U.S.
SECURITIES AND EXCHANGE COMMISSION




WA SHINGTON,
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, 2008





or





o       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.)








2469 E Ft
Union Blvd, Cottonwood, UT  84121


Mailing
address


P.O. Box
711308, Salt Lake City, UT  84171


(Address
of principal executive offices)  (zip code)








Issuer's
telephone number (801) 847 6444








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)


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 o





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. o








State
issuer's net income for its most recent fiscal
year:    $95,916





As of December 31, 2008, there were
42,248,303 (1 vote per share) Common and 287,595 Convertible Preferred, for a
preferred (converted to common) and common share total of 45,124,253. All shares
have a par value of $0.01.  The aggregate market value of the
Registrant's voting stock held by non-affiliates of the Registrant was
approximately $381,634 computed at the closing price as of December 31,
2008.  The number of preferred and common shares held by
non-affiliates of the Registrant total 38,163,408 votes.








DOCUMENTS
INCORPORATED BY REFERENCE





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





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





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.   x Yes o No











TABLE
      OF CONTENTSItem Number and Caption
            PagePART IItem1.     Description of
      Business
            1Item2.     Description of
      Property
            2Item3.     Legal
      Proceedings
            2Item4.     Submission of
      Matters to a Vote of Security Holders
            3PART IIItem5.     Market for Common
      Equity and Related Stockholder Matters
            3Item6.     Management's
      Discussion and Analysis or Plan of Operations
            6Item7.      Financial
      Statements
            7Item8.      Changes in
      and Disagreements With Accountants on Accounting and
              Financial
      Disclosure
            7Item8A.    Controls and
      Procedures
            8PART IIIItem9.     Directors,
      Executive Officers, Promoters and Control Persons;
              Compliance
      with Section 16(a) of the Exchange Act
            8Item
      10.   Executive Compensation
            11Item11.   Security Ownership of Certain
      Beneficial Owners and Management
            12Item12.   Certain Relationships and
      Related Transactions
            13Item13.   Exhibits and Reports on Form
      8-K
            15Item14.   Principal Accountant Fees
      & Services
            17


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 evaluating
transitional partnerships and identifying appropriate acquisition suitors, while
also assessing available options for monetizing the existing Patent Portfolio
through enhanced licensing Agreements.
 
 
 History
 
 The Company began as a part of
Information Resources, Inc. (“IRI”) in 1987, was incorporated as a subsidiary of
IRI under the laws of the State of Delaware on December 8, 1989, and was fully
distributed to stockholders of IRI in a spinoff on October 31,
1990.  At the time of the spinoff a portion of the business and assets
of the Company included a software operation in Australia, which was sold in
March, 1993.  The Company (VideOCart, Inc.) filed petitions for relief
under Chapter 11 bankruptcy in December 1993.  The Company was
inactive until July 5, 1996 when the Company merged with Klever Kart, Inc. in a
reverse merger and changed its name to Klever Marketing, Inc.  During
the period from July 5, 1996 to December 31, 2003, the Company  was in
a development stage, except for an approximate 2-month period in 2000 when the
Company generated revenue from installations of their Klever-Kart system in
stores.
 
 In August 2004, the Company signed a
partnership contract with Fujitsu Transaction Solutions (FTXS).  Under
this contract, Fujitsu committed to manufacture and develop the hardware for a
cart-based, advertising and promotional device offering (the U-Scan Shopping
Cart), to develop relevant and required software and applications to support
said device, to act as sales lead for the solution & hardware sell-in
process and to provide for technical installations, IT implementation, and
support for all retail locations.  The Company and Fujitsu agreed to
jointly share responsibility for marketing into Fujitsu’s current retail client
base for the initial nationwide sales effort.  The Company likewise
agreed to act as sales lead for the participant sell-in of advertising and
promotion space to both retailers and manufacturers.
 
 In 2007,
the Company was informed by Fujitsu (FTXS) that they were restructuring their US
management team and had reprioritized their go-to-market model, which
unfortunately would no longer include pursuing the joint deployment of U-Scan
Shopping Carts in the US marketplace, as this was no longer part of their US
business strategy. As a result, Fujitsu amicably disengaged from collaborative
deployment discussions with the Company. However today and despite concluding US
go-to-market collaboration with Fujitsu in 2007, the Company continues to pursue
a remaining obligation by Fujitsu of $25,000 related to the sale of its
international Patents and Patent work done by the Company on Fujitsu’s behalf.
Importantly post-Fujitsu, the Company has endeavored to pursue alternative
deployment approaches; has continued efforts to protect the Patents against
potential infringement; and has continued to explore opportunities to monetize
the Patent Portfolio, which retains a meaningful duration in-market.
Proactively, and in pursuit of an exit strategy, the Company is currently
assessing potential acquisition suitors, who are best poised to take full and
timely advantage of the Company’s Patent portfolio and who would be
competitively advantaged by control over said Patents.
  Inactive
Public Company
 
 Since
January 1, 2007, the Company has functioned as an inactive public company
without productive assets, revenues, or earnings.  As previously
indicated and disclosed, the business plan going forward is to attempt to seek
various possible merger or acquisition possibilities for the Company as an
inactive public company, sometimes known as a “Shell”
corporation.  Operating as an inactive public company poses certain
impediments and risk factors to the Company and the shareholders, the most
significant of which are outlined below:
 
 ·
                The
      Company has patent assets of undetermined value and substantial
      debt.  It has continued operations with limited capital
      contributions, these assets must be considered during the period of
      business inactivity as “wasting assets” which will be expended to continue
      the operation of the Company on a minimal basis and as a public reporting
      company pending a subsequent acquisition, merger, or
      reorganization.  There can be no warranty or assurance how long
      the Company can continue in its present state as a inactive public company
      without further capitalization.
 
 ·
                The
      Company can make no warranty or assurance it will be successful in
      obtaining a suitable merger or acquisition candidate and is pursuing such
      objectives on a best efforts basis through its part-time management and
      board members.
 
 ·
                There
      are imposed by SEC regulation certain restrictions and limitations upon
      investors who can purchase shares in an inactive public corporation
      through brokerage firms, which regulations limit the suitability of any
      shares to be sold while inactive to a limited range of individuals who are
      able to bear high risk investments.
 
 ·
                The
      fact that the Company shares are limited to a restricted group of buyers
      and the fact that the Company must report itself as a Shell company in its
      periodic reporting requirements may limit the value of the Company as a
      public entity and the tradability of its shares in the
    market.
 
 ·
                There
      are certain limitations and restraints upon the use of SEC Rule 144 for
      the resale of restricted securities in a Shell corporation which may have
      to be satisfied by various individuals holding restricted stock in the
      Company.
 
 ·
                In
      the future, the SEC or various state security regulatory agencies may
      impose further or additional regulations or limitations on the Company or
      the tradability of its stock as a Shell
company.
 
 
 1
 ITEM
2   DESCRIPTION OF PROPERTY
 
 The
Company currently occupies approximately 800 square feet of office
space.  The lease terms are $400 per month and the term is month to
month.  The office space is used as the corporate
headquarters.  It is located at 2469 E Ft Union Blvd, suite 214,
Cottonwood, UT  84121.
   ITEM
3   LEGAL PROCEEDINGS
 
 On
October 27, 2003, Thomas J. LaLanne, assignee of eiKart, LLC., filed against the
Company in the Third Judicial District Court of Utah under the provisions of the
Utah Foreign Judgment Act, a judgment from the Superior Court of California, in
and for the County of San Francisco Jurisdiction.  The judgment was in
relation to a consulting agreement between eiKart, LLC. and the Company. This
judgment was included in the financial statements as part of accrued liabilities
at December 31, 2006. In June 2007, this litigation was settled in full out-of
court by a cash payment of $10,000 and the remainder of the liability of $80,448
was included in the statement of operations as extraordinary income
 
 On September 6, 2002, an entry of
judgment was entered against the Company by Micropower Direct,
LLC.  The total judgment was for $17,167.18.  During 2006,
this judgment was paid in full.
 
 On December 12, 2005 Klever Marketing
was summoned, and a complaint was filed in the Third District Court of the State
of Utah, by Dennis Shepard, one of the partners of S&C
Medical.  The complaint contested Klever Marketing’s cancellation of
an attempted deal with S&C medical in December of 2001.  On
January 13, 2007, Klever Marketing answered their complaint and filed a counter
claim against S&C Medical.  During 2007,this litigation was
settled out-of court, resulting in a favorable depreciation of the claim sought,
and full and complete resolution in this matter, also resulting in the return of
992,100 shares of common stock to the Company’s treasury.  These
shares were subsequently cancelled.
 
 During
2006, Arthur Portugal, a former officer of the Company, filed a formal claim
asserted for approximately $125,000 for past due executive compensation
including stock options.  Mr. Portugal previously filed a formal
administrative wage claim in California which is inactive and no longer
pending.  As of December 31, 2008, the Company has accrued
compensation of $96,700 for Mr. Portugal as part of his employment agreement
through June 30, 2006.  The Company also has accrued notes payable of
$11,374 due to Mr. Portugal.
 
 
 2
 
 ITEM 4   SUBMISSION OF MATTERS TO AVOTE
OF SECURITY HOLDERS
  There were no matters submitted to a
vote of shareholders during 2008.
 
 PART II
 
 
 ITEM 5   MARKET FOR COMMON
EQUITY ANDRELATED
STOCKHOLDER MATTERS
 
 
 The stock is traded on the “Pink
Sheets” with the trading symbol KLMK.PK .  The company has 50 million
authorized common shares.
 
 
 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:
 
 2008:
                              
                              High
                              
                              
                              LowFirst
      Quarter
                              
                              $
                              0.05
                              
                              
                              $
                              0.01Second
      Quarter
                              
                              $
                              0.02
                              
                              
                              $
                              0.01Third
      Quarter
                              
                              $
                              0.01
                              
                              
                              $
                              0.01Fourth
      Quarter
                              
                              $
                              0.01
                              
                              
                              $
                              0.012007:
                              
                              High
                              
                              
                              LowFirst
      Quarter
                              
                              $
                              0.10
                              
                              
                              $
                              0.05Second
      Quarter
                              
                              $
                              0.07
                              
                              
                              $
                              0.04Third
      Quarter
                              
                              $
                              0.05
                              
                              
                              $
                              0.02Fourth
      Quarter
                              
                              $
                              0.05
                              
                              
                              $
                              0.02
 
 The
number of shareholders of record of the Company's common stock as of
December  31, 2008 was approximately 864.
 
 3
 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 any available funds for the development of the
Company's business.
 
 
 Recent
Sales of Unregistered Securities.
 
 During the year ended December 31,
2007, the Company issued 1,090,000 shares of common stock for cash of
$272,500.  The shares were sold for $.25 per share.
 
 In December 2007, the Company issued
450,000 shares of common stock for general and administrative expenses of
$17,500.  The shares were valued at $.035 per share.
 
 In October 2007, the Company issued
8,411,103 shares of common stock for accounts payable and debt instruments
totaling $2,102,776.  The shares were valued at $.25 per
share.
 
 On
January 15, 2008, the Company issued 44,000 shares of common stock for cash of
11,000 dollars.  The shares were valued at $.25 per
share.
 
 On
December 16, 2008, 5,170,000 shares of common stock were returned to the Company
and were cancelled.
 
 On
December 22, 2008, the Company issued 100,000 shares of common stock for cash of
$5,000.  The shares were valued at $.05 per share.
 
 On
December 29, 2008, the Company issued 140,000 shares of common stock for cash of
$7,000.  The shares were valued at $.05 per share.
 
 On
December 31, 2008, the Company recorded a stock subscription receivable of
$23,000 for the issue of 460,000 shares of common stock.  The shares
were valued at $.05 per share.
 
 
 Compliance
with Section 16(a) of the Securities Exchange Act of 1934
 
 Section 16(a) of the Exchange Act
requires the Company’s directors, executive officers, and persons who own more
than 10% of a registered class of the Company’s equity securities, to file with
the Commission reports regarding initial ownership and changes in
ownership.  Directors, executive officers, and greater than 10%
stockholders are required by the Commission to furnish the Company with copies
of all Section 16(a) forms they file.
 
  4
 Beneficial
Ownership Compliance Reporting
 
 The
company is aware of the following share and option transactions for the
reporting period ending December 31, 2008 for which Form 4 or Form 5 were not
filed.
 Options
                                  
                                  
                                  Options
                                  
                                  
                                  
                                  TermName
                                  
                                  Officer
      or board
                                  
                                  Number
      of shares
                                  
                                  
                                  Share
      Price
                                  
                                  
                                  Total
      cost
                                  
                                  
                                  at
      .50
                                  
                                  
                                  at
      1.00
                                  
                                  Date
                                  
                                  in
      yearsBill
      Bailey
                                  
                                  B
      &O
                                  
                                  
                                  40,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  10,000
                                  
                                  
                                  
                                  10,000
                                  
                                  
                                  
                                  10,000
                                  
                                  2/1/2007
                                  
                                  
                                  3Bill
      Bailey
                                  
                                  B
      &O
                                  
                                  
                                  20,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  5,000
                                  
                                  
                                  
                                  5,000
                                  
                                  
                                  
                                  5,000
                                  
                                  7/31/2007
                                  
                                  
                                  3Jeremiah
      Cox
                                  
                                  B
      &O
                                  
                                  
                                  200,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  50,000
                                  
                                  
                                  
                                  50,000
                                  
                                  
                                  
                                  50,000
                                  
                                  4/16/2007
                                  
                                  
                                  3Jeremiah
      Cox
                                  
                                  B
      &O
                                  
                                  
                                  40,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  10,000
                                  
                                  
                                  
                                  10,000
                                  
                                  
                                  
                                  10,000
                                  
                                  6/1/2007
                                  
                                  
                                  3Jeremiah
      Cox
                                  
                                  B
      &O
                                  
                                  
                                  60,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  15,000
                                  
                                  
                                  
                                  15,000
                                  
                                  
                                  
                                  15,000
                                  
                                  6/1/2007Jeremiah
      Cox
                                  
                                  B
      &O
                                  
                                  
                                  120,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  30,000
                                  
                                  
                                  
                                  30,000
                                  
                                  
                                  
                                  30,000
                                  
                                  6/28/2007
                                  
                                  
                                  3Jeremiah
      Cox
                                  
                                  B
      &O
                                  
                                  
                                  20,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  5,000
                                  
                                  
                                  
                                  5,000
                                  
                                  
                                  
                                  5,000
                                  
                                  7/24/2007
                                  
                                  
                                  3Jeremiah
      Cox
                                  
                                  B
      &O
                                  
                                  
                                  20,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  5,000
                                  
                                  
                                  
                                  5,000
                                  
                                  
                                  
                                  5,000
                                  
                                  7/26/2007
                                  
                                  
                                  3Jeremiah
      Cox
                                  
                                  B
      &O
                                  
                                  
                                  120,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  30,000
                                  
                                  
                                  
                                  30,000
                                  
                                  
                                  
                                  30,000
                                  
                                  12/7/2007
                                  
                                  
                                  3Paul
      Begum
                                  
                                  B
      &O
                                  
                                  
                                  100,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  25,000
                                  
                                  
                                  
                                  25,000
                                  
                                  
                                  
                                  25,000
                                  
                                  2/1/2007
                                  
                                  
                                  3Paul
      Begum
                                  
                                  B
      &O
                                  
                                  
                                  100,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  25,000
                                  
                                  
                                  
                                  25,000
                                  
                                  
                                  
                                  25,000
                                  
                                  2/9/2007
                                  
                                  
                                  3Paul
      Begum
                                  
                                  B
      &O
                                  
                                  
                                  20,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  5,000
                                  
                                  
                                  
                                  5,000
                                  
                                  
                                  
                                  5,000
                                  
                                  7/25/2007
                                  
                                  
                                  3Paul
      Begum
                                  
                                  B
      &O
                                  
                                  
                                  180,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  45,000
                                  
                                  
                                  
                                  45,000
                                  
                                  
                                  
                                  45,000
                                  
                                  9/28/2007
                                  
                                  
                                  3Jeremiah
      Cox
                                  
                                  B&O
                                  
                                  
                                  44,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  11,000
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  1/15/2008Jeremiah
      Cox
                                  
                                  B&O
                                  
                                  
                                  44,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  11,000
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  1/15/2008Paul
      Begum
                                  
                                  B
      &O
                                  
                                  
                                  100,000
                                  
                                  
                                  
                                  0.05
                                  
                                  
                                  
                                  5,000
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  12/22/2008Paul
      Begum
                                  
                                  B&O
                                  
                                  
                                  140,000
                                  
                                  
                                  
                                  0.05
                                  
                                  
                                  
                                  7,000
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  12/29/2008
 
 5
  ITEM
6   MANAGEMENT’S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
 
  The
Company will continue to operate on an inactive basis, while it attempts find an
appropriate and synergistic suitor to acquire it assets in a transaction
acceptable to its shareholders. Alternatively, the company may attempt to
renegotiate existing licensing agreements to ensure the ongoing monetization of
its Patent Portfolio. However, there is no Operational Plan to maintain any
day-to-day Operations, thus requiring only minimal financing to ensure the
payment of ongoing and nominal expenses.
  We advise
anyone relying upon this report that any statement of earnings by the company
for the calendar year ending 2008 have been obtained partially through the
reduction, adjustment or termination of various debt obligations and does notin any way
reflect revenues to the company from operations. The company continues as an
inactive company without revenues and with continuing substantial expenses,
yielding a net loss from operations if considered apart from reduction of debt.
The company continues to search for merger or acquisition candidates or possible
entities to whom it may sell its patent interest, but makes no warranty or
assurance that it will be successful in any of these endeavors. Further, there
is no assurance that the company can continue to operate without cash flows or
revenues and during the past year has relied exclusively upon interim capital
financing for its continuation. Based upon these and other related factors, the
auditors for the company will necessarily have to continue to express a
reservation of the company's ability to continue as a going
concern."
   
   BUSINESS
DEVELOPMENT, NEXT 12 MONTHS
   As a
result of the current financial condition of the Company, the plan of the
Company for the next twelve months is to attempt to monetize its Patent
Portfolio through expanded licensing agreements and/or to sell minority or
majority interest in the Company, its assets and/or its Patents to a qualified
suitor through a cash and/or equity transaction. This will allow the Company to
pay off its remaining liabilities, financial and contractual obligations,
cleaning up its balance sheet in its entirety, while obtaining equity interest
(with upside potential) in a going business concern for its shareholders. In the
interim, the Company plans to continue to find sufficient smaller financing to
permit the Company to continue to prevent the loss or wasting of its assets and
to continue to seek such an appropriate synergistic suitor, fully capable of
leveraging the Company’s assets, while returning value to its shareholders.
Currently, the Company has sufficient liquid assets to permit current restricted
operations to continue for one month or until such a desired suitor is found and
a transaction is secured. If such smaller interim financing is not obtained, it
is likely that the Company will cease being a going concern at the end of such
period.
  
 6
 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 remains in the development stage. For the year ended
December 31, 2008 the company had net income of $95,916, due in part to an
extraordinary gain of  $164,991 as a result of restructuring
debt.  For the year ended December 31, 2007, the Company had net
income of $1,563,900 due to an extraordinary gain of $2,271,394 as a result of
restructuring debt.  The Company had a loss before extraordinary items
of $707,494 for the year ended December 31, 2007.
 
 Liquidity and Capital Resources -The Company requires working capital principally to fund its proposed
research and development and operating expenses for which the Company has relied
on short-term borrowings and the issuance of restricted common
stock.  There are no formal commitments from banks or other lending
sources for lines of credit or similar short-term borrowings, but the Company
has been able to borrow minimal additional working capital that has been
required to prevent the assets from wasting away.  From time to time
in the past, required short-term borrowings have been obtained from a principal
shareholder or other related entities.
 
 Cash flows.  Operating
activities used cash of approximately $19,900 and $298,000 for 2008 and 2007
respectively.  The increase in the use of cash is due primarily to a
decrease in accounts receivable and accrued liabilities.
 
 Investing activities have used cash of
approximately $0 and $0 for 2008 and 2007, respectively.  Investing
activities primarily represent purchases of patents relating to the electronic
in-store advertising.
 
 Financing activities provided cash of
approximately $20,400 and $296,000 for 2008 and 2007,
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
ACCOUNTANTSON
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. The Firm of
Robison Hill conducted the year end audit for the period ending December 31,
2007.  During 2008, the Company Board of Directors appointed the firm
of Chisholm Bierwolf Nilson & Morrill, LLC to conduct the audit and to
provide additional services for the year ended December 31, 2008.
 
 7
 
 
 ITEM
8A(T)   CONTROLS AND PROCEDURES
 
 The Company's Chief Executive Officer
and Chief Financial
 Officer
are responsible for establishing and maintaining disclosure controls and
procedures for the Company.
 
 Our
internal controls framework is based on the criteria set forth in the Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).  Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
 
 (a) Evaluation of Disclosure Controls
and Procedures
 
 As of the end of the period covered by
this report, the Company carried out an evaluation, under the supervision and
with the participation of the Company's management and audit committee,
including the Company's President, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures pursuant to Rule
13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Based upon the evaluation, the Company's President concluded that, as of
the end of the period covered by this report, the Company's disclosure controls
and procedures were effective in timely alerting him to material information
relating to the Company required to be included in the reports that the Company
files and submits pursuant to the Exchange Act.
 
 This annual report does not include an
attestation report of the Company’s registered public accounting firm regarding
internal control over financial reporting.  Management’s report was
not subject to attestation by the Company’s registered public accounting firm
pursuant to temporary rules of the Securities and Exchange Commission that
permit the Company to provide only management’s report in this annual
report.
 
 (b) Changes in Internal
Controls
 
 Based on this evaluation as of December
31, 2008, there were no changes in the Company's internal controls over
financial reporting or in any other areas that occurred during the fourth fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.
   PART III
 
 
 ITEM
9   DIRECTORS EXECUTIVE OFFICERS, PROMOTERS ANDCONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OFTHE
EXCHANGE ACT
 
 
 Executive
Officers and Directors
 
 The
following table sets forth the name, age, and position of each executive officer
and director of the Company:
 
 Director's
      Name
                                        
                                        Age
                                        
                                        Office
                                        
                                        Term
      ExpiresWilliam
      C. Bailey
                                        
                                        
                                        72
                                        
                                        Chairman
                                        
                                        Status
      Change, 01/09; resigned.Paul
      G. Begum
                                        
                                        
                                        66
                                        
                                        Secretary
      & Treasurer
                                        
                                        Status
      Change, 01/09; resigned. Appointed Chairman and CEOJohn
      L. Hastings III
                                        
                                        
                                        45
                                        
                                        Interim
      Pres./CEO
                                        
                                        Status
      Change, 01/09; resigned.Bernadette
      Suckel
                                        
                                        
                                        52
                                        
                                        Interim
      COO
                                        
                                        Status
      Change, 02/08 and 04/08; resigned.Craig
      Poulton
                                        
                                        
                                        49
                                        
                                        Director
                                        
                                        Status
      Change, 01/09; resigned.Michael
      L. Mills
                                        
                                        
                                        47
                                        
                                        Director
                                        
                                        Status
      Change, 01/09; resigned.Jeremiah
      Cox
                                        
                                        
                                        36
                                        
                                        CFO
                                        
                                        Status
      Change, 01/09;
resigned.
   8
  William
C. Bailey, age 72, was elected as a director of the Company in June 1994.Since July of 2005, Mr.
Bailey has been serving as Chairman of the Board.  Mr. Bailey isalsoPresident and
owner of Mount Olympus Waters, Inc. and founder of Water and Power
Technologies.  Mr. Bailey served on the Board of Directors for the
American Bottled Water Association and the International Bottled Water
Association from 1975 to 1996, and was the Association’s President in 1978 and
again in 1990.  He received the industry’s first award of Excellence
from IWBA in 1987 and was elected to the Beverage World Water Hall of Fame in
1989.  He serves as a member of the Board of Trustees for the Utah
Food Industry Associations Insurance Trust.  He is a lifetime member
of the Board of Trustees for the Utah Symphony Opera, having served as Chairman
from 1999-2002.  He has been a member of the Board of Directors for
KUED 1990- 1996, University of Utah Alumni Board 1990-1994, and a member of the
University of Utah’s Fine Art’s Advisory Board.  He is also a member
of the Salt Lake Rotary and served as Secretary 1999-2000.  He
resigned January 9, 2009 with an effective date of December 31,
2008.
 
 Paul G. Begum, Founder, age 66 returned
to the Board of Directors in February, 2007.  Paul served as Secretary
& Treasurer, having previously served in prior years as President & CEO.
Paul has substantial entrepreneurial experience managing and owning controlling
interest in HelpUSolve, LLC which operates a number of divisions with products
ranging from filtered breathing masks (EnviroAir), food service industry cup
liners, script writing, screen plays and theatrical production. Paul also brings
substantial and diverse fundraising abilities and negotiating skills to the
Board.  He resigned as Secretary  & Treasurer effective
January 9, 2009.  On the same date he was appointed Chairman and Chief
Executive Officer of the Company.
 
 Michael
L. Mills, age 47, was elected as a director of the Company in December
1998.
 Mr. Mills
is President/CEO of Cackle Fresh Egg Farms, Inc. (an entity merged from Olson
Holdings, Inc.).  Cackle Fresh Egg Farms deals primarily in the
distribution of eggs, with headquarters in Washington State.  Mr.
Mills 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 mathematics.  He resigned January 9,
2009 with an effective date of December 31, 2008.
 
 John L.
Hastings III, age 45, joined the Company in November 2006 as Interim
President and CEO of Klever Marketing. John brought with him more than 20
years of experience in the roles of Sales, Marketing & Brand Management,
Consultative Practice Leader and Executive General Management within Consumer
Packaged Goods, Global Information Services and Global Retail/CPG Research &
Analytics industries. As of February 2008, John was appointed Chief Sales &
Marketing Officer of RemoteMDX and has continued to serve voluntarily on a
part-time, interim capacity at the company.  He resigned January 9,
2009 with an effective date of December 31, 2008.
 
 Bernadette
Suckel, age 52, joined the Company in November 2006 as Interim Chief Operating
Officer of Klever Marketing, working on a part time basis. She brought with her
more than 25 years experience in the roles of Sales, Marketing, Business
Development and Consultative Sales Management within Global Research, Global
Information Management, Large Systems and Retail Technologies
industries.  She resigned from her role as director and COO, effective
April 28, 2008.
 
 Jeremiah
Cox, age 36, joined the Company in April 2007 and serves as the Chief Financial
Officer. Jeremiah has entrepreneurial experience in operating and managing a
substantial real estate portfolio and holdings; capital management and equity
fundraising skills; and mortgage banking and currency trading experience. He
continues to operate a number of real estate investment, land development,
property management companies and a cellular phone retailer. He resigned January
9, 2009 with an effective date of December 31, 2008.
 
 9
 Craig
Poulton, age 49, joined the company in 2006 and is the Managing Partner of
Poulton and Associates, Insurance Company. He resigned January 9, 2009 with an
effective date of December 31, 2008.
 
 Robert
Campbell age 65, joined the Company in January 2009 and serves at the Chief
Operating Officer, Secretary Treasurer and board member.  Bob is a
recently retired Project Director with Parsons Corporation – one of the world’s
largest engineering and construction companies.  During his 33 years
with Parsons, Bob served in a number of key managerial and project management
positions, including such projects as San Francisco’s current $4.4 billion water
systems improvement program, Orange County’s $3.2 billion wastewater improvement
program, the Los Angeles Metro Rail and many more.  He is considered
an innovator and leader in project management and project control
systems.
 
 Ray
Norris, age 56, joined the Company in January 2009 and serves as a board
member.  He is currently employed with Focus Enterprises.
   Director's
      Name
                                        
                                        Age
                                        
                                        Office
                                        
                                        Date
      of changeWilliam
      C. Bailey
                                        
                                        
                                        72
                                        
                                        Chairman
                                        
                                        Resigned
      January 9, 2009Paul
      G. Begum
                                        
                                        
                                        66
                                        
                                        Secretary
      & Treasurer
                                        
                                        Resigned
      January 9, 2009John
      L. Hastings III
                                        
                                        
                                        45
                                        
                                        Interim
      Pres./CEO
                                        
                                        Resigned
      January 9, 2009Bernadette
      Suckel
                                        
                                        
                                        52
                                        
                                        Interim
      COO
                                        
                                        Resigned
      April 28, 2008Craig
      Poulton
                                        
                                        
                                        49
                                        
                                        Director
                                        
                                        Resigned
      January 9, 2009Michael
      L. Mills
                                        
                                        
                                        47
                                        
                                        Director
                                        
                                        Resigned
      January 9, 2009Jeremian
      Cox
                                        
                                        
                                        36
                                        
                                        CFO
                                        
                                        Resigned
      January 9, 2009Paul
      Begum
                                        
                                        
                                        66
                                        
                                        CEO
      & Chairman
                                        
                                        Installed January
      9, 2009Robert
      Campbell
                                        
                                        
                                        65
                                        
                                        COO
      & Sec/Treasurer
                                        
                                        Installed January
      9, 2009Ray
      Norris
                                        
                                        
                                        60
                                        
                                        Director
                                        
                                        Installed January
      9,
2009
  10
 
 Audit
Committee
 
 As of December 31, 2008, the Company
had one active board committee, the Audit and Compliance
Committee.  D. Paul Smith and Michael L. Mills serve on this
committee.  The committee meets annually to determine auditors and
scope of the audit, as well as reviews of the 10KSB and all audited
financials.
 
 Audit
Committee Financial Expert
 
 The
Company's board of directors does not have an "audit committee financial
expert," within the meaning of such phrase under applicable regulations of the
Securities and Exchange Commission, serving on its audit committee. The board of
directors believes that all members of its audit committee are financially
literate and experienced in business matters, and that one or more members of
the audit committee are capable of (i) understanding generally accepted
accounting principles ("GAAP") and financial statements, (ii) assessing the
general application of GAAP principles in connection with our accounting for
estimates, accruals and reserves, (iii) analyzing and evaluating our financial
statements, (iv) understanding our internal controls and procedures for
financial reporting; and (v) understanding audit committee functions, all of
which are attributes of an audit committee financial expert. However, the board
of directors believes that there is not any audit committee member who has
obtained these attributes through the experience specified in the SEC's
definition of "audit committee financial expert." Further, like many small
companies, it is difficult for the Company to attract and retain board members
who qualify as "audit committee financial experts," and competition for these
individuals is significant. The board believes that its current audit committee
is able to fulfill its role under SEC regulations despite not having a
designated "audit committee financial expert."
 
 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.
 
  (a)
                                                                    
                                                                    (b)
                                                                    
                                                                    
                                                                    
                                                                    (c.
                                                                    )
                                                                    (d)
                                                                    
                                                                    (e)
                                                                    
                                                                    (f)
                                                                    
                                                                    (g)
                                                                    
                                                                    (h)
                                                                    
                                                                    (i)Other
                                                                    
                                                                    
                                                                    
                                                                    SecuritiesYear
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    Annual
                                                                    
                                                                    Restricted
                                                                    
                                                                    Underlying
                                                                    
                                                                    
                                                                    
                                                                    All
      OtherEnded
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    Compen-
                                                                    
                                                                    Stock
                                                                    
                                                                    Options/
                                                                    
                                                                    LTIP
                                                                    
                                                                    Compen-Name
      and
                                                                    
                                                                    Dec.
                                                                    
                                                                    
                                                                    Salary
                                                                    
                                                                    Bonus
                                                                    
                                                                    sation
                                                                    
                                                                    Awards(s)
                                                                    
                                                                    SAR's
                                                                    
                                                                    Payouts
                                                                    
                                                                    sationPrincipal
      Position
                                                                    
                                                                    
                                                                    31
                                                                    
                                                                    
                                                                    ($)
                                                                    
                                                                    ($)
                                                                    
                                                                    
                                                                    
                                                                    ($)
                                                                    
                                                                    (no.)
                                                                    
                                                                    ($)
                                                                    
                                                                    ($)John
      Hastings (1)
                                                                    
                                                                    2008
                                                                    
                                                                    
                                                                    $
                                                                    22,500Interim
      Pres/CEO
                                                                    
                                                                    2007
                                                                    
                                                                    
                                                                    $
                                                                    128,7502006
                                                                    
                                                                    
                                                                    $
                                                                    60,000Bernadette
      Suckel (2)
                                                                    
                                                                    2008
                                                                    
                                                                    
                                                                    $
                                                                    6,000Interim
      COO
                                                                    
                                                                    2007
                                                                    
                                                                    
                                                                    $
                                                                    45,0002006
                                                                    
                                                                    
                                                                    $
                                                                    10,000
  (1) John
Hastings joined the Company on November 16, 2006, under terms of a contract, as
Interim President and Chief Executive Officer and as a member of the board. He
resigned January 9, 2009 with an effective date of December 31,
2008.
 (2)
Bernadette Suckel joined the Company on November 16, 2006, under terms of a
contract,  as Interim Chief Operating Officer and as a member of the
board. She resigned from both positions effective April 28, 2008.
  
 11
 
 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, 2008, to the chief executive officer, chief
financial officer, and directors of the Company.
 
 Name
                            Shares
      Acquired on exercise
                            Value
      Realized ($)
                            Number
      of Securities Underlying Unexercised Options
                            Value
      of Unexercised in-the-money options ($) (a)
 
 Exercisable
                            Unexercisable
                            Exercisable
                            UnexercisableWilliam
      Bailey
                            0
                            $0
                            0
                            $0
                            $0
                            $0Jeremiah
      Cox
                              
                              Paul
      G. Begum
                            0
                              
                              0
                            $0
                              
                              $0
                            0
                              
                              0
                            $0
                              
                              $0
                            $0
                              
                              $0
                            $0
                              
                              $0
 
 (a)
                          Based
      on the closing price of the Company’s Common Stock on December 31, 2008 at
      $.02    per
share
 
 Executive
Compensation and Benefits
 
 The Company provides no health
insurance to any full or part-time employees.
 
 The Company adopted a stock incentive
plan for its employees, executive officers, directors, and
consultants.
 
 
 ITEM
11   SECURITY OWNERSHIP OF BENEFICIAL OWNERSAND
MANAGEMENT
 
 Principal
Shareholders
 
 The table below sets forth information
as to each person owning of record or who was known by the Company to own
beneficially shares of stock that have more than 5% of the 42,277,063 votes as
of December 31, 2008, 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.
  Name and Address ofBeneficial Owner Directors andPrincipal Shareholders
                              
                              Nature
      of Ownership
                              
                              Shares
      Owned
                              
                              PercentDirectors
      and Executive OfficersPaul
      G. Begum
                              
                              Direct
                              
                              
                              1,496,540P.O.
      Box 58045
                              
                              Preferred
      shares stated as common
                              
                              
                              2,875,950Salt
      Lake City, UT 84158
                              
                              Options/Warrants
                              
                              
                              338,800Commons
      shares resulting from exercise of anti-dilution rights
                              
                              
                              9,808,935Total
                              
                              
                              14,520,225
                              
                              34.14%
  12
 ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
 Olson
Holdings, Inc. loans to the Company
 
 Michael Mills, a board member as of
December 31, 2008, previously served as an officer of Olson Holdings. As of
January 9, 2009, Mr. Mills resigned as a board member with an effective date of
December 31, 2008 and is now longer considered a related party.  Olson
Holdings, Inc. made a $150,000 unsecured loan to the Company on February 26,
2001.  This note has a six-month term at 10% annual interest maturing
on August 26, 2001.  The maker of the note may give written notice
within 10-days of maturity, to the Company, to convert the principal and
interest into common stock with a convertible price of $1.05 (10-day weighted
average from February 26, 2001 and the nine days prior).
 
 Olson Holdings made an unsecured loan
to the Company on January 7, 2002 for $1,836.  This note has an annual
interest rate of 8% and matures on January 7, 2004.  An option was
granted in connection with this note for 3,060 shares at a strike price of $1.00
and an expiration date of January 7, 2005.
 
 On September 30, 2007, the principal
balance due on the loans of $151,836 was converted to 607,343 shares of common
restricted stock at $.25 per share and the accrued interest totaling $139,551
was forgiven and included in extraordinary gain from troubled debt
restructuring.  At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
 
 Olson
Foundation loans to the Company
 
 Michael Mills, a board member as of
December 31, 2008, previously served as an officer of Olson Foundation. As of
January 9, 2009, Mr. Mills resigned as a board member with an effective date of
December 31, 2008 and is now longer considered a related party. Olson Foundation
loaned the Company $60,000 on July 16, 2001, of which is secured by a blanket
lien on the assets of the Company.  An interest rate of 10% compounded
monthly applies until January 15, 2002.  Principal and all due and
unpaid interest are to be paid on January 16, 2002, or the interest rate
increases to 15% compounded daily.  Warrants were issued in
conjunction with this loan for 18,182 common shares at a strike price of $0.01
and an expiration date of July 16, 2006. This note is convertible to Class C
convertible preferred shares or to Class D convertible preferred shares at the
option of the note holder.
 
 Olson Foundation loaned the Company
$90,000 on July 30, 2001, of which is secured by a blanket lien on the assets of
the Company.  An interest rate of 10% compounded monthly applies until
January 30, 2002.  Principal and all due and unpaid interest are to be
paid on January 30, 2002, or the interest rate increases to 15% compounded
daily.  Warrants were issued in conjunction with this loan for 27,273
common shares at a strike price of $0.01 and an expiration date of July 30,
2006. This note is convertible to Class C convertible preferred shares or to
Class D convertible preferred shares at the option of the note
holder.
 
 Olson Foundation made unsecured loans
to the Company on May 3, 2002, August 16, 2002, and October 29, 2002 for $7,359,
$10,000, and $1,059, respectively.  These notes are payable within two
years plus interest at 8% per annum. In conjunction with the notes, Olson
Foundation also received common stock options for each note at a ratio of 1.667
common shares for each dollar loaned.
 
 On September 30, 2007, the principal
balance due on the loans of $168,418 was converted to 673,673 shares of common
restricted stock at $.25 per share and the accrued interest totaling $220,375
was forgiven and included in extraordinary gain from troubled debt
restructuring.  At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
 
 
 Presidio
Investments, LLC loan to the Company
 
 Presidio Investments, LLC has loaned
the Company $1,000,000, which loan is secured by a blanket lien on the assets of
the Company.  The sole trustee of Presidio Investments, LLC is William
J. Howard, trustee of the Olson Legacy Trust, whose residual beneficiary is the
Olson Foundation.  The Olson Foundation, defined as a related
party,  was the guarantor for funds borrowed from Northern Trust Bank
which funds were used to make the loan to the Company. This note was amended on
March 22, 2001 with an additional $500,000 loaned to the Company between January
1, 2001 and March 22, 2001.  An Interest rate of 8% applies until
March 31, 2001 and increases to 10% on April 1, 2001.  Principal and
all due and unpaid interest are to be paid on October 1, 2001.  This
note is convertible to Class C convertible preferred shares at the option of the
note holder.
 
 On September 30, 2007, the principal
balance due on the loans of $1,500,000 was converted to 6,000,000 shares of
common restricted stock at $.25 per share and the accrued interest totaling
$1,483,019 was forgiven and included in extraordinary gain from troubled debt
restructuring.  At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
 On December 31, 2008, the preferred
shares held by Presidio Investments were sold to a private investment group and
Presidio Investments is no longer considered a related party.
 
 
 13
 The
Seabury Group Loan to the Company
 
 The Seabury Group loaned the Company
$60,000 on July 5, 2001, of which is secured by a blanket lien on the assets of
the Company.  An interest rate of 10% compounded monthly applies until
January 5, 2002.  Principal and all due and unpaid interest are to be
paid on January 5, 2002, or the interest rate increases to 15% compounded
daily.  Warrants were issued in conjunction with this loan for 18,182
common shares at a strike price of $0.01 and an expiration date of July 5,
2006.  This note is convertible to Class C convertible preferred
shares or to Class D convertible preferred shares at the option of the note
holder
 
 The Seabury Group loaned the Company
$190,000 on August 22, 2001, of which is secured by a blanket lien on the assets
of the Company.  An interest rate of 10% compounded monthly applies
until February 22, 2002.  Principal and all due and unpaid interest
are to be paid on February 22, 2002, or the interest rate increases to 15%
compounded daily.  Warrants were issued in conjunction with this loan
for 57,576 common shares at a strike price of $0.01 and an expiration date of
August 22, 2006.  This note is convertible to Class C convertible
preferred shares or to Class D convertible preferred shares at the option of the
note holder.
 
 On September 30, 2007, the principal
balance due on the loans of $150,000 was converted to 1,000,000 shares of common
restricted stock at $.25 per share and the accrued interest totaling $348,000
was forgiven and included in extraordinary gain from troubled debt
restructuring.  At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
 On December 31, 2008, the preferred
shares held by Seabury Investments were sold to a private investment group and
Seabury Investments is no longer considered a related party.
 
 
 Arbinger
Loans to the Company
 
 D Paul Smith previously served on the
Board of Directors of the Company and is also an officer and shareholder in the
Arbinger Institute. Mr. Smith is no longer considered a related party since his
resignation as the board of director in 2008. The Arbinger Institute has made
$41,893 in loans to the Company.  As part of a restructure process,
the accrued interest of $14,749 was converted to 58,996 shares of common
restricted shares at the rate of .25 cents per share.   The
68,467 associated options have expired.
 
 At December 31, 2008 and 2007, the
total amount due on these loans is $41,893 and $41,893,
respectively.
 
 Director
and Officer Loans to the Company
 
 
 During the year ended December 31,
2006, two former officers and directors loaned the Company
$16,500.  The loans are due on demand and carry an interest rate of 8%
per annum.  On September 30, 2007, $776 of interest was converted to
3,105 common restricted stock at $.25 per share.  At December 31, 2008
and 2007, the total due on these loans was $17,797 and $17,797,
respectively.  Due to their resignation they are no longer considered
as related parties in 2008.
 
  14
  
 ITEM
13. EXHIBITS, AND REPORTS ON FORM 8-K
 
 
 (a)     The
following documents are filed as part of this report.
 
  Balance SheetsDecember
      31, 2008 and 2007
                          F-3Statement of OperationsFor
      the Years Ended December 31, 2008 and 2007and
      for the Cumulative Period from July 5, 1996 (inception of development
      stage)to
      December 31, 2008
                          F-4Statement of Stockholders' EquityFrom
      July 5, 1996 (inception of development stage) to December 31,
      2008
                          F-5Statement Cash FlowsFor
      the Years Ended December 31, 2008 and 2007 and for the Cumulative
      Periodfrom
      July 5, 1996 (inception of development stage) to December 31,
      2008
                          F-12Notes to Financial Statements
                          
                          F-14
  15
   
 2.     Financial
Statement Schedules
 
 All
schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
 
 3.     Exhibits
 The
following exhibits are included as part of this report:
 Exhibit
 Number           Title
of Document
 
 3.01                Restated
Certificate of Incorporation of Klever Marketing, Inc. a
Delaware corporation (1)
 
 3.02                Certificate
of Designation of Rights, Privileges and Preferences: Rights
of A Class
Voting Preferred Stock, Series 1, of Klever Marketing, Inc.,
dated February
7, 2000 (2)
 
 3.03                Bylaws,
as amended (2)
 
 4.01                Amended
Certificate of Designation of Rights, Privileges and
Preferences: Rights of
A Class of Voting Preferred Stock, Series 1, of Klever Marketing,
Inc., Dated
February 7, 2000 (3)
 
 4.02                Certificate
of Designation of Rights, Privileges and Preferences of Class B
Voting Preferred
Stock, of Klever Marketing, Inc., dated September 24, 2000 (3)
 
 4.03                Certificate
of Designation of Rights, Privileges and Preferences of Class C
Voting Preferred
Stock, of Klever Marketing, Inc., dated January 2, 2001 (3)
  
  
  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)
  
 
 31.1
                          Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002.
 31.2
                          Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002.
 32.1
                          Certification
      Pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.
 32.2
                          Certification
      Pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.
 
 (1)Incorporated herein by reference from Registrant’s Form 10KSB, dated June
20, 1997.
 (2)
Incorporated herein by reference from Registrant’s Form 10KSB, dated March 29,
2001
 (3)
Incorporated herein by reference from Registrant’s Form 10QSB, dated May 15,
2001.
 (4)
Incorporated herein by reference from Registrant’s Form 10QSB, dated May 15,
2002.
 (5)Incorporated
herein by reference from Registrant’s Form 10QSB, dated August 19,
2002
 
 (b)
                          Reports Filed on Form
      8-K
 
 On May 3, 2007, the Company filed a
Form 8-K under Item 9, Regulation FD Disclosure.
 
 On July 19, 2007, the Company filed a
Form 8-K under Item 7, Regulation FD Disclosure.
 
 On November 13, 2007, the Company filed
a Form 8-K under Item 8, Other.
 
 On July 28, 2008, the Company filed a
Form 8-K under item 8, Other.
 
 16
 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES & SERVICES
 
 The following is a summary of the fees
billed to us by Robison, Hill & Company for professional services rendered
for the years ended December 31, 2008 and 2007:
 
 Service
                                
                                2008
                                
                                
                                2007Audit
      Fees
                                
                                $
                                23,782
                                
                                
                                $
                                17,989Audit-Related
      Fees
                                
                                
                                -
                                
                                
                                
                                -Tax
      Fees
                                
                                
                                250
                                
                                
                                
                                250All
      Other Fees
                                
                                
                                -
                                
                                
                                
                                -Total
                                
                                $
                                24,032
                                
                                
                                $
                                18,239
 
 Audit Fees. Consists of fees
billed for professional services rendered for the audits of our consolidated
financial statements, reviews of our interim consolidated financial statements
included in quarterly reports, services performed in connection with filings
with the Securities & Exchange Commission and related comfort letters and
other services that are normally provided by Robison, Hill & Company in
connection with statutory and regulatory filings or engagements.
 
 Tax Fees. Consists of fees
billed for professional services for tax compliance, tax advice and tax
planning. These services include assistance regarding federal, state and local
tax compliance and consultation in connection with various transactions and
acquisitions.
 
 
 Audit Committee Pre-Approval
of Audit and Permissible Non-Audit Services of Independent
Auditors
 
 The Audit
Committee is to pre-approve all audit and non-audit services provided by the
independent auditors. These services may include audit services, audit-related
services, tax services and other services as allowed by law or regulation.
Pre-approval is generally provided for up to one year and any pre-approval is
detailed as to the particular service or category of services and is generally
subject to a specifically approved amount. The independent auditors and
management are required to periodically report to the Audit Committee regarding
the extent of services provided by the independent auditors in accordance with
this pre-approval and the fees incurred to date. The Audit Committee may also
pre-approve particular services on a case-by-case basis.
 
 The Audit
Committee pre-approved 100% of the Company’s 2008 audit fees, audit-related
fees, tax fees, and all other fees to the extent the services occurred after May
6, 2003, the effective date of the Securities and Exchange Commission’s final
pre-approval rules.
 
 
 
 17
 
 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 14, 2009
                            By:
                            /s/ Paul
      G. BegumPaul
      G. BegumCEO
      & Chairman (Principal Executive Officer)
 
 Pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities
indicated on this 14th day of April 2008.
 
 Signatures
                                            
                                            Title/S/
      Paul G. Begum
                                            
                                            CEO
      & Chairman as of 01/09/2009Paul
      G. Begum
                                            
                                            (Principal
      Executive Officer)/S/
      Robert Campbell
                                            
                                            COO
      and Secretary Treasurer as of 01/09/2009Robert
      Campbell/S/
      Ray Norris
                                            
                                            DirectorRay
      Norris
 18
            
     REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 The Board
of Directors
 Klever
Marketing Inc.
 Salt Lake
City, Utah
 
 We have
audited the accompanying balance sheet of Klever Marketing Inc. as of December
31, 2008, and the related statements of operations, stockholders’ equity and cash
flows for the year 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 audit. The financial statements of Klever
Marketing Inc. as of December 31, 2007 were audited by other auditors whose
report dated April 14, 2008, expressed an unqualified opinion on those
statements.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform an audit of its
internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting.  Accordingly, we express no
such opinion.  An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides 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, 2008, and the results of their operations, cash flows and changes
in stockholders’ deficit for the year then ended and for the cumulative period
from inception to December 31, 2008, 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 no current source of revenue and suffered losses
from operations since inception and also is dependent on financing to continue
operations. These conditions raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
described in note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
 
   Chisholm,
Bierwolf, Nilson & Morrill, LLC
 Chisholm,
Bierwolf, Nilson & Morrill, LLC
 Bountiful,
Utah
 May 15,
2009
           
  
  
  
  
 /S/
      Robison Hill & Co.Certified
      Public Accountants
  
  
 KLEVER
      MARKETING, INC.(a
      Development Stage Company)BALANCE SHEETSDecember
      31,
                                                                
                                                                
                                                                December
      31,ASSETS
                                                                
                                                                2008
                                                                
                                                                
                                                                2007Current
      AssetsCash
                                                                
                                                                $
                                                                851
                                                                
                                                                
                                                                $
                                                                376Other
      Receivable
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                25,000Total
      Current Assets
                                                                
                                                                
                                                                851
                                                                
                                                                
                                                                
                                                                25,376Fixed
      AssetsOffice
      Equipment
                                                                
                                                                
                                                                92,964
                                                                
                                                                
                                                                
                                                                92,964Less
      Accumulated Depreciation
                                                                
                                                                
                                                                (92,964
                                                                )
                                                                
                                                                
                                                                (92,964
                                                                )Net
      Fixed Assets
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -Other
      AssetsPatents
                                                                
                                                                
                                                                775,045
                                                                
                                                                
                                                                
                                                                775,045Less
      Accumulated Amortization
                                                                
                                                                
                                                                (775,045
                                                                )
                                                                
                                                                
                                                                (775,045
                                                                )Net
      Other Assets
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -Total
      Assets
                                                                
                                                                $
                                                                851
                                                                
                                                                
                                                                $
                                                                25,376LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      LiabilitiesAccounts
      Payable, Trade
                                                                
                                                                $
                                                                307,308
                                                                
                                                                
                                                                $
                                                                309,537Accrued
      Liabilities
                                                                
                                                                
                                                                651,898
                                                                
                                                                
                                                                
                                                                790,508Line
      of Credit
                                                                
                                                                
                                                                20,423
                                                                
                                                                
                                                                
                                                                23,023Related
      Party Payables
                                                                
                                                                
                                                                9,000
                                                                
                                                                
                                                                
                                                                9,000Notes
      Payable
                                                                
                                                                
                                                                45,000
                                                                
                                                                
                                                                
                                                                45,000Stock
      Deposit
                                                                
                                                                
                                                                11,000
                                                                
                                                                
                                                                
                                                                -Total
      Current Liabilities
                                                                
                                                                
                                                                1,044,629
                                                                
                                                                
                                                                
                                                                1,177,068Stockholders'
      DeficitPreferred
      stock (par value $.01), 2,000,000 shares authorized287,595
      and 168,434 shares issued and outstanding at December 31,
    2008
                                                                
                                                                
                                                                2,876
                                                                
                                                                
                                                                
                                                                1,684and
      December 31, 2007, respectivelyCommon
      Stock (Par Value $.01), 50,000,000 shares authorized42,248,303
      and 46,718,303 shares issued and outstanding atDecember
      31, 2008 and December 31, 2007, respectively
                                                                
                                                                
                                                                422,483
                                                                
                                                                
                                                                
                                                                467,183Common
      Stock to be issued, 469,752 shares atDecember
      31, 2008 and December 31, 2007
                                                                
                                                                
                                                                4,698
                                                                
                                                                
                                                                
                                                                4,698Subscription
      Receivable
                                                                
                                                                
                                                                (23,000
                                                                )
                                                                
                                                                
                                                                -Treasury
      Stock, 100,000 and 5,270,000 shares at December 31, 2008and
      December 31, 2007, respectively
                                                                
                                                                
                                                                (1,000
                                                                )
                                                                
                                                                
                                                                (52,700
                                                                )Paid
      in Capital in Excess of Par Value
                                                                
                                                                
                                                                16,059,016
                                                                
                                                                
                                                                
                                                                16,032,208Retained
      Deficit
                                                                
                                                                
                                                                (3,333,785
                                                                )
                                                                
                                                                
                                                                (3,333,785
                                                                )Deficit
      Accumulated During Development Stage
                                                                
                                                                
                                                                (14,175,066
                                                                )
                                                                
                                                                
                                                                (14,270,982
                                                                )Total
      Stockholders' Deficit
                                                                
                                                                
                                                                (1,043,778
                                                                )
                                                                
                                                                
                                                                (1,151,692
                                                                )Total
      Liabilities and Stockholders' Deficit
                                                                
                                                                $
                                                                851
                                                                
                                                                
                                                                $
                                                                25,376
   F-3
 
 KLEVER MARKETING, INC.(A
      Development Stage Company)STATEMENTS OF OPERATIONSFrom
      Inception ofDevelopment
      StageFor
      the Years Ended
                                            
                                            
                                            On
      July 5, 1996December
      31,
                                            
                                            
                                            Through2008
                                            
                                            
                                            2007
                                            
                                            
                                            December
      31, 2008Revenue
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            256,000ExpensesSales
      and Marketing
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            163,306General
      and Administrative
                                            
                                            
                                            93,223
                                            
                                            
                                            
                                            549,760
                                            
                                            
                                            
                                            10,444,510Research
      and Development
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            4,529,656Total
      Expenses
                                            
                                            
                                            93,223
                                            
                                            
                                            
                                            549,760
                                            
                                            
                                            
                                            15,137,472Other
      Income (Expense)Other
      Income
                                            
                                            
                                            50,000
                                            
                                            
                                            
                                            25,126
                                            
                                            
                                            
                                            503,843Interest
      Income
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            18,902Interest
      Expense
                                            
                                            
                                            (25,752
                                            )
                                            
                                            
                                            (309,898
                                            )
                                            
                                            
                                            (2,597,000
                                            )Forgiveness
      of Debt
                                            
                                            
                                            164,991
                                            
                                            
                                            
                                            127,137
                                            
                                            
                                            
                                            292,128Gain
      (Loss) on Sale of Assets
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            26,947Capital
      Gain on Sale of Investments
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            191,492Total
      Other Income (Expense)
                                            
                                            
                                            189,239
                                            
                                            
                                            
                                            (157,635
                                            )
                                            
                                            
                                            (1,563,688
                                            )Income
      (Loss) Before Taxes
                                            
                                            
                                            96,017
                                            
                                            
                                            
                                            (707,395
                                            )
                                            
                                            
                                            (16,445,159
                                            )Income
      Taxes
                                            
                                            
                                            100
                                            
                                            
                                            
                                            100
                                            
                                            
                                            
                                            1,300Net
      Loss Before Extraordinary Items
                                            
                                            
                                            95,917
                                            
                                            
                                            
                                            (707,495
                                            )
                                            
                                            
                                            (16,446,459
                                            )Extraordinary
      Item - troubled debt restructuring
                                            
                                            
                                            -
                                            
                                            
                                            
                                            2,271,394
                                            
                                            
                                            
                                            2,271,394Net
      Income (Loss)
                                            
                                            $
                                            95,917
                                            
                                            
                                            $
                                            1,563,899
                                            
                                            
                                            $
                                            (14,175,065
                                            )Loss
      per Common ShareBasicIncome
      (Loss) Before Extraordinary Item
                                            
                                            $
                                            0.00
                                            
                                            
                                            $
                                            (0.02
                                            )Extraordinary
      Item
                                            
                                            
                                            -
                                            
                                            
                                            
                                            0.06Income
      (Loss) Per Share
                                            
                                            
                                            0.00
                                            
                                            
                                            $
                                            0.04DilutedIncome
      (Loss) Before Extraordinary Item
                                            
                                            $
                                            0.00
                                            
                                            
                                            $
                                            (0.01
                                            )Extraordinary
      Item
                                            
                                            
                                            -
                                            
                                            
                                            
                                            0.05Income
      (Loss) Per Share
                                            
                                            $
                                            0.00
                                            
                                            
                                            $
                                            0.04Weighted
      Average Shares OutstandingBasic
                                            
                                            
                                            46,530,769
                                            
                                            
                                            
                                            41,193,978Diluted
                                            
                                            
                                            56,339,704
                                            
                                            
                                            
                                            49,303,785
 
  
 F-4
 
 KLEVER
      MARKETING, INC.(a
      Development Stage Company)STATEMENTS OF STOCKHOLDERS' EQUITYFrom
      Inception ofDevelopment
      StageOn
      July 5,Preferred
      Stock
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              Common
      Stock
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              Common
                                                                                                                                                                                                                                Stock
      to be
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              Subscription
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              Treasury
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              Paid
      in Capital in
                                                                                                                                                                                                                                Excess
      of
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              Retained
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              1996
      Through
                                                                                                                                                                                                                                December 31,Shares
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              Amount
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              Shares
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              Amount
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              Issued
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              Receivable
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              Stock
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              Par
      Value
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              Deficit
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              2008Balance,
      December 31, 1995
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              247,100
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              $
                                                                                                                                                                                                                              2,471
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              12,210,949
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              $
                                                                                                                                                                                                                              122,109
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              $
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              $
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              $
                                                                                                                                                                                                                              74,022,028
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              $
                                                                                                                                                                                                                              (103,351,248
                                                                                                                                                                                                                              )
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              $
                                                                                                                                                                                                                              -January
      1996, shares issuedin
      connection with merger
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              (247,100
                                                                                                                                                                                                                              )
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              (2,471
                                                                                                                                                                                                                              )
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              (3,784,905
                                                                                                                                                                                                                              )
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              (37,849
                                                                                                                                                                                                                              )
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              5,059
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              (70,257,358
                                                                                                                                                                                                                              )
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              100,017,463Shares
      issued for cash at$0.50
      - 3.00 per share
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              314,287
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              3,143
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              507,932
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -Shares
      issued in exercise ofoptions
      at $1.00 - $1.25 per share
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              130,000
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              1,300
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              136,200
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -Shares
      issued for services at$1.25
      per share
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              14,282
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              143
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              17,710
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -Shares
      issued for receivableat
      $1.00 - 3.00 per share
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              407
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              101,543
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -Shares
      issued to officer andemployee
      for patents
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              2,250
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              130,500
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -Net
      Loss
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              (831,814
                                                                                                                                                                                                                              )Balance,
      December 31, 1996
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              8,884,613
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              88,846
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              7,716
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              4,658,555
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              (3,333,785
                                                                                                                                                                                                                              )
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              (831,814
                                                                                                                                                                                                                              )Shares
      issued for cash at$0.01
      - 3.00 per share
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              228,150
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              2,282
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              49
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              449,976
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -Shares
      issued to officers forloans
      at $0.08 - 1.82 per share
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              249,444
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              2,494
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              74,287
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -Shares
      issued for services at$0.50
      - 2.59 per share
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              10,398
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              104
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              7,391
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -Shares
      issued to officersfor
      patents
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              260,813
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              2,608
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              (2,250
                                                                                                                                                                                                                              )
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              1,892
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -Shares
      issued for cash andreceivables
      at $1.75 - 2.00 pershare
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              58,286
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              583
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              (100
                                                                                                                                                                                                                              )
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              85,267
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -Shares
      issued to VideOcartcreditors
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              97,610
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              976
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              (976
                                                                                                                                                                                                                              )
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -Shares
      issued for research &development
      at par
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              464
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -Shares
      issued for employeecompensation
      at $2.50 per share
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              6,000
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              60
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              14,940
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -Net
      Loss
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              (755,594
                                                                                                                                                                                                                              )Balance,
      December 31, 1997
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              9,795,314
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              97,953
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              4,903
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              -
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              5,292,308
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              (3,333,785
                                                                                                                                                                                                                              )
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              
                                                                                                                                                                                                                              (1,587,408
                                                                                                                                                                                                                              )
 
 F-5
 
 Shares
      issued for cashat
      $1.50 - 3.00 per share
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              294,059
                                              
                                              
                                              
                                              2,941
                                              
                                              
                                              
                                              (100
                                              )
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              612,416
                                              
                                              
                                              
                                              
                                              
                                              
                                              -Shares
      issued for servicesat
      $2.00 - 7.80 per share
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              13,648
                                              
                                              
                                              
                                              136
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              43,590
                                              
                                              
                                              
                                              
                                              
                                              
                                              -Shares
      issued for employeecompensation
      at $2.19 - 3.06per
      share
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              4,363
                                              
                                              
                                              
                                              44
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              9,954
                                              
                                              
                                              
                                              
                                              
                                              
                                              -Shares
      issued for accountsreceivable
      at $1.50 - 2.12 pershare
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              129,437
                                              
                                              
                                              
                                              1,294
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              209,671
                                              
                                              
                                              
                                              
                                              
                                              
                                              -Shares
      issued for 1,500 shares ofAvtel
      stock at $3.00 per share
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              4,125
                                              
                                              
                                              
                                              41
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              12,334
                                              
                                              
                                              
                                              
                                              
                                              
                                              -Shares
      issued for research&
      development contract
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              46,366
                                              
                                              
                                              
                                              464
                                              
                                              
                                              
                                              (464
                                              )
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              -Shares
      issued to officer forpatent
      at $2.94 per share
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              150,000
                                              
                                              
                                              
                                              1,500
                                              
                                              
                                              
                                              250
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              512,313
                                              
                                              
                                              
                                              
                                              
                                              
                                              -Shares
      returned at $1.58 pershare
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              (42,493
                                              )
                                              
                                              
                                              (425
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              (66,667
                                              )
                                              
                                              
                                              
                                              
                                              
                                              -Net
      Loss
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              (1,496,926
                                              )Balance,
      December 31 1998
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              10,394,819
                                              
                                              
                                              
                                              103,948
                                              
                                              
                                              
                                              4,589
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              6,625,919
                                              
                                              
                                              
                                              (3,333,785
                                              )
                                              
                                              
                                              (3,084,334
                                              )Shares
      issued for cashat
      $1.96 - 3.00 per share
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              701,525
                                              
                                              
                                              
                                              7,015
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,649,949
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Shares
      issued for employeecompensation
      at $1.95 - 2.34per
      share
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              2,995
                                              
                                              
                                              
                                              30
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              6,187
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Shares
      issued for exercise ofoptions
      at $0.52 - 0.86 per share
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              238,271
                                              
                                              
                                              
                                              2,383
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              200,342
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Shares
      returned at $0.67-1.58per
      share
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (62,489
                                              )
                                              
                                              
                                              (625
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (107,047
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Net
      Loss
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (1,734,623
                                              )Balance,
      December 31,1999
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              11,275,121
                                              
                                              
                                              
                                              112,751
                                              
                                              
                                              
                                              4,589
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              8,375,350
                                              
                                              
                                              
                                              (3,333,785
                                              )
                                              
                                              
                                              (4,818,957
                                              )
 
 F-6
 
 Shares
      issued for cashat
      $1.07 - 2.75 per share
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            279,742
                                            
                                            
                                            
                                            2,798
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            532,754
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Preferred
      shares issued for cashat
      $17 - 26 per share
                                            
                                            
                                            84,576
                                            
                                            
                                            
                                            846
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            1,827,529
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Shares
      issued for employeecompensation
      at $3.99 per share
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            74,608
                                            
                                            
                                            
                                            746
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            296,939
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Shares
      issued for exercise ofstock
      options at $0.86 - 1.07per
      share
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            597,778
                                            
                                            
                                            
                                            5,978
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            511,931
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Shares
      issued for accountspayable
      at $2.75 - 3.00 per share
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            9,488
                                            
                                            
                                            
                                            95
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            26,649
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Paid-in
      capital from treasury stocktransaction
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            16,180
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Shares
      canceled & converted to preferredshares
      at $2.75 per share
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (100,000
                                            )
                                            
                                            
                                            (1,000
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (274,000
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Conversion
      of note payable topreferred
      shares at $26 per share
                                            
                                            
                                            9,615
                                            
                                            
                                            
                                            96
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            249,904
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Shares
      issued that werepaid
      for in 997
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            23,334
                                            
                                            
                                            
                                            233
                                            
                                            
                                            
                                            (233
                                            )
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Shares
      issued for servicesat
      $0.89 per share
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            2,697
                                            
                                            
                                            
                                            27
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            2,373
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Shares
      returned at$1.73
      - 2.12 per share
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (10,000
                                            )
                                            
                                            
                                            (100
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (19,150
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Net
      Loss
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (4,066,283
                                            )Balance,
      December 31, 2000
                                            
                                            
                                            94,191
                                            
                                            
                                            
                                            942
                                            
                                            
                                            
                                            12,152,768
                                            
                                            
                                            
                                            121,528
                                            
                                            
                                            
                                            4,356
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            11,546,459
                                            
                                            
                                            
                                            (3,333,785
                                            )
                                            
                                            
                                            (8,885,240
                                            )Shares
      issued for cashat
      $0.82 per share
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            4,685
                                            
                                            
                                            
                                            47
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            3,795
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Preferred
      shares issuedfor
      cash at $6.60 per share
                                            
                                            
                                            6,061
                                            
                                            
                                            
                                            60
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            39,940
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Preferred
      shares issuedfor
      payment of note payable at$6.60
      per share
                                            
                                            
                                            68,182
                                            
                                            
                                            
                                            682
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            449,318
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Shares
      canceled for nonpayment
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (4,694
                                            )
                                            
                                            
                                            (47
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (9,903
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Shares
      issued for research &development
      expenses at $1.00per
      share
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            15,000
                                            
                                            
                                            
                                            150
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            14,850
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Shares
      issued for general &administrative
      expenses at $0.66per
      share
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            507,048
                                            
                                            
                                            
                                            5,070
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            329,581
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Shares
      returned to Company foraccounts
      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
                                            
                                            
                                            
                                            4,356
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (1,000
                                            )
                                            
                                            
                                            12,276,665
                                            
                                            
                                            
                                            (3,333,785
                                            )
                                            
                                            
                                            (11,227,645
                                            )
 
 F-7
 Shares
      canceled for servicesnot
      rendered
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (304,229
                                                  )
                                                  
                                                  
                                                  (3,042
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (197,749
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Cash
      received for sharesthat
      have not yet been issued
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  3,333
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  21,667
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Net
      Loss
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (1,025,837
                                                  )Balance,
      December 31, 2002
                                                  
                                                  
                                                  168,434
                                                  
                                                  
                                                  
                                                  1,684
                                                  
                                                  
                                                  
                                                  12,370,578
                                                  
                                                  
                                                  
                                                  123,706
                                                  
                                                  
                                                  
                                                  7,689
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (1,000
                                                  )
                                                  
                                                  
                                                  12,100,583
                                                  
                                                  
                                                  
                                                  (3,333,785
                                                  )
                                                  
                                                  
                                                  (12,253,482
                                                  )Shares
      issued for cash at$0.05
      - 0.75 per share
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  2,580,000
                                                  
                                                  
                                                  
                                                  25,800
                                                  
                                                  
                                                  
                                                  (3,333
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  151,033
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Shares
      issued for S&CMedical
      at $0.05 per share
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  3,000,000
                                                  
                                                  
                                                  
                                                  30,000
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  120,000
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Shares
      issued for notes payable at$.04-.05
      per share
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  11,259,786
                                                  
                                                  
                                                  
                                                  112,598
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  446,642
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Shares
      issued for accounts payableat
      $.01-.10 per share
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  4,200,000
                                                  
                                                  
                                                  
                                                  42,000
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  96,000
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Shares
      authorized for expenseat
      $.03 per share - not issued
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  9,545
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  19,090
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Shares
      authorized for payment ofaccounts
      payable at $.21 per shareshare
      - not issued
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  56
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  1,115
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Net
      Loss
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (1,361,753
                                                  )Balance,
      December31, 2003
                                                  
                                                  
                                                  168,434
                                                  
                                                  
                                                  
                                                  1,684
                                                  
                                                  
                                                  
                                                  33,410,364
                                                  
                                                  
                                                  
                                                  334,104
                                                  
                                                  
                                                  
                                                  13,957
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (1,000
                                                  )
                                                  
                                                  
                                                  12,934,463
                                                  
                                                  
                                                  
                                                  (3,333,785
                                                  )
                                                  
                                                  
                                                  (13,615,235
                                                  )
 
 F-8
  
 Shares
      issued for cash at$.036
      - .15 per share
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                770,000
                                                
                                                
                                                
                                                7,700
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                57,420
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Shares
      issued for accounts payableat
      $.05-.23/share
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                391,939
                                                
                                                
                                                
                                                3,919
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                27,306
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Shares
      issued for expenses at$.04
      - .23 per share
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,910,604
                                                
                                                
                                                
                                                19,106
                                                
                                                
                                                
                                                (9,203
                                                )
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                108,325
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Authorized
      shares issued
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                5,571
                                                
                                                
                                                
                                                56
                                                
                                                
                                                
                                                (56
                                                )
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Shares
      issued for settlement ofliabilities
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                152,142
                                                
                                                
                                                
                                                1,521
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                36,514
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Net
      Loss
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (632,293
                                                )Balance,
      December31, 2004
                                                
                                                
                                                168,434
                                                
                                                
                                                
                                                1,684
                                                
                                                
                                                
                                                36,640,620
                                                
                                                
                                                
                                                366,406
                                                
                                                
                                                
                                                4,698
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (1,000
                                                )
                                                
                                                
                                                13,164,028
                                                
                                                
                                                
                                                (3,333,785
                                                )
                                                
                                                
                                                (14,247,528
                                                )Shares
      issued for cashat
      $.028 - .25 per share
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,790,000
                                                
                                                
                                                
                                                17,900
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                254,726
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Shares
      issued for expenses at$.25
      per share
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                92,500
                                                
                                                
                                                
                                                925
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                22,200
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Net
      Loss
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (736,913
                                                )Balance,
      December31, 2005
                                                
                                                
                                                168,434
                                                
                                                
                                                
                                                1,684
                                                
                                                
                                                
                                                38,523,120
                                                
                                                
                                                
                                                385,231
                                                
                                                
                                                
                                                4,698
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (1,000
                                                )
                                                
                                                
                                                13,440,954
                                                
                                                
                                                
                                                (3,333,785
                                                )
                                                
                                                
                                                (14,984,441
                                                )Shares
      issued for general andadministrative
      expenses at $.25per
      share
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                2,788
                                                
                                                
                                                
                                                29
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                669
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Shares
      issued for cashat
      $.25 per share
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                586,000
                                                
                                                
                                                
                                                5,860
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                140,640
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Shares
      issued for accounts payableat
      $.25 per share
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                71,956
                                                
                                                
                                                
                                                719
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                17,270
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Compensation
      expense fromissuance
      of stock options
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                43,653
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Net
      Loss
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (850,440
                                                )Balance,
      December 31, 2006
                                                
                                                
                                                168,434
                                                
                                                
                                                
                                                1,684
                                                
                                                
                                                
                                                39,183,864
                                                
                                                
                                                
                                                391,839
                                                
                                                
                                                
                                                4,698
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (1,000
                                                )
                                                
                                                
                                                13,643,186
                                                
                                                
                                                
                                                (3,333,785
                                                )
                                                
                                                
                                                (15,834,881
                                                )
 
 F-9
 
 Shares
      issued for general andadministrative
      expenses at$.03
      - $.05 per share
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              450,000
                                              
                                              
                                              
                                              4,500
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              13000
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Shares
      issued for cash at$.25
      per share
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,090,000
                                              
                                              
                                              
                                              10,900
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              261,600
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Shares
      issued for accountspayable
      at $.25 per share
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              67,988
                                              
                                              
                                              
                                              680
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              16,315
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Shares
      issued for notespayable
      at $.25 per share
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              8,281,016
                                              
                                              
                                              
                                              82,810
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,987,444
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Shares
      issued for accruedinterest
      at $.25 per share
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              62,101
                                              
                                              
                                              
                                              621
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              14,905Shares
      returned to the treasury
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              (51,700
                                              )
                                              
                                              
                                              51,700
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Shares
      returned to treasury andcancelled
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (2,416,666
                                              )
                                              
                                              
                                              (24,167
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              24,167
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Compensation
      expense fromissuance
      of stock options
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              19,891
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Net
      Income
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,563,899Balance,
      December 31, 2007
                                              
                                              
                                              168,434
                                              
                                              
                                              
                                              1,684
                                              
                                              
                                              
                                              46,718,303
                                              
                                              
                                              
                                              467,183
                                              
                                              
                                              
                                              4,698
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (52,700
                                              )
                                              
                                              
                                              16,032,208
                                              
                                              
                                              
                                              (3,333,785
                                              )
                                              
                                              
                                              (14,270,982
                                              )Additional
      preferred sharesissued
      as dividends
                                              
                                              
                                              119,161
                                              
                                              
                                              
                                              1,192
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              (1,192
                                              )Shares
      returned to treasury and cancelled
                                              
                                              
                                              
                                              (5,170,000
                                              )
                                              
                                              
                                              (51,700
                                              )
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              51,700Subscription
      Receivable
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              (23,000
                                              )Shares
      issued for cash at $.05 per share
                                              
                                              
                                              
                                              700,000
                                              
                                              
                                              
                                              7,000
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              28,000Net
      Income
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              95,916Balance,
      December 31 2008
                                              
                                              
                                              287,595
                                              
                                              
                                              $
                                              2,876
                                              
                                              
                                              
                                              42,248,303
                                              
                                              
                                              $
                                              422,483
                                              
                                              
                                              $
                                              4,698
                                              
                                              
                                              $
                                              (23,000
                                              )
                                              
                                              $
                                              (1,000
                                              )
                                              
                                              $
                                              16,059,016
                                              
                                              
                                              $
                                              (3,333,785
                                              )
                                              
                                              $
                                              (14,175,066
                                              )
 
 F-10
 KLEVER
      MARKETING, INC.(A
      Development Stage Company)STATEMENTS OF CASH FLOWSFrom
      Inception ofDevelopment
      StageFor
      the Years Ended
                                          
                                          
                                          On
      July 5, 1996December
      31,
                                          
                                          
                                          Through2008
                                          
                                          
                                          2007
                                          
                                          
                                          December
      31, 2008CASH
      FLOWS FROM OPERATINGACTIVITIES:Net
      Income (Loss)
                                          
                                          $
                                          95,916
                                          
                                          
                                          $
                                          1,563,899
                                          
                                          
                                          $
                                          (14,175,066
                                          )Adjustments
      Used to Reconcile Net Loss to NetCash
      Provided by (Used in) Operating Activities:Stock
      Issued for General and Administrative
                                          
                                          
                                          -
                                          
                                          
                                          
                                          17,500
                                          
                                          
                                          
                                          1,004,982Stock
      Issued for Research and Development
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          62,850Stock
      Returned for Services not Rendered
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (200,790
                                          )(Gain)
      Loss on Sale/Disposal of Assets
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          486,536Compensation
      Expense from Stock Options
                                          
                                          
                                          -
                                          
                                          
                                          
                                          19,891
                                          
                                          
                                          
                                          89,791Stock
      Issued for Interest
                                          
                                          
                                          -
                                          
                                          
                                          
                                          15,525
                                          
                                          
                                          
                                          135,226Stock
      Issued for Accounts Payable
                                          
                                          
                                          -
                                          
                                          
                                          
                                          16,996
                                          
                                          
                                          
                                          243,458Deferred
      Income
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (214,000
                                          )Depreciation
      and Amortization
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          1,912,883Write-off
      Bad Debts
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          15,000(Increase)
      Decrease in Accounts Receivable
                                          
                                          
                                          25,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          24,587(Increase)
      Decrease in Subscription Receivable
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          37,694(Increase)
      Decrease in Other Assets & Prepaids
                                          
                                          
                                          -
                                          
                                          
                                          
                                          4,715
                                          
                                          
                                          
                                          89,238Increase
      (Decrease) in Accounts Payable
                                          
                                          
                                          (2,229
                                          )
                                          
                                          
                                          (77,453
                                          )
                                          
                                          
                                          214,104Increase
      (Decrease) in Accrued Liabilities
                                          
                                          
                                          (138,612
                                          )
                                          
                                          
                                          (1,859,392
                                          )
                                          
                                          
                                          558,672Net
      Cash Used in Operating Activities
                                          
                                          
                                          (19,925
                                          )
                                          
                                          
                                          (298,319
                                          )
                                          
                                          
                                          (9,714,835
                                          )CASH
      FLOWS FROM INVESTINGACTIVITIES:Acquisition/Sale
      of Equipment, net
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (587,801
                                          )Acquisition/Sale
      of Patents
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          25,089Acquisition/Sale
      of Stock, net
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          12,375Net
      Cash Used by Investing Activities
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (550,337
                                          )CASH
      FLOWS FROM FINANCINGACTIVITIES:Stock
      Deposit
                                          
                                          
                                          11,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          11,000Proceeds
      from Capital Stock Issued
                                          
                                          
                                          12,000
                                          
                                          
                                          
                                          272,500
                                          
                                          
                                          
                                          7,050,173Proceeds
      from Loans
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          3,473,252line
      of Credit
                                          
                                          
                                          (2,600
                                          )
                                          
                                          
                                          23,023
                                          
                                          
                                          
                                          20,423Loan
      Receivables
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (15,000
                                          )Principal
      Payments on Lease Obligations
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (18,769
                                          )Cash
      Payments on Notes Payable
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (279,730
                                          )Net
      Cash Provided by Financing Activities
                                          
                                          
                                          20,400
                                          
                                          
                                          
                                          295,523
                                          
                                          
                                          
                                          10,241,349Net
      Increase (Decrease) in Cash and CashEquivalents
                                          
                                          
                                          475
                                          
                                          
                                          
                                          (2,796
                                          )
                                          
                                          
                                          (23,823
                                          )Cash
      and Cash Equivalents, Beginning of Year
                                          
                                          
                                          376
                                          
                                          
                                          
                                          3,172
                                          
                                          
                                          
                                          24,674Cash
      and Cash Equivalents, End of Year
                                          
                                          $
                                          851
                                          
                                          
                                          $
                                          376
                                          
                                          
                                          $
                                          851
 
   F-11
   KLEVER
      MARKETING, INC.(A
      Development Stage Company)STATEMENTS
      OF CASH FLOWS(continued)From
      Inception ofDevelopment
      StageFor
      the Years Ended
                                          
                                          
                                          On
      July 5, 1996December
      31,
                                          
                                          
                                          Through2008
                                          
                                          
                                          2007
                                          
                                          
                                          December
      31, 2008SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Interest
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -Income
      Taxes
                                          
                                          $
                                          100
                                          
                                          
                                          $
                                          100
                                          
                                          
                                          $
                                          1,300SUPPLEMENTAL
      DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:On
      September 30, 2007, the Company issued 8,281,016 shares of common stock in
      exchange fornotes
      payable totaling $2,070,254. As part of the agreements, accrued
      interest related to these notestotaling
      $2,190,946 was forgiven, and recorded as extraordinary gain at September
      30, 2007.
   F-12
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
  
 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 net income of $95,916 for the year ended
December 31, 2008, due to other income  of $164,991 as a result of
forgiveness of debt. For the year ended December 31, 2007, the Company had net
income of $1,563,899, due to extraordinary gain of $2,271,394 as a result of
restructuring debt.  The Company had a loss before extraordinary items
of $707,494 for the year ended December 31, 2007. The Company has losses of
$14,175,066 since inception.  At December 31, 2008 and 2007, the
company had working capital deficits in the amounts of $1,043,778 and $1,151,692
respectively.
 
 The
Company 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 has been in the development stage
since this time.
  F-13
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 NOTE 1 - NATURE OF
OPERATIONS AND GOING CONCERN (continued)
 
 
 Nature of
Business
 
 The Company was formed for the purpose
of creating a vehicle to obtain capital, to file and acquire patents, to seek
out, investigate, develop, manufacture, market and distribute electronic
shopping cart based and in-store advertising, promotion and media content and
retail shopper services, which have potential for profit.  The Company
is currently in the development stage and seeking new business
opportunities.
 
 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.
 
 Use 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 2007 financial statements to conform with the 2008 presentation.
These reclassifications are deemed immaterial to the financial statements taken
as a whole.
  F-14
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
  
 NOTE 2 - SUMMARY OF
ACCOUNTING POLICIES (continued)
 
 Fair Value of Financial
Instruments
 
 Effective
January 1, 2007, the company adopted the provisions of SFAS No. 157, Fair Value
Measurements.  SFAS No. 157 provides a framework for the recognition,
valuation and measurement of fair value of balance sheet items that would equal
the price received to sell an asset or that would be paid to transfer a
liability in an orderly transaction between market participants as of the
measurement date. The carrying value of the Company's financial instruments,
including intangible assets, accounts payable and accrued liabilities at
December 31, 2008 and 2007 approximates their fair values due to the short-term
nature of these financial instruments. Management assigns no value to intangible
assets because there is no market participant interest in the purchase of these
assets or liabilities.
 
 
 Earnings (Loss) Per
Share
 The
computation of net earnings (loss) per share of common stock is based on the
weighted average number of shares outstanding during each period
presented.  The Company utilizes the treasury stock method to
calculate diluted earnings (loss) per share, which considers potentially
issuable shares on common stock equivalents.  In accordance with
SFAS  No. 128, "Earnings per Share," common
stock options have a dilutive effect when the average market price of the common
stock during the period exceeds the exercise price of the
options.
 
 Common stock
equivalents for the company derive from two sources.  Options, granted
with the issue of common stock, that when exercised are converted to common
stock and the potential common stock that may result from the application of an
anti-dilutive rights clause contained in the designation of rights for preferred
shares.  The preferred share right allows an anti-dilution formula to
calculate the number of common shares that the Company would be obligated to
issue should the preferred share holders elect to convert their preferred shares
to common shares.
 
 The average
market price of the Company's common stock during the years ended December 31,
2008 and 2007 was $0.03 and $0.02, respectively.  As such,
potentially issuable commons shares related to options were excluded from the
calculation of diluted loss per share for the period ended December 31, 2008 and
2007 because their effect was anti-dilutive
 
 At December
31, 2008 and 2007, the total number of potentially dilutive common stock
equivalents is presented below:
  2008
                                                    2007Potential
      Common stock equivalents from stock options:
                                                    -
                                                    -Potential
      Common stock equivalents from Preferred share rights:
                                                    9,808,935
                                                    8,109,807
  F-15
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
  Year
      endedDecember
      31,Statement
      of Operations Summary Information:
                                        
                                        2008
                                        
                                        
                                        2007Numerator:Income
      (loss) before extraordinary items
                                        
                                        $
                                        95,916
                                        
                                        
                                        $
                                        (707,495
                                        )Income
      from extraordinary items, net of tax
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,271,394Net
      income
                                        
                                        $
                                        95,916
                                        
                                        
                                        $
                                        1,563,899Denominator:Weighted-average
      common shares outstandingBasic
                                        
                                        
                                        46,530,769
                                        
                                        
                                        
                                        41,193,978Conversion
      of preferred rights
                                        
                                        
                                        9,808,935
                                        
                                        
                                        
                                        8,109,807Diluted
                                        
                                        
                                        56,339,704
                                        
                                        
                                        
                                        49,303,785EARNINGS  (LOSS)
      PER SHARE:BasicIncome
      (loss) before extraordinary items
                                        
                                        $
                                        0.00
                                        
                                        
                                        $
                                        (0.02
                                        )Income
      from extraordinary items, net of tax
                                        
                                        
                                        -
                                        
                                        
                                        
                                        0.06Net
      income
                                        
                                        $
                                        0.00
                                        
                                        
                                        $
                                        0.04DilutedIncome
      (loss) before extraordinary items
                                        
                                        $
                                        0.00
                                        
                                        
                                        $
                                        (0.01
                                        )Income
      from extraordinary items, net of tax
                                        
                                        
                                        -
                                        
                                        
                                        $
                                        0.05Net
      income
                                        
                                        $
                                        0.00
                                        
                                        
                                        $
                                        0.04
 
 
 
 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. The Company
is currently under the development stage and did not generate revenues from the
operations during 2008 and 2007. As of December 31, 2008 and 2007 there were $0
accounts receivable and accordingly, no provision for allowance of doubtful
accounts was recorded.
 
 
 
 Fixed
Assets
 
 Fixed assets are stated at cost. Fixed
asset have been fully depreciated and have a book value of
$0.  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
      yearsOffice
      furniture and fixtures
                                      5-10
      years
 
 Upon sale or other disposition of
property and equipment, the cost and related accumulated depreciation or
amortization are removed from the accounts and any gain or loss is included in
the determination of income or loss.
 
 Expenditures for maintenance and
repairs are charged to expense as incurred.  Major overhauls and
betterments are capitalized and depreciated over their estimated economic useful
lives.
 
 Depreciation expense was $0 and $0 for
the years ended December 31, 2008 and 2007, respectively.
 
  F-16
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
  
 NOTE 2 - SUMMARY OF
ACCOUNTING POLICIES (continued)
 
 Intangibles
 
 Intangibles associated with certain
technology agreements are amortized over 10 - 14 years.
 
 Amortization expense was $0 and $0 for
the years ended December 31, 2008 and 2007, respectively.  The
intangibles are fully amortized and have a book value of $0 at December 31, 2008
and 2007.
 
 Stock
Options
 
 Effective January 1, 2006, the company
adopted the provisions of SFAS No. 123(R). SFAS No. 123(R) requires
employee equity awards to be accounted for under the fair value method.
Accordingly, share-based compensation is measured at grant date, based on the
fair value of the award. Prior to January 1, 2006, the company accounted for
awards granted to employees under its equity incentive plans under the intrinsic
value method prescribed by Accounting Principles Board (APB) Opinion
No. 25, “Accounting for Stock Issued to Employees” (APB 25), and related
interpretations, and provided the required pro forma disclosures prescribed by
SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS
No. 123), as amended.
 
 Under the modified prospective method
of adoption for SFAS No. 123(R), the compensation cost recognized by the
company beginning on January 1, 2006 includes (a) compensation cost for all
equity incentive awards granted prior to, but not yet vested as of
January 1, 2006, based on the grant-date fair value estimated in accordance
with the original provisions of SFAS No. 123, and (b) compensation
cost for all equity incentive awards granted subsequent to January 1, 2006,
based on the grant-date fair value estimated in accordance with the provisions
of SFAS No. 123(R). The company uses the straight-line attribution method
to recognize share-based compensation costs over the service period of the
award. Upon exercise, cancellation, forfeiture, or expiration of stock options,
or upon vesting or forfeiture of restricted stock units, deferred tax assets for
options and restricted stock units with multiple vesting dates are eliminated
for each vesting period on a first-in, first-out basis as if each vesting period
was a separate award. To calculate the excess tax benefits available for use in
offsetting future tax shortfalls as of the date of implementation, the company
followed the alternative transition method discussed in FASB Staff Position
No. 123(R)-3.
   F-17
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
  
 NOTE 2 - SUMMARY OF
ACCOUNTING POLICIES (continued)
 
 During
the year ended December 31, 2008, the Company granted no stock
options.  During the prior year ended December 31, 2007 the Company
granted 520,000 stock options to officers and directors, and granted 25,000
stock options to non-employees. Accordingly, stock-based compensation expense of
$19,891 was recognized in the Statement of Operations at December 31,
2007.  The Black-Scholes option pricing model was used to calculate to
estimate fair value of the options granted.  The following assumptions
were made: risk-free rate was between 3.15% and 4.98%; expected life of the
options was 3 years; expected volatility of stock for the three year options was
between 213.7% and 237%, respectively.
 
 NOTE 3 - INCOME
TAXES
 
 As of December 31, 2008, the Company
had a net operating loss carry forward for income tax reporting purposes of
approximately $17,508,849 that may be offset against future taxable income
through 2028.  Current tax laws limit the amount of loss available to
be offset against future taxable income when a substantial change in ownership
occurs.  Therefore, the amount available to offset future taxable
income may be limited.  No tax benefit has been reported in the
financial statements, because the Company believes there is a 50% or greater
chance the carry-forwards will expire unused.  Accordingly, the
potential tax benefits of the loss carry-forwards are offset by a valuation
allowance of the same amount.
 
 2008
                                                    
                                                    
                                                    2007Net
      Operating Losses
                                                    
                                                    $
                                                    2,608,279
                                                    
                                                    
                                                    $
                                                    2,622,667Valuation
      Allowance
                                                    
                                                    
                                                    (2,608,279
                                                    )
                                                    
                                                    
                                                    (2,622,667
                                                    )$
                                                    -
                                                    
                                                    
                                                    $
                                                    -
 
 
 The provision for income taxes differs
from the amount computed using the federal US statutory income tax rate as
follows:
 
 2008
                                                  
                                                  
                                                  2007Provision
      (Benefit) at US Statutory Rate
                                                  
                                                  $
                                                  (14,388
                                                  )
                                                  
                                                  $
                                                  (237,569
                                                  )Increase
      (Decrease) in Valuation Allowance
                                                  
                                                  
                                                  14,388
                                                  
                                                  
                                                  
                                                  (237,569
                                                  )$
                                                  -
                                                  
                                                  
                                                  $
                                                  -
 
  F-18
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
  
 NOTE 3 - INCOME TAXES
(continued)
 
 The Company evaluates its valuation
allowance requirements based on projected future operations.  When
circumstances change and causes a change in management's judgment about the
recoverability of deferred tax assets, the impact of the change on the valuation
is reflected in current income.
 
 
 
 NOTE 4 - LEASE
COMMITMENT
 
 During the month of June, 2007, the
Company terminated a month to month lease of approximately 700 square feet of
office space from Poulton & Associates.  The rent payments, under
the terms of the terminated lease were approximately $800 per
month.
 
 During the period starting July, 2007
and ending December 2008, the Company was located in a facility of approximately
1,000 square feet, provided at no charge by a board member.
 
 During the month of January, 2009, the
Company began a month to month lease of approximately 800 square feet of office
space from Eagle Mortgage.  The rent payments, under the terms of the
lease are $400 per month.
 
 
 
 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 year ended December 31, 2008
and 2007, the Company expended $0 and $0 respectively for research and
development of the technology involved with its patents.
 
 F-19
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 
 
 NOTE 6- RELATED PARTY
TRANSACTIONS
 
 Olson
Holdings, Inc. loans to the Company
 
 Michael Mills, a board member as of
December 31, 2008, previously served as an officer of Olson Holdings. As of
January 9, 2009, Mr. Mills resigned as a board member with an effective date of
December 31, 2008 and is now longer considered a related
party.    Olson Holdings, Inc. made a $150,000 unsecured
loan to the Company on February 26, 2001.  This note has a six-month
term at 10% annual interest maturing on August 26, 2001.  The maker of
the note may give written notice within 10-days of maturity, to the Company, to
convert the principal and interest into common stock with a convertible price of
$1.05 (10-day weighted average from February 26, 2001 and the nine days
prior).
 
 Olson Holdings made an unsecured loan
to the Company on January 7, 2002 for $1,836.  This note has an annual
interest rate of 8% and matures on January 7, 2004.  An option was
granted in connection with this note for 3,060 shares at a strike price of $1.00
and an expiration date of January 7, 2005.
 
 On September 30, 2007, the principal
balance due on the loans of $151,836 was converted to 607,343 shares of common
restricted stock at $.25 per share and the accrued interest totaling $139,551
was forgiven and included in extraordinary gain from troubled debt
restructuring.  At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
 
 Olson
Foundation loans to the Company
 
 Michael Mills, a board member as of
December 31, 2008, previously served as an officer of Olson
Foundation.  As of January 9, 2009, Mr. Mills resigned as a board
member with an effective date of December 31, 2008 and is no longer considered a
related party. Olson Foundation loaned the Company $60,000 on July 16, 2001, of
which is secured by a blanket lien on the assets of the Company.  An
interest rate of 10% compounded monthly applies until January 15,
2002.  Principal and all due and unpaid interest are to be paid on
January 16, 2002, or the interest rate increases to 15% compounded
daily.  Warrants were issued in conjunction with this loan for 18,182
common shares at a strike price of $0.01 and an expiration date of July 16,
2006. This note is convertible to Class C convertible preferred shares or to
Class D convertible preferred shares at the option of the note
holder.
 
 Olson Foundation loaned the Company
$90,000 on July 30, 2001, of which is secured by a blanket lien on the assets of
the Company.  An interest rate of 10% compounded monthly applies until
January 30, 2002.  Principal and all due and unpaid interest are to be
paid on January 30, 2002, or the interest rate increases to 15% compounded
daily.  Warrants were issued in conjunction with this loan for 27,273
common shares at a strike price of $0.01 and an expiration date of
July 30, 2006. This note is convertible to Class C convertible preferred shares
or to Class D convertible preferred shares at the option of the note holder.
 F-20
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 NOTE 6- RELATED PARTY
TRANSACTIONS (continued)
  Olson Foundation made unsecured loans
to the Company on May 3, 2002, August 16, 2002, and October 29, 2002 for $7,359,
$10,000, and $1,059, respectively.  These notes are payable within two
years plus interest at 8% per annum. In conjunction with the notes, Olson
Foundation also received common stock options for each note at a ratio of 1.667
common shares for each dollar loaned.
 
 On September 30, 2007, the principal
balance due on the loans of $168,418 was converted to 673,673 shares of common
restricted stock at $.25 per share and the accrued interest totaling $220,375
was forgiven and included in extraordinary gain from troubled debt
restructuring.  At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
 
 Presidio
Investments, LLC loan to the Company
 
 Presidio InvestmentsLLC, a preferred
shareholder, has loaned the Company $1,000,000, which loan is secured by a
blanket lien on the assets of the Company.  The sole trustee of
Presidio Investments, LLC is William J. Howard, trustee of the Olson Legacy
Trust, whose residual beneficiary is the Olson Foundation.  The Olson
Foundation, defined as a related party, was the guarantor for funds borrowed
from Northern Trust Bank which funds were used to make the loan to the Company.
This note was amended on March 22, 2001 with an additional $500,000 loaned to
the Company between January 1, 2001 and March 22, 2001.  An Interest
rate of 8% applies until March 31, 2001 and increases to 10% on April 1,
2001.  Principal and all due and unpaid interest are to be paid on
October 1, 2001.  This note is convertible to Class C convertible
preferred shares at the option of the note holder.
 
 On September 30, 2007, the principal
balance due on the loans of $1,500,000 was converted to 6,000,000 shares of
common restricted stock at $.25 per share and the accrued interest totaling
$1,483,019 was forgiven and included in extraordinary gain from troubled debt
restructuring.  At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
  On December 31, 2008, the preferred
shares held by Presidio Investments were sold to a private investment group and
Presidio Investments is no longer considered a related party.
 
 
 F-21
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 
 
 NOTE 6- RELATED PARTY
TRANSACTIONS (continued)
 
 The Seabury Group, a preferred
shareholder, loaned the Company $190,000 on August 22, 2001, of which is secured
by a blanket lien on the assets of the Company.  An interest rate of
10% compounded monthly applies until February 22, 2002.  Principal and
all due and unpaid interest are to be paid on February 22, 2002, or the interest
rate increases to 15% compounded daily.  Warrants were issued in
conjunction with this loan for 57,576 common shares at a strike price of $0.01
and an expiration date of August 22, 2006.  This note is convertible
to Class C convertible preferred shares or to Class D convertible preferred
shares at the option of the note holder.
 
 On September 30, 2007, the principal
balance due on the loans of $150,000 was converted to 1,000,000 shares of common
restricted stock at $.25 per share and the accrued interest totaling $348,000
was forgiven and included in extraordinary gain from troubled debt
restructuring.  At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
 
 On December 31, 2008, the preferred
shares held by Seabury Investments were sold to a private investment group and
Seabury Investments is no longer considered a related party.
 
 
 Arbinger
Loans to the Company
 
 D Paul Smith previously served on the
Board of Directors of the Company and is also an officer and shareholder in the
Arbinger Institute. Mr. Smith is no longer considered a related party since his
resignation as the board of director in 2008. The Arbinger Institute has made
$41,893 in loans to the Company.  As part of a restructure process,
the accrued interest of $14,749 was converted to 58,996 shares of common
restricted shares at the rate of .25 cents per share.   The
68,467 associated options have expired.
 
 At December 31, 2008 and 2007, the
total amount due on these loans is $41,893 and $41,893,
respectively.
 
 
 Director
and Officer Loans to the Company
 
 During the year ended December 31,
2006, two former officers and directors loaned the Company
$16,500.  The loans are due on demand and carry an interest rate of 8%
per annum.  On September 30, 2007, $776 of interest was converted to
3,105 common restricted stock at $.25 per share.  At December 31, 2008
and 2007, the total due on these loans was $17,797 and $17,797,
respectively.  Due to their resignation they are no longer considered
as related parties in 2008.
 
 
 F-22
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 NOTE 7- LINE OF
CREDIT
 
 During the year ended December 31,
2006, a former officer and director established, in his name, a credit card line
of credit and authorized the Company to use this card for Company purchases and
overdraft protection.  The total line of credit is $25,000 dollars.
Under terms of the card agreement, interest is charged at 9% for purchases,
21.99% for cash advances and 21.99% for overdrafts.  At December 31,
2008 and 2007, the total due on this credit card was $20,423 and $23,023,
respectively.
 
 
 
 NOTE 8 - NOTES
PAYABLE
 
 
 During 2002, the Company received loans
of $45,000 from third parties.  The loans are demand loans and carry
an interest rate of 8% per annum.  At December 31, 2008 and 2007, the
total amount of principal and accrued interest are presented below:
  2008
                                                
                                                
                                                2007Principal
                                                
                                                $
                                                45,000
                                                
                                                
                                                $
                                                45,000Accrued
      Interest
                                                
                                                
                                                31,336
                                                
                                                
                                                
                                                24,124Total
                                                
                                                $
                                                76,336
                                                
                                                
                                                $
                                                69,124
  NOTE 9 - STOCK
OPTIONS
 
 The shareholders approved, by a
majority vote, the adoption of the 1998 Stock Incentive Plan (the
“Plan”).  As amended on August 11, 2003, the Plan reserves 20,000,000
shares of common stock for issuance upon the exercise of options which may be
granted from time-to-time to officers, directors and certain employees and
consultants of the Company or its subsidiaries.  The Plan permits the
award of both qualified and non-qualified incentive stock options.  On
August 18, 2003, the Company registered its “Amended Stock Incentive Plan of
Klever Marketing, Inc.” on Form S-8.
 
 As of December 31, 2008, 748,800
options were outstanding. The Company granted no options in 2008. The Company
granted 545,000 options during 2007, of which 545,000 expire in three
years.  Compensation expense charged to operations for the twelve
months ended December 31, 2007 is 19,891.
 
 The following table sets forth the
options and warrants outstanding as of December 31, 2008 and 2007.
 
 F-23
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 NOTE 9 - STOCK OPTIONS
(continued)
 
 
 WeightedOption
      /
                                              
                                              
                                              Average
                                              
                                              
                                              WeightedWarrants
                                              
                                              
                                              Exercise
                                              
                                              
                                              AverageShares
                                              
                                              
                                              Price
                                              
                                              
                                              Fair
      ValueOptions
      & warrants outstanding,December
      31, 2006
                                              
                                              
                                              5,070,388
                                              
                                              
                                              $
                                              0.18
                                              
                                              
                                              $
                                              .03Granted,
      Exercise price more than fair value
                                              
                                              
                                              545,000
                                              
                                              
                                              $
                                              0.75
                                              
                                              
                                              $
                                              .03Granted,
      Exercise price less than fair value
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Expired
                                              
                                              
                                              4,820,588
                                              
                                              
                                              $
                                              .13
                                              
                                              
                                              $
                                              .03Exercised
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Options
      & warrants outstanding,December
      31, 2007
                                              
                                              
                                              794,800
                                              
                                              
                                              $
                                              0.75
                                              
                                              
                                              $
                                              .03
 
 
 WeightedOption
      /
                                          
                                          
                                          Average
                                          
                                          
                                          WeightedWarrants
                                          
                                          
                                          Exercise
                                          
                                          
                                          AverageShares
                                          
                                          
                                          Price
                                          
                                          
                                          Fair
      ValueOptions
      & warrants outstanding,December
      31, 2007
                                          
                                          
                                          794,800
                                          
                                          
                                          $
                                          0.75
                                          
                                          
                                          $
                                          .03Granted,
      Exercise price more than fair value
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Granted,
      Exercise price less than fair value
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Expired
                                          
                                          
                                          46,000
                                          
                                          
                                          $
                                          0.75
                                          
                                          
                                          $
                                          .03Exercised
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Options
      & warrants outstanding,December
      31, 2008
                                          
                                          
                                          748,800
                                          
                                          
                                          $
                                          0.75
                                          
                                          
                                          $
                                          .03
 
 
 
 
 
 F-24
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 NOTE 9 - STOCK OPTIONS
(continued)
 
 Weighted-
                                              
                                              
                                              Weighted-Weighted-
                                              
                                              
                                              Shares/
                                              
                                              
                                              Average
                                              
                                              
                                              AverageShares
      /
                                              
                                              
                                              Average
                                              
                                              
                                              Warrants
                                              
                                              
                                              Exercise
      Price
                                              
                                              
                                              ContractualExercise
                                              
                                              
                                              Warrants
                                              
                                              
                                              Exercise
                                              
                                              
                                              Currently
                                              
                                              
                                              Currently
                                              
                                              
                                              RemainingPrice
      Range
                                              
                                              
                                              Outstanding
                                              
                                              
                                              Price
                                              
                                              
                                              Exercisable
                                              
                                              
                                              Exercisable
                                              
                                              
                                              Life
      (months)0.10
                                              
                                              
                                              
                                              25,000
                                              
                                              
                                              
                                              0.10
                                              
                                              
                                              
                                              25,000
                                              
                                              
                                              
                                              0.10
                                              
                                              
                                              
                                              80.50
                                              
                                              
                                              
                                              391,900
                                              
                                              
                                              
                                              0.50
                                              
                                              
                                              
                                              391,900
                                              
                                              
                                              
                                              0.50
                                              
                                              
                                              
                                              141.00
                                              
                                              
                                              
                                              331,900
                                              
                                              
                                              
                                              1.00
                                              
                                              
                                              
                                              331,900
                                              
                                              
                                              
                                              1.00
                                              
                                              
                                              
                                              14748,800
                                              
                                              
                                              
                                              0.71
                                              
                                              
                                              
                                              748,800
                                              
                                              
                                              
                                              0.71
 
 
 NOTE 10 - PREFERRED
STOCK
 
 On February 7, 2000 the Board of
Directors authorized and established “Class A Voting Preferred Stock” (“Class A
Shares”) as a class of its $.01 par value, 2,000,000 shares authorized,
preferred stock.  Class A Shares consisted of 1,000,000, 125,000
shares thereof were designated as Series 1 shares.  On May 20, 2002,
the Board of Directors amended the number of authorized shares of Class A voting
preferred stock to 55,000 shares.
 
 Class A Shares are convertible into
Common Stock at an initial conversion price of $2.60 (subject to
adjustment).
 
 Holders of Class A Shares shall be
entitled to receive when and as declared by the Board of Directors of the
Company out of any funds at the time legally available therefore dividends at
the rate of $2.20 per share per annum, payable semi-annually on the first day of
January and July of each year.  Such dividends shall accrue on each
such share from the date of its original issuance and shall accrue from day to
day, whether or not earned or declared.  Such dividend shall be
cumulative and may be paid in cash or in kind through the distribution of .0425
Class A Shares, Series 1, for each outstanding Class A Share, on each dividend
payment date.  In addition, each
holder of Class A Shares shall be entitled to receive, when and as declared, a
dividend equal to each dividend declared and paid on the shares of Common Stock,
on a share for share basis.  If there is a split or dividend on the
Common Stock, then the Class A Share dividends shall be adjusted as if a similar
split or dividend had occurred with respect to the Class A Shares.
 
 
 F-25
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 NOTE 10 - PREFERRED STOCK
(continued)
 
 Class A Shareholders shall be entitled
to one vote for each share of Common Stock into which such Class A Shares could
then be converted, and shall have voting rights and powers equal to that of a
holder of Common Stock.  The Holders of Class A Shares shall vote with
the holders of Common Stock and not as a separate class.
 
 Class A Shares carry a liquidation
preference of $26 per share plus any accrued but unpaid dividends on such
shares, if any, and adjusted for combinations, splits, dividends or
distributions of shares of stock with respect to such shares.
 
 The Class A Shares shall be redeemable
by the Company, in whole or in part, at the option of the Board of Directors of
the Company, at any time and from time to time on or after July 1, 2002. The
redemption price shall be $26 per share together with accrued but unpaid
dividends on such shares, if any.
 
 On September 24, 2000 the Board of
Directors authorized and established “Class B Voting Preferred Stock” (“Class B
Shares”) as a class of its $.01 par value, 2,000,000 shares authorized,
preferred stock.  Class B Shares consisted of 250,000, 125,000 shares
thereof were designated as Series 1 shares.  On May 20, 2002, the
Board of Directors amended the number of authorized shares of Class B voting
preferred stock to 42,000 shares.
 
 Class B Shares
are convertible into Common Stock at an initial conversion price of $1.70
(subject to adjustment).
  F-26
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
  
 NOTE 10 - PREFERRED STOCK
(continued)
 
 
 
 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.
 
  F-27
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
  
 NOTE 10 - PREFERRED STOCK
(continued)
 
 Class B Shares shall carry a
liquidation preference of $17 per share plus any accrued but unpaid dividends on
such shares, if any, and adjusted for combinations, splits, dividends or
distributions of shares of stock with respect to such shares.
 
 The Class B Shares shall be redeemable
by the Company, in whole or in part, at the option of the Board of Directors of
the Company, at any time and from time to time on or after March 24, 2004 for
Series 1, and such date as determined by the Board of Directors for each
additional Series.  The redemption price shall be $17.00 per share
together with accrued but unpaid dividends on such shares, if any.
 
 On January 2, 2001 the Board of
Directors authorized and established “Class C Voting Preferred Stock” (“Class C
Shares”) as a class of its $.01 par value, 2,000,000 shares authorized,
preferred stock.  Class C Shares consisted of 500,000, 125,000 shares
thereof were designated as Series 1 shares and 125,000 shares thereof were
designated as Series 2 shares.  On May 20, 2002, the Board of
Directors amended the number of authorized shares of Class C voting preferred
stock to 150,000 shares.
 
 Class C Shares are convertible into
Common Stock at an initial conversion price of $.66 (subject to
adjustment).
 
 Holders of Class C Shares shall be
entitled to receive when and as declared by the Board of Directors of the
Corporation out of any funds at the time legally available therefore dividends
at the rate of the Original Issue Price divided by 11.8181818 per share per
annum, payable semi-annually on the first day of January and July of each
year.  Such dividends shall accrue on each such share from the date of
its original issuance and shall accrue from day to day, whether or not earned or
declared.  Such dividends shall be cumulative and may be paid in cash
or in kind through the distribution of .0425 Class C Shares, of the same Series
for which the dividend is accrued, for each outstanding Class C Share, on each
dividend payment date; provided, that if such dividends in respect of any period
shall not have been paid or declared and set apart for payment for all
outstanding Class C Shares by each payment date, then until all unpaid dividends
thereon shall be paid or set apart for payment to the holders of such shares,
the Corporation may not pay, declare or set apart any dividend or other
distribution on its shares of Common Stock or other shares junior to the Class C
Shares, nor may any other distributions, redemptions or other payments be made
with respect to the shares of Common Stock or other junior shares.  In
addition to the foregoing, each holder of a Class C Share shall be entitled to
receive, when and as declared, a dividend equal to each dividend declared and
paid on the shares of Common Stock, on a share for share basis, so the holders
of the Class C Shares shall be entitled to participate equally on a share for
share basis with the holders of the shares of Common Stock.  If there
is a share split or dividend on the Common Stock, then the Class C Share
dividends shall be adjusted as if a similar split or dividend had occurred with
respect to the Class C Shares.
  F-28
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
  
 NOTE 10 - PREFERRED STOCK
(continued)
 
 Class C Shareholders shall be entitled
to one vote for each share of Common Stock into which such Class C Shares could
then be converted and shall have voting rights and powers equal to the voting
rights and powers of a holder of shares of Common Stock. The holders of Class C
Shares shall vote with the holders of shares of Common Stock and not as a
separate class.
 
 Class C Shares shall carry a
liquidation preference of $6.60 per share plus any accrued but unpaid dividends
on such shares, if any, and adjusted for combinations, splits, dividends or
distributions of shares of stock with respect to such shares.
 
 The Class C Shares shall be redeemable
by the Company, in whole or in part, at the option of the Board of Directors of
the Company, at any time and from time to time on or after July 2, 2004 for
Series 1, and such date as determined by the Board of Directors for each
additional Series.  The redemption price shall be $6.60 per share
together with accrued but unpaid dividends on such shares, if any.
 
 On May 20, 2002, the Board of Directors
authorized and established “Class D Voting Preferred Stock”  (“Class D
Shares”) as a class of its $.01 par value, 2,000,000 shares authorized,
preferred stock.  Class D Shares consist of 500,000 shares thereof are
designated as “Class D Voting Preferred Stock” (the “Class D
Shares”).
 
 Class D Shares are convertible into
Common Stock at an initial conversion price of $1.05
 (subject
to adjustment).
 
 Holders of Class D Shares shall be
entitled to receive when and as declared by the Board of Directors of the
Corporation out of any funds at the time legally available therefore dividends
at the rate of the Original Issue Price divided by 11.8181818 per share per
annum, payable semi-annually on the first day of January and July of each
year.  Such dividends shall accrue on each such share from the date of
its original issuance and shall accrue from day to day, whether or not earned or
declared.  Such dividends shall be cumulative and may be paid in cash
or in kind through the distribution of .0425 Class D Shares for each outstanding
Class D Share, on each dividend payment date; provided, that if such dividends
in respect of any period shall not have been paid or declared and set apart for
payment for all outstanding Class D Shares by each payment date, then until all
unpaid dividends thereon shall be paid or set apart for payment to the holders
of such shares, the Corporation may not pay, declare or set apart any dividend
or other distribution on its shares of Common Stock or other shares junior to
the Class D Shares, nor may any other distributions, redemptions or other
payments be made with respect to the shares of Common Stock or other junior
shares.  In addition to the foregoing, each holder of a Class D Share
shall be entitled to receive, when and as declared, a dividend equal to each
dividend declared and paid on the shares of Common Stock, on a share for share
basis, so the holders of the Class D
Shares shall be entitled to participate equally on a share for share basis with
the holders of the shares of Common Stock.  If there is a share split
or dividend on the Common Stock, thenthe Class
D Share dividends shall be adjusted as if a similar split or dividend had
occurred with respect to the Class D Shares.
  F-29
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
  
 NOTE 10 - PREFERRED STOCK
(continued)
 
 
 Class D Shareholders shall be entitled
to one vote for each share of Common Stock into which such Class D Shares could
then be converted and shall have voting rights and powers equal to the voting
rights and powers of a holder of shares of Common Stock. The holders of Class D
Shares shall vote with the holders of shares of Common Stock and not as a
separate class.
 
 Class D Shares shall carry a
liquidation preference of $10.50 per share plus any accrued but unpaid dividends
on such shares, if any, and adjusted for combinations, splits, dividends or
distributions of shares of stock with respect to such shares.
 
 The Class D Shares shall be redeemable
by the Company, in whole or in part, at the option of the Board of Directors of
the Company, at any time and from time to time on or after May 14,
2007.  The redemption price shall be $10.50 per share together with
accrued but unpaid dividends on such shares, if any.
 
 NOTE 11 -
LITIGATION
 
 On
October 27, 2003, Thomas J. LaLanne, assignee of eiKart, LLC. filed against the
Company in the Third Judicial District Court of Utah.  The legal
action was permitted under the provision of the Utah Foreign Judgment Act and
allowed a judgment, previously rendered against the Company by the Superior
Court of California, in and for the County of San Francisco Jurisdiction, to be
filed in the state of Utah. The judgment was in relation to a consulting
agreement between eiKart, LLC. and the Company. This judgment was included in
the financial statements as part of accrued liabilities at December 31, 2006. In
June 2007, this litigation was settled in full out-of court by a cash payment of
$10,000 and the remainder of the liability of $80,448 was included in the
statement of operations as extraordinary income for the period ending December
31, 2007.
 
 
 On December 12, 2005 Klever Marketing
was summoned, and a complaint was filed in the Third District Court of the State
of Utah, by Dennis Shepard, one of the partners of S&C
Medical.  The complaint contested Klever Marketing’s cancellation of
an attempted deal with S&C medical in December of 2001.  On
January 13, 2006, Klever Marketing answered their complaint
and filed a counter claim against S&C Medical.  During 2008, this
litigation was settled out-of court, resulting in a favorable disposition of the
claim sought, and full and complete resolution in this matter, also resulting in
the return of 992,100 shares of common stock to the Company’s
treasury.  These shares were subsequently
cancelled.
 
 
  F-30
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
  
 NOTE 11 – LITIGATION
(continued)
 
 
 During
2006, Arthur Portugal, a former officer of the Company, filed a formal claim
asserted for approximately $125,000 for past due executive compensation
including stock options.  Mr. Portugal previously filed a formal
administrative wage claim in California which is inactive and no longer
pending.  As of December 31, 2008, the Company has accrued
compensation of $96,700 for Mr. Portugal as part of his employment agreement
through June 30, 2006.  The Company also has accrued notes payable of
$11,374 due to Mr. Portugal.
 
 In
addition to the claim for Arthur Portugal, there are other claims for unpaid
salary and benefits due to former officers and employees that exist on the
balance sheet as accrued  liabilities, Management has either completed
or is in the process of negotiating with a number of these claimants in order to
conclude agreements that would allow these liabilities to be settled in the form
of payment by cash, stock and stock options.  As of December 31, 2008,
the total amount of claims for accrued but unpaid salary and benefits is
$456,312
 
  F-31
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
  
 NOTE 12 - STOCK
TRANSACTIONS
 
 On
February 20, 2007, the company issued 200,000 shares of commons stock for cash
of $50,000.  The shares were valued at $.25 per share.
 
 On March 6, 2007 the company issued
40,000 shares of commons stock for cash of $10,000. The shares were valued at
$.25 per share.
 
 On April
9, 2007, the company received 992,100 shares of common stock as the result of
litigation settlement.  The shares were returned to treasury and
cancelled.
 
 On April 16, 2007, the Company issued
200,000 shares of common stock for cash of $50,000.  The shares were
valued at $.25 per share.
 
 On June 1, 2007, the Company issued
60,000 shares of common stock for cash of $15,000.  The shares were
valued at $.25 per share.
 
 On June 1, 2007, the Company issued
40,000 shares of common stock for cash of $10,000.  The shares were
valued at $.25 per share.
 
 On June
28, 2007, the Company issued 120,000 shares of common stock for cash of
$30,000.  The shares were valued at $.25 per share.
 
 On June 30, 2007, the Company issued
34,764 shares of common stock for payment of service in the amount of
$8,691.  The shares were valued at $.25 per share.
 
 On July
24, 2007, the Company issued 20,000 shares of common stock for cash of $5,000.
The shares were valued at $.25 per share.
 
 On July 25, 2007, the Company issued
20,000 shares of common stock for cash of $5,000.  The shares were
valued at $.25 per share.
 
 On July 26, 2007, the Company issued
20,000 shares of common stock for cash of $5,000. The shares were valued at $.25
per share.
 
 On July 31, 2007, the Company issued
20,000 shares of common stock for cash of $5,000.  The shares were
valued at $.25 per share.
 
 On August 3, 2007, the Company issued
50,000 shares of common stock for cash of $12,500. The shares were valued at
$.25 per share.
  F-32
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
  
 NOTE 12 - STOCK TRANSACTIONS
(continued)
 
 On August 31, 2007, the Company
authorized issuance of 150,000 shares of common stock for services rendered in
the amount of $5,000.  The shares were valued at $.03 per
share.  At December 31, 2007, these had not been issued.
 
 On September 28, 2007, the Company
issued 180,000 shares of common stock for cash of $45,000. The shares were
valued at $.25 per share.
 
 On
September 30, 2007, the company issued 150,000 shares of commons stock for
services rendered in the amount of $7,500.  The shares were valued at
$.05 per share.  At December 31, 2007, these shares had not been
issued.
 
 On September 30, 2007, the Company
issued the following shares of common stock: 8,281,016 shares for notes payable
of $2,070,254; 62,101 shares for accrued interest of $15,525; 33,224 shares for
accounts payable of $8,306.  The shares were valued at $.25 per
share.
 
 On
October 31, 2007, the Company authorized issuance of 150,000 shares of common
stock for services rendered in the amount of $5,000.  The shares were
valued at $.03 per share.  At December 31, 2007, these had not been
issued.
 
 On December 7, 2007, 6,594,566 shares
of common stock were returned to the Company and held as treasury
stock.  On the same date, 1,424,566 of these shares were
cancelled.
 
 On December 7, 2007, the Company issued
120,000 shares of common stock for cash of $30,000.  The shares were
valued at $.25 per share.
 
 On
January 15, 2008, the Company issued 44,000 shares of common stock for cash of
11,000 dollars.  The shares were valued at $.25 per share. This
transaction was recorded in 2007.
 On
December 16, 2008, 5,170,000 shares of common stock were returned to the Company
and were cancelled.
 
 On
December 22, 2008, the Company issued 100,000 shares of common stock for cash of
$5,000.  The shares were valued at $.05 per share.
 
 On
December 29, 2008, the Company issued 140,000 shares of common stock for cash of
$7,000.  The shares were valued at $.05 per share.
 
 On
December 31, 2008, the Company recorded a stock subscription receivable of
$23,000 for the issue of 460,000 shares of common stock.  The shares
were valued at $.05 per share.
 
  F-33
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
  
 NOTE 13 - LICENSE
AGREEMENT
 
 On May 11, 2004, Media Cart, Inc.
acquired from the Company a limited exclusive license to use the Company’s
United States patent portfolio for electronic display devices specific to Media
Cart’s product design.  Under the license agreement, Media Cart paid
the Company $200,000 and will pay ongoing royalties for all Media Cart products
that utilize the Company’s licensed technology.
 
 On February 15, 2005 ModStream Digital
Messaging Products, LLC acquired from the Company limited non-exclusive
licensees to use the Company's United States patent portfolio for electronic
display devices specific to ModStreams product design. This product design is
limited to a 80 character dot-matrix LCD-type screen with limited alerts, and
does not include full motion video or product scanning.  Under the
license agreement, ModStream paid the Company $150,000 and will pay ongoing
royalties for all ModStream products that utilize the specific components of the
Company's licensed technology.
 
 NOTE 14 - SALE OF
PATENTS
 
 On August 27, 2004, the Company sold
all of its international patents for $350,000.  The international
patents comprised approximately 69% of the total patents the Company
owned.  At December 31, 2008 and 2007, the Company was owed $0 and
$25,000, respectively, relating to this sale.
 
 NOTE 15 - UNCERTAIN TAX
POSITIONS
 
 Effective January 1, 2007, the company
adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109”
(“FIN 48”). FIN 48 prescribes a recognition threshold and a measurement
attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to
be recognized, a tax position must be more-likely-than-not to be sustained upon
examination by taxing authorities. The adoption of the provisions of FIN 48 did
not have a material impact on the company’s condensed consolidated financial
position and results of operations. At January 1, 2007, the company had no
liability for unrecognized tax benefits and no accrual for the payment of
related interest.
 
 
 
 
 
 
 F-34
 KLEVER
MARKETING, INC.
 (a
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 
 
 NOTE 15 - UNCERTAIN TAX
POSITIONS (continued)
 
 Interest costs related to unrecognized
tax benefits are classified as “Interest expense, net” in the accompanying
consolidated statements of operations. Penalties, if any, would be recognized as
a component of “Selling, general and administrative expenses”. The Company
recognized $0 of interest expense related to unrecognized tax benefits for the
year ended December 31, 2008.  In many cases the company’s uncertain
tax positions are related to tax years that remain subject to examination by
relevant tax authorities. With few exceptions, the company is generally no
longer subject to U.S. federal, state, local or non-U.S. income tax examinations
by tax authorities for years before 2003. The following describes the open tax
years, by major tax jurisdiction, as of December 31, 2008:
   United
      States (a)
                                        2004
      - Present(a)
      Includes federal as well as state or similar local jurisdictions, as
      applicable.
 
 F-35