                                2,124,392       2,685,049
                                                               ===============  ==============

Eligible, end of year for exercise currently (at prices
ranging from $.01 to $3.00 per share)                                1,458,500       2,055,752
                                                               ===============  ==============
</TABLE>

                                     F - 17
<PAGE>

                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                   (Continued)

NOTE 8 - 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
Share dividends shall be adjusted as if a similar split or dividend had occurred
with respect to the Class A Shares.

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

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

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

        On September 24, 2000 the Board of Directors  authorized and established
"Class B Voting  Preferred  Stock" ("Class B Shares") as a class of its $.01 par
value,  2,000,000 shares authorized,  preferred stock. Class B Shares consist of
250,000, 125,000 shares thereof are designated as Series 1 shares.

                                     F - 18

<PAGE>



                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                   (Continued)

NOTE 8 - PREFERRED STOCK (continued)

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

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

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

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

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

                                     F - 19

<PAGE>



                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                   (Continued)

NOTE 8 - PREFERRED STOCK (continued)

        On January 2, 2001 the Board of  Directors  authorized  and  established
"Class C Voting  Preferred  Stock" ("Class C Shares") as a class of its $.01 par
value,  2,000,000 shares authorized,  preferred stock. Class C Shares consist of
500,000,  125,000  shares  thereof are designated as Series 1 shares and 125,000
shares thereof are designated as Series 2 shares.

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

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

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

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


                                     F - 20

<PAGE>


                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                   (Continued)

NOTE 8 - PREFERRED STOCK (continued)

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

NOTE 9 - CONTINGENCIES

        On September  18, 2001, a Complaint  was filed in Superior  Court of the
State of  California,  County of San  Francisco,  by eiKart,  L.L.C.  ("eiKart")
against the Company. The Complaint arises out of a written agreement between the
Company and eiKart dated May 11, 2001. Pursuant to the agreement,  eiKart was to
pursue  certain  financing  sources for the Company.  The Complaint also alleges
that eiKart was requested by and performed  for the Company  certain  additional
financing  consulting  services.  The  Complaint  also  claims  that the Company
defrauded  eiKart by  stating  that it was  seeking  interim  financing  when in
reality,  the Company was not seeking financing,  but trying to "go private" and
that the Company  defrauded  eiKart by not executing an amendment to the written
agreement.  eiKart  seeks  payment  in the  form of  stock  options  and cash as
required pursuant to said written agreement as if all benchmarks were satisfied,
payment  for the fair value of  financing  services  rendered  (alleged to be in
excess  of  $300,000)  and  recovery  of  damages  suffered  as a result  of the
fraudulent  misrepresentations  in the amount to be proven at trial. The Company
disputes  all claims as invalid and intends to  vigorously  defend this  action.
Management  believes that the Company will prevail in this matter,  therefore no
provision has been made in the financial statements related to this claim.

        During August 2001, the Company issued 507,048 shares of common stock as
a  prepayment  for  services to be rendered  over the next twelve  months.  This
resulted in a prepaid  asset of $193,043 and  expenses of $139,438.  After three
months the agreement was canceled.  The Company is due to receive 380,286 shares
of its own common  stock back for the nine  months of  services  that were never
rendered. As of May 6, 2002, the Company has not received the shares.




                                     F - 21