SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
                                   -----------

[x]      Annual report under section 13 or 15(d) of the Securities  Exchange Act
         of 1934 for the fiscal year ended March 31, 2002

[ ]      Transition report under section 13 or 15(d) of the Securities  Exchange
         Act of 1934 for the transition period from to


                         Commission File Number 0-24372

                                  ARKONA, Inc.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

                            Sundog Technologies, Inc.
                      -------------------------------------
                     (Former name of small business issuer)



               DELAWARE                                33-0611746
     --------------------------------          --------------------------------
    (State or other  jurisdiction  of         (IRS Employer Identification No.)
    incorporation or organization)




                           10542 South Jordan Gateway
                            South Jordan, Utah 84095
               ---------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (801) 501-7100

Securities  registered  under to Section  12(b) of the Act:
None

Name of exchange on which registered:   N/A

Securities  registered  under to Section  12(g) of the Name of exchange on which
registered: OTC Bulletin Board Act: Common Stock, par value $.001

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  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 [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

       Issuer's revenues for its most recent fiscal year were $2,338,176.


The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of June 15, 2002 was $7,177,990.  The number of shares outstanding
of the issuer's common stock, par value $.001 per share, as of June 30, 2002 was
23,842,798 shares, of which 15,951,088 were held by non-affiliates.

                     Transitional Small Business Disclosure
                               Format (Check one):

                                   Yes No _X_


<PAGE>



<TABLE>
<CAPTION>


                                Table of Contents
<S>                                                                         <C>                             <C>

PART I........................................................................................................1


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


   Item 2.  Description of Property..........................................................................16


   Item 3.  Legal Proceedings................................................................................16


   Item 4.   Submission of Matters to a Vote of Security Holders.............................................16


PART II......................................................................................................16


   Item 5.   Market for Common Equity and Related Stockholder Matters........................................16


   Item 6.   Management's Discussion and Analysis............................................................19


   Item 7.   Financial Statements............................................................................21


   Item 8. Changes in and Disagreement With Accountants on Accounting and Financial Disclosure.............. 21


PART III.................................................................................................... 22


   Item 9.  Directors, Executive Officers, Promoters and Control
            Persons; Compliance with Section 16(a) of the Exchange Act.  22


   Item 10.  Executive Compensation..........................................................................22


   Item 11.   Security Ownership of Certain Beneficial Owners and Management.................................22


   Item 12.  Certain Relationships and Related Transactions..................................................22


   Item 13.  Exhibits and Reports on Form 8-K................................................................22

 Consolidated Financial Statements...........................................................................F-1
</TABLE>



<PAGE>
                                     PART I

Item 1.   Description of Business

Certain   statements   in  this  Annual   Report  on  Form   10-KSB   constitute
forward-looking  statements  within the meaning of Section 27A of the Securities
Act and Section 21E of the  Exchange  Act.  You should  regard any  statement in
these   sections  that  is  not  a  statement  of   historical   fact  to  be  a
forward-looking  statement of management's beliefs,  expectations and plans, all
of which  may be  adversely  affected  by risks and other  factors  outside  the
control of the Company. Actual results may differ significantly from the results
discussed  in the  forward-looking  statements.  Factors that might cause actual
results to vary from the views expressed in forward-looking  statements include,
but are not  limited  to,  risk  factors  discussed  below in " -  Certain  Risk
Factors."

Introduction

         ARKONA,   Inc.   ("we,"  "Arkona"  or  the  "Company")  is  a  Delaware
corporation  organized in 1992 and engaged in the software development business.
Since our acquisition of substantially  all of the assets of Ensign  Information
Systems  ("Ensign") in November  2000, we have been  principally  engaged in the
business of developing,  marketing and selling software  products for use by new
and used-car dealership markets.

Our Principal Product: The ARKONA Dealer Management Suite

Overview

         The Arkona Dealer  Management  Suite ("ADMS") is our flagship  product.
This  innovative  software  solution  is  fully  integrated  and is  capable  of
automating  all major aspects of an automobile  dealership,  including the parts
department, sales, finance, insurance, customer management and service. ADMS was
developed to run on IBM's iSeries (AS400)  platform,  a technology that has been
market-proven  and  offers  tremendous  stability.  We  also  offer  ADMS  in an
application service provider ("ASP") format.  Whether a client wants an in-house
or an ASP implementation, we are prepared to deliver a fully integrated turn-key
solution.

Designed With the Dealer in Mind
--------------------------------

         Our ADMS is packed with  features  that make it easy to use and manage.
ADMS was  designed  with  the  dealer  in mind,  not  computer  technicians.  No
programming  or technical  knowledge is required to use the features,  including
the  products   analytical  tools.  The  Help  Text  key  is  one  of  our  most
user-friendly features. It often provides our clients with on-screen information
when they need it, without the necessity of going to the documentation.

         Not every  feature of ADMS is used by a particular  dealer on a regular
basis. Our streamlined  design  emphasizes more frequently used features,  while
not neglecting the less-used.  For instance,  Physical  Inventory is integral to
the  Parts  module.  It's a handy  feature  that  fully  automates  an annual or
perpetual  inventory  count.  But when it's not needed,  it's off to the side so
that it isn't in the way.

                                       1
<PAGE>

Features of the Arkona Dealer Management Suite (ADMS)
-----------------------------------------------------

         Our ADMS product contains numerous standard and innovative  features to
make the complex job of managing a car  dealership  easier.  The  following is a
partial list and  description  of the features  and  functions  contained in our
new-car dealership management version of ADMS.

o Vehicle Sales: The Business Office  application  supports the sales department
and features deal desking,  deal  contracting,  managing  front-end and back-end
gross, vehicle inventory management, customer follow-up and prospect management.
Under the deal  screen,  real-time  vehicle  costs  including  detail for repair
orders,  purchase  orders and parts  invoices are provided.  Every  customer and
associated  activity  is  tracked  within  all  departments  of the  dealership.
Real-time and online  information  is provided on front-end  and back-end  sales
gross for capped  and/or  uncapped  deals for any date range along with  reports
that can be printed with detail of all  activities  performed and tracked in the
business office.

o  Document  Generation:  The  Document  Generation  feature  allows the user to
program, maintain, and print financing,  insurance and other types of customized
forms.

o General Ledger: All applications integrate with the general ledger application
in real-time. Authorized users have easy access to general ledger detail for any
open  or  closed  month.  The  general  ledger  application   features  accounts
receivable,  accounts payable,  purchase orders, journal entries, cash receipts,
check  writing,  bank  deposits,  cashiering,  bank  reconciliation,   scheduled
entries,  full  reporting  of  transaction  detail and much  more.  ADMS is also
multiple-company  compatible.  The analysis and reporting capabilities available
in the general ledger module is very powerful and easy to use. Custom  financial
reports with up to 16 columns online and in print format are available.  Dynamic
column headings,  drill down capabilities to source  documents,  forecasting and
comparative reporting in MTD, QTD and YTD formats are also available.

o Vehicle Inventory: The Vehicle Information application tracks,  maintains, and
reports on the vehicle inventory. In addition, the general ledger application is
automatically  updated when  vehicles are entered  into  inventory.  Our Vehicle
Information  application  also permits one to determine  the number of vehicles,
along  with  their  value and age,  with one  keystroke.  The  application  also
includes user defined fields and permits paperless special ordering.

o Parts,  Inventory and Invoicing:  The Parts Inventory & Invoicing  application
supports the parts  department  and features  parts  inquiry,  billing,  special
orders, integrated purchase orders, demand tracking, recommended stock orders, a
physical  inventory  system,  phase-in/phase-out,   factory  parts  information,
comprehensive sales and inventory analysis reporting,  and full integration with
the  general  ledger and  accounts  receivable.  Real-time  accounts  receivable
customer  information about credit limits,  balances and more are available.  We
provide a paperless  special  order system that makes parts  ordering  quick and
easy. As with other ADMS modules, the analysis and reporting capabilities of the
Parts,  Inventory and Invoicing  application  make extracting all data in almost
any format easy.

o Portfolio Management: The Portfolio Management application integrates with the
business  office and allows the  dealership  to  initiate  and  service  finance
contracts  in the  Buy-here/Pay-here  format.  It also  includes  reporting  for
payment receipt and investment company management.

o Payroll& Personnel Management:  The Payroll & Personnel Management application
is a full in-house payroll check and tax reporting application.

                                       2
<PAGE>

o Service Department:  The Service Department  application  supports the service
department and body shop. It features an integrated  appointment system,  repair
order  writing,   sales  and  technician   analysis   reports,   work-in-process
management,   and  full   integration  with  the  general  ledger  and  accounts
receivable.

o Contact  Management:  The  Contact  Management  application  is an  integrated
follow-up system that features an automatic follow-up letter generation program.
The  application  prints  mailing  labels,  lists,  or sends  data to a file for
selected customers. The application  automatically generate letters,  postcards,
envelopes,  or system messages based on user-defined events such as birth dates,
sales anniversaries, and receipted special orders.

These features allow the Arkona Dealer  Management  Solutions to be functionally
competitive  with other dealer  management  systems  while  maintaining  greater
flexibility and a significant cost advantage.

Flexibility And Full Package Integration
----------------------------------------

         ADMS was  created  using a modular  approach  with an  object  oriented
development scheme. Each fully featured module is tightly integrated so that all
modules  work  together.  As  customers  request new  features,  new modules are
created without having to modify the entire  software.  Each new module is added
to the software as a "plug and play" feature.  This modular  approach enables us
to enhance and  customize  ADMS in a fraction of the time required by some other
software providers.

         ARKONA's unique process for  integrating  modules permits more users to
share  information  and allows for  widespread use of company data. As a result,
management and other decisions can be made based on information  obtained from a
variety of areas and applications.  The effect can be increased productivity and
a solid basis for making sound business decisions.

         In February 2001, we made ADMS available  using an Application  Service
Provider  (ASP) model.  To date our  competition  has been unable to implement a
comparable  ASP solution.  We believe that this solution  gives us a significant
advantage  over the  competition  by allowing  dealers to access ADMS across the
Internet using inexpensive access  technologies and personal  computers.  An ASP
implementation has the following advantages over the more traditional approach:

o It significantly reduces cost of entry because of the reduced need to purchase
computers and software.

o It significantly reduces on-going hardware maintenance costs.

o It eliminates the need to maintain or periodically upgrade operating systems.

o It reduces information system headcount expense since we assume responsibility
for the system.

Security
--------

         Our  software  includes   state-of-the-art   on-line  access  security.
Multiple  phases of security  allow an  operator  maintenance,  entry,  inquiry,
report or complete lockout. In addition, our security system allows a dealership
to have one  operator  enter data and  another to  process  it.  With the use of
Virtual Private Network (VPN), transactions pass securely over the Internet from
server to workstation and back again.

                                       3
<PAGE>

Easy Recovery
-------------

         Recovery  is built  into all  operations.  If for any reason the system
were to fail,  such as during an accounts  receivable  statement run, the dealer
need only restart the system and the task will pick up where it left off. In the
general ledger  application,  if the hardware fails during a major posting,  the
program will remember where it was and keep running from that point.

         With the release of our ASP  technology,  we are now looking to provide
our clients with data backup and mirroring services.  This service is offered to
assure 24/7 data  availability  and  recovery  from data  corruption  or natural
disasters. For clients that elect our ASP package, data availability, protection
and recovery is a built-in  feature.  For clients  operating  ADMS in house,  we
offer this service for a monthly fee.

         Our  ASP  systems  are  hosted  in  a  physical   environment  that  is
operational  24 hours a day,  7 days a week,  has  multiple  fiber  trunks  from
multiple sources, backup generators and runs of fully redundant hardware,  power
and ISP  connections.  The hosting  facility  also offers raised floors and HVAC
temperature  control systems with separate cooling zones and seismically  braced
racks.  It has a wide range of  security  features,  including  state-of-the-art
smoke detection and fire suppression  systems,  motion sensors, and 24x7 secured
access, as well as video camera surveillance and security breach alarms.

Our Market and Strategy

Our Market

         According  to  a  study  sponsored  by  the  Texas  Automobile  Dealers
Association,  the  market  for our ADMS  product  consists  of the  over  22,000
automobile  dealerships  in the United  States.  With respect to how  automobile
dealerships use dealer management systems,  the National Auto Dealer Association
(NADA) reports:

o        97% of auto dealers use computers, 70% use a mainframe.

o        18% will upgrade or replace their system in each calendar year.

o The average  annual  dealer  systems  expenditure  on  information  systems is
$96,000.

o        $45,000 average for dealerships selling 150 units annually.

o        $68,000 for dealerships selling 350 new units annually.

o        $132,000 for dealerships selling 750 units annually.

o        The Average Dealerships uses 13 workstations.

o        5 terminals average for dealerships selling 150 units annually.

o        19 terminals for dealerships selling over 750 units annually.

                                       4
<PAGE>

Market Opportunity

         We currently have approximately 200 installed dealership locations in a
market consisting of over 22,000 dealerships in which automation is mandatory to
staying  competitive.  Annually,  18% (3900  dealerships)  of the target  market
replace  upgrade  or add to  their  systems,  which  creates  tremendous  growth
potential. There are several defining market characteristics that present both a
significant challenge, and a significant opportunity, for ARKONA.

o        Market domination by older technology. Eighty percent of the automotive
         dealership  software  market is dominated by two solutions - Reynolds &
         Reynolds (R&R) and Automatic Data Processing Inc. (ADP).  Both of these
         products  are  based  on  15  year-old  proprietary  technologies.  Our
         software is built on the state-of-the-art IBM iSeries (AS400) platform,
         making it extremely  flexible to implement and  maintain.  It addition,
         our use of IBM's iSeries  platform allows us to embrace newer computing
         models  such  as the  ASP  (Application  Service  Provider)  or  mobile
         computing models.

o        The market  leaders'  solutions  are expensive to install and maintain.
         Because the market leaders have captured such a large percentage of the
         market,  there is little natural market pressure to control pricing. As
         a result,  the prices charged by these  competitors are extremely high.
         These  extremely  high  prices  permit us to offer its price at a price
         that is consistent with long-term profitability but is well below those
         of R&R and ADP.

o        Increased  competition in the automobile dealer industry.  The National
         Automobile   Dealers   Association   (NADA)  has   identified   several
         significant  trends in the retail car and truck  environment  that will
         force dealers to better manage their business, including:

         o        Pressure on profit margins in all  departments are expected to
                  force  dealers to  upgrade  management  procedures,  marketing
                  skills and performance in each  department.  Reliable,  timely
                  information is required to accomplish this.

         o        Franchise concentration is forcing dealers to increase volumes
                  even while profit margins are shrinking.

         o        Continued   improvements   in  product  quality  and  extended
                  warranties have significantly reduced the required service for
                  new vehicles,  thus impacting  automobile dealers' traditional
                  source of revenue.  The shrinking service  opportunity and the
                  growth  of  competing  third-party  service  providers  (i.e.:
                  Jiffy-Lube,  Midas  Mufflers,  Brake-O,  etc.) are  pressuring
                  dealers  to  operate  their  service  departments  as  a  true
                  business   entity   with   greater    emphasis   on   customer
                  satisfaction.

         o        Manufacturers  are  demanding  more control over the marketing
                  channel  in an  effort  to manage  customer  satisfaction  and
                  volumes.  This  effort  includes  increased   requirements  in
                  reporting,  physical  facilities,  communications and computer
                  systems.

         We  believe  that  the low  cost  and  high  functionality  of our ADMS
solution can help automobile dealers face many of these challenges.  We view the
challenges facing today's automobile dealers as a great business opportunity for
ARKONA.

                                       5
<PAGE>

Our Sales and Marketing Strategy
--------------------------------

         Currently,  we market ADMS products and services  primarily through the
efforts of three full-time  in-house salesmen  directly to dealers,  through the
attendance  of trade shows and seminars  and the issuance of press  releases and
other traditional  methods. Our direct marketing efforts are very successful due
to the fact that most of our direct sales efforts begin with a customer referral
and/or recommendation.  We have placed ads in industry publications in the past;
however,  we have  discovered  that direct  marketing to dealerships is our most
effective  and  cost  efficient  way to sell our ADMS  product.  Currently,  our
marketing efforts produce more demand for our ADMS product than we can install.

         In addition  to our direct  marketing  efforts,  and  potentially  more
important  to  us  as  a  company,  are  our  efforts  in  developing  strategic
relationships  with third party suppliers,  automobile  manufacturers  and other
industry  partners.  Currently,  we have  requests  from 31 third party  service
providers to integrate  with ADMS.  We expect to finalize an agreement  with one
automobile  manufacturer to roll out ADMS as their dealer management solution of
choice,  and we are in discussions with two others to do the same.  Finally,  we
are working with independent  automobile  dealer  associations on a national and
state level to provide a cost effective solution to their dealers. Our goal over
the next two to three  years is to  become  the  market  leader  in the used car
market and a market contender in the new car market.  We believe that, if we are
able to finalize the strategic relationships we are negotiating,  of which there
can be no assurance, we will be able to attain our goals.

         In  addition,  we  believe  that the  independent  or used  car  market
represent a huge opportunity for the dealer  management system provider that can
provide a fully-integrated  dealer management system at a price that independent
or used car dealers can afford To date, our competition has been unable to enter
this market  because their pricing is generally not cost  effective for used car
dealers.  Our ASP offering allows us to provide  independent  automobile dealers
with a full-featured  fully integrated  dealer management system at a price that
is affordable for them and profitable for us.

         Another effective  marketing tool is our philosophy and business model.
We believe that we need to earn our customer's business every month. So we don't
lock our dealers into restrictive long-term contracts like our competition.

         Our goal is to ensure  that,  when a new  dealership  becomes an ARKONA
client, it is just the beginning of a close working relationship. It is far less
costly to keep a customer than to find a new one. Following  implementation,  we
continue to monitor our clients experience to assure that they are using all the
productivity tools and features built-in the product.  Currently,  we offer free
unlimited  phone  support  between  the hours of 7:00 am and 6:00 pm MST  Monday
through Friday, and on Saturdays from 7:00 am until 2:00 pm.

         As part of our  ongoing  training  commitment  to our  clients,  we are
currently  organizing  "ARKONA  University." This program is designed to provide
ongoing  training to our  clients.  Clients will be given the choice of detailed
self-help  manuals,  classroom-style  training  offered at our offices,  on-site
training at the client's location or training via the Internet.  In addition, we
provide Internet-based training using Web-X.

Our Intellectual Property

         We regard our intellectual  property as critical to our success, and we
rely on  copyright,  trademark  and  trade  secret  protection  to  protect  our
proprietary  rights  in  intellectual   property.  We  are  in  the  process  of


                                       6
<PAGE>

registering  certain  trademarks related to our ADMS product and believe that we
have a common law copyright  that  protects the source code of such product.  In
addition, all of our employees involved in the creation of any software or other
products  we are  developing  are asked to sign  confidentiality  and  invention
agreements.  We have not, however,  attempted to apply for a formal,  registered
patent or  copyright  with  respect to our ADMS  product.  Although we intend to
continue to take steps to protect our  intellectual  property,  there  remains a
risk that our  intellectual  property  rights may be challenged,  invalidated or
circumvented,  or the rights granted  thereunder may not provide any competitive
advantage.

         During the 2002 fiscal  year,  we spent  $412,994 on  company-sponsored
research and development,  and during the 2001 fiscal year, we spent $576,021 on
company-sponsored research and development. None of our research efforts to date
have been sponsored by customers.

 Competition

         The Texas Automobile  Dealers  Association  sponsored a market study on
the DMS market place. The following  information on the competition is from that
study.  The  marketplace  for  automobile  dealership   information  systems  is
dominated by two large companies which have established severe barriers to entry
for  new  competitors.   Market  share  among  the  major  suppliers  of  dealer
information  systems is equally divided between  Automated Data Processing (ADP)
and Reynolds & Reynolds (R&R) with a combined market share of 80%. The remaining
20% is  shared by the rest,  including  Electronic  Data  Systems,  Inc.  (EDS),
Universal Computer Systems (UCS) and ARKONA.

         The  following  summaries  provide  general  information  on the  major
offerings  of the two  market  leaders,  ADP and R&R.  The  number of  installed
systems relates to total installations and does not breakout stand alone modules
such as dealer  communication  systems (DCS) or finance and insurance  services.
The strengths and weaknesses of each vendor are briefly mentioned.

Automated Data Processing (ADP)
-------------------------------

         ADP is a large,  international  firm with over $1.5  billion in revenue
and  over  200,000  clients  in all  divisions,  making  it  one of the  largest
independent  computing and consulting  firms in the U.S. The Dealership  Systems
Division of ADP  generates an estimated  $800 million in revenues  from sales to
automotive dealers.

Install Base:     8,000 Dealerships.
Hardware:         Proprietary.
Software:         Proprietary - PICK Operating System.

Strengths:        Large install base of dealers.
                  Highly rated in the marketplace.
                  Strong in accounting applications.
                  Local user groups in many cities.
                  Wide pricing ranges for systems.
                  National service and support.
                  Provides time sharing and service bureau services.

Weaknesses:       Very highly priced for performance.
                  Hardware has limited name recognition.
                  Hardware  maintained by ADP,  which is not  responsive  during
                  down-time.  Lack of flexibility in software performance.  High
                  internal  turnover  of skilled  personnel,  Service and Sales.
                  Lack  standard  features  such  as  check  reconciliation  for
                  payroll or Accounts Payable.

                                       7
<PAGE>

Reynolds & Reynolds (R&R)
-------------------------

         Reynolds & Reynolds  has  revenues of  approximately  $1 billion with a
major  presence  in several  automotive  market  segments  including  auto parts
wholesale distribution,  automotive jobbers, auto parts retail and services. R&R
also markets electronic parts catalog systems, dealer communications systems and
is the major supplier of custom computer forms for dealer systems.

Install Base:     7,000 Dealerships
Hardware:         NCR Tower
Software:         Proprietary

Strengths:        Large dealership installed base.
                  Good references.
                  Competitive pricing.
                  Well-organized service and support.
                  Strong sales and marketing organizations.
                  Form sales to competitive installations.

Weaknesses:       Frequent hardware changes.
                  Software re-licensing with hardware change.
                  New product release problems.
                  Reputation for poor customer follow-up and servicing.

         The  current  market  dominance  of ADP and R&R  creates a  significant
barrier to entry for ARKONA.  ADP and R&R benefit from the natural reluctance of
some dealerships to abandon the dominant technology and adopt a solution that is
new to the dealer and backed by a  relatively  unknown  company that has limited
resources.  We are in the process of working with car dealerships,  the NADA and
automobile  manufacturers in order to reduce or eliminate some of these barriers
to entry.

         Although there are significant barriers to entry into the dealer market
and competition is strong, there is great opportunity for ARKONA solutions. Many
of the ADP and R&R systems are over 5 years old.  The  equipment is paid for but
the systems still require high maintenance with low reliability.  One of the key
strengths of our product is flexibility.  Most dealers desire much more autonomy
than what our competitive vendors can allow.

         Additionally,  ADP and R&R charge very high monthly maintenance fees on
both hardware and software. In some cases, they mark up hardware  manufacturer's
prices by 300 to 400 percent.  This enables a  competitor  to bid a  replacement
system at equal or lower monthly costs even though the system is paid for.

         R&R has been  particularly  vulnerable  because of a regular shift from
one hardware supplier to another with little or no  transferability of software.
A dealer  must  re-purchase  the  software  with each new model R&R  introduces.
ARKONA has been able to provide a  continuous  flow of software  upgrades to all
users regardless of purchase date or hardware model.

Employees

         As of March 31, 2002, in addition to our executive officers,  we had 36
employees, including 6 computer programmers, 5 marketing and sales employees, 23


                                       8
<PAGE>

installation and support employees, and 2 administrative and clerical employees.
None of our employees is  represented by a collective  bargaining  organization,
and we consider our relationship with all our employees to be satisfactory.

History


         Arkona was  organized  in 1992 for the  initial  purpose of seeking and
acquiring  business  opportunities.  We were  originally  known as The  Thorsden
Group, Ltd but changed our name to Sundog  Technologies,  Inc. in April 1999. In
February  2001,  we changed our name from Sundog  Technologies,  Inc. to ARKONA,
Inc.  in  order  to  avoid  a  dispute  with  Sun  Microsystems  over  trademark
infringement.

Acquisition of Ensign Information Systems
-----------------------------------------

         In late 2000, we discovered Ensign Information  Systems and its primary
product,  its Dealer  Management  Suite.  We  believed  that Ensign had a proven
product,  great technology and capable technical  personnel but lacked extensive
management,  sales and marketing resource.  On November 9, 2000, we entered into
an Asset Purchase and Sale  Agreement  with Ensign,  pursuant to which we issued
1,500,000 shares of common stock in exchange for substantially all of the assets
of Ensign, including its intellectual property. We structured the acquisition to
be non-dilutive to shareholders.  In order to make the transaction non-dilutive,
we  purchased  from certain key  shareholders  1,740,250  shares of  outstanding
common stock at a price of $0.02 per share.

         At the time of the asset  purchase,  Ensign was  installing  its Dealer
Management Suite product in nine dealerships per year.  Today, we are installing
our ARKONA Dealer Management Suite product in six or more automobile dealerships
per month and are optimistic  that the number of  installation  will continue to
grow during FY 2003.

Merger with Arkona, Inc.; Suspension of Universal Update(TM)
------------------------------------------------------------

         In October 1997, we acquired Arkona,  Inc., a Utah  corporation  ("Utah
Arkona"),  as a  wholly-owned  subsidiary  corporation.  In 1997,  Utah Arkona's
founders  anticipated  the  growth  of  an  emerging  market  niche,  enterprise
information   exchange   (EIX),   an   outgrowth   of   the   traditional   data
replication/synchronization    marketplace.   This   technology   allows   rapid
integration of business  information  systems throughout the enterprise and easy
sharing of critical information with remote,  occasionally connected workers and
partners around the world. During December 1998, Utah Arkona completed the first
shipping version of its core product, Universal Update(TM). We shipped a revised
Universal  Update(TM)  v.  1.5,  in  June  1999.  Early  versions  of  Universal
Update(TM) v. 1.5 did not sell well.

         In 2000,  with new management and an expanded sales force,  we marketed
Universal  Update(TM) to more than 2000 potential customers and repositioned the
technology  in  the  mobile  computing  market.  Nevertheless,  soon  after  the
acquisition  of the Ensign  assets in  November  2000,  in light of the  limited
resources  at our  disposal  and  concerns  over the amount of  additional  work
required to make  Universal  Update(TM) a profitable  endeavor,  our  management
determined to suspend further development and marketing of Universal  Update(TM)
and focus our resources and attention to the automobile  dealership  back office
products  developed by Ensign.  In January  2001, we merged Utah Arkona with and
into the Company,  with the Company  surviving,  in order make the name "Arkona"
available to the Company.

                                       9
<PAGE>

Sale of Qui Vive; Envision Write-Off
------------------------------------

         On June 5,  1998,  we  formed a new  subsidiary  called,  Qui Vive Inc.
("QV"). QV was engaged in the development of e-mail security software.  On April
7, 2000,  we sold our  interest in QV to  Envision  Development  Corporation,  a
Florida corporation,  in exchange for 1,482,500 shares of Envision common stock.
We have since written down to zero all of our shares of Envision common stock.

Certain Risk Factors

Our short and long-term  success is subject to certain risks,  many of which are
substantial in nature. You should consider carefully the following risk factors,
in addition to other information contained in this report as you evaluate us and
our  business.  Any one of these  factors  could  cause  actual  results  of our
operations to differ materially from projected results.

We have operated at a net loss throughout our limited  operating history and may
continue to operate at a net loss.

         We  acquired  the assets that  generate  all of our revenue in November
2000, and,  accordingly,  our current business has a limited  operating  history
upon  which  an  evaluation  of our  prospects  and us can  be  based.  We  have
experienced  net losses in each quarter  since  inception,  with an  accumulated
deficit  of  approximately  $(20,783,233)  as of March  31,  2002.  We expect to
continue  to operate  at a net loss and to  experience  negative  cash flow from
operations  until  sometime  late 2002 or early 2003,  as we seek to develop our
business and customer base. In order to achieve positive operating cash flow and
profitability,  we must  significantly  increase the number of dealerships using
our products.  Even if we generate  significant  sales,  revenues from sales may
never exceed associated costs, and we may not be able to achieve profitability.

We require  additional  capital to meet our short-term  obligations and continue
development of our products.

         We do not  presently  have  working  capital  sufficient  to  meet  our
immediate term obligations.  We expect to continue to rely on outside financing,
in addition to recurring revenues,  to fund our operations for the near term and
cannot assure you that additional financing will be available on terms favorable
to us, or at all. If adequate funds are not  available,  or are not available on
acceptable  terms,  our  ability  to fund  our  marketing  and  planned  product
development  programs or otherwise  respond to  competitive  pressures  would be
significantly  limited. If capital were to continue to be unavailable,  we would
be forced to cease operations.

Our  accountants  have  included  an  explanatory  paragraph  on  our  financial
statements regarding our status as a "going concern."

         Our consolidated financial statements included in this report have been
prepared  on the  assumption  that we will  continue  as a  going  concern.  Our
independent public accountants have issued their report dated June 30, 2002 that
includes  an  explanatory  paragraph  stating  that  our  recurring  losses  and
accumulated  deficit,  among other  things,  raise  substantial  doubt about our
ability to continue as a going  concern.  Our product line is limited and it has
been necessary to rely upon financing from the sale of our equity  securities to
sustain operations. Additional financing could be required if we are to continue
as a going concern.

                                       10
<PAGE>

The market may not accept our ADMS product or other future offerings.

         Our Arkona Dealer  Management  Suite product is relatively  new, and we
are  operating in a market where two  competitors  control 80% of the market and
have a  significant  advantage  relative  to market  acceptance.  End-users  may
determine not to purchase our ADMS product because of our insignificant position
in the market, because of concerns about our product and related services or for
various  other  reasons.  We can provide no  assurance  that  end-users  will be
interested in purchasing any of our existing or future products in the near term
or the longer term.

Our competitors have greater resources than we do.

         The market for automobile dealership data management software is highly
competitive,  and we must compete with companies that possess greater financial,
technical and marketing  resources than we do. These  advantages may enable them
to respond more quickly to new or emerging  technologies and changes in customer
preferences.  These  advantages  may also allow them to engage in more extensive
research and development,  undertake extensive far-reaching marketing campaigns,
adopt  more  aggressive  pricing  policies  and make more  attractive  offers to
potential  employees and strategic  partners.  As a result,  we may be unable to
obtain a significant  market share in the automobile dealer management  software
business. In addition, competition may result in price reductions, reduced gross
margin and loss of market share. We may not be able to compete successfully, and
competitive  pressures may adversely affect our business,  results of operations
and financial condition.

Our services are subject to system failure and security risks.

         Our operations,  particularly  our ASP product,  are dependent upon our
ability to protect  our  network  infrastructure  against  damage  from  natural
disasters,  such as  fire,  earthquakes  and  floods,  as well  as  power  loss,
telecommunications  failures and similar events. All of our network and computer
equipment,  including  components  critical  to our  operations,  are  currently
concentrated  in a co-location  facility  provided by WorldCom.  Notwithstanding
precautionary  measures  that  we and  our  co-location  host  have  taken,  the
occurrence of a natural disaster or other unanticipated system or power failures
could cause  interruptions in the services we provide.  In addition,  failure of
our telecommunications  providers to provide the data communications capacity we
require as a result of natural  disasters,  operational  disruptions  or for any
other reason could cause interruptions in the services we provide. Any damage or
failure  that  causes  interruptions  in our  operations  could  have a material
adverse effect on our business, financial condition and results of operations.

         Our ASP network is subject to factors that could cause interruptions in
service or reduced  capacity for our customers.  Despite the  implementation  of
security  measures,  the core of our network  infrastructure  is  vulnerable  to
unauthorized  access,  computer viruses,  equipment failure and other disruptive
problems, including the following:

o        We and our users may experience interruptions in service as a result of
         the accidental or intentional  actions of Internet  users,  current and
         former employees or others.

o        Unauthorized   access  may  jeopardize  the  security  of  confidential
         information stored in our computer systems and our customers'  computer
         systems,  which may result in liability to our  customers  and also may
         deter potential customers.

o        We may face  liability for  transmitting  viruses to third parties that
         damage or impair their access to computer networks,  programs,  data or
         information.

o        There may be a systemic failure of Internet communications,  leading to
         claims associated with the general unavailability of the Internet.

o        Eliminating  computer viruses and alleviating  other security  problems
         may  require  interruptions,  delays or  cessation  of  service  to our
         customers.

                                       11
<PAGE>

The occurrence of any unauthorized access,  computer virus, equipment failure or
other  disruptive  problem could have a material adverse affect on our business,
financial condition and results of operations.

We are dependent upon highly qualified personnel, and the loss of such personnel
is a risk to our success.

         We are highly  dependent upon the efforts of management and technically
skilled personnel,  including programmers,  installers and engineers, and future
performance  will  depend in part upon our  ability to  increase  sales,  manage
growth effectively,  and to retain the services of our management, our technical
staff and sales staff. Competition for management, technical and sales personnel
is intense, and we do not have long-term  employment  agreements with any of our
employees.  As a result, we may be unable to retain our key employees or attract
other highly qualified  employees in the future. The loss of the services of any
of our management,  technical or sales team of the failure to attract and retain
additional key employees  could have a material  adverse effect on our business,
financial condition and results of operations.

We rely on our  intellectual  property  rights,  and if we are unable to protect
these  rights  we  may  face  increased  competition  and  our  business  may be
materially adversely affected.

         We regard our  intellectual  property,  particularly  our Arkona Dealer
Management Suite, as critical to our success, and we rely on copyright and trade
secret  protection to protect our proprietary  rights in intellectual  property.
Any of our  intellectual  property  rights  may be  challenged,  invalidated  or
circumvented,  or the rights granted  thereunder may not provide any competitive
advantage.  We could also incur  substantial costs in asserting our intellectual
property  or  proprietary  rights  against  others,  including  any such  rights
obtained from third parties,  and/or  defending any  infringement  suits brought
against us.  Although each of our employees and  consultants is asked to entered
into a confidentiality and invention  agreement,  there can be no assurance that
such agreements  will be honored or that we will be able to protect  effectively
our rights to trade secrets and know-how.

         In  addition,   there  can  be  no  assurance   that  others  will  not
independently  develop  substantially  equivalent  proprietary  information  and
techniques or otherwise gain access to our trade secrets and know-how. We may be
required  to  obtain  licenses  to  certain   intellectual   property  or  other
proprietary  rights from third parties.  Such licenses or proprietary rights may
not be made available  under  acceptable  terms,  if at all. If we do not obtain
required  licenses or proprietary  rights,  we could encounter delays in product
development  or find that the  development  or sale of products  requiring  such
licenses is foreclosed.

Software  products  tend to evolve  rapidly,  and our  competitors  may  develop
products that are technically superior to our products.

         Our primary product, the Arkona Dealer Management Suite, is primarily a
software  product.  The software  market is recognized  for rapid  technological
developments,   frequent  new  product   introductions   and  evolving  industry
standards. The rapid evolution of software products requires that we continually
improve the performance,  features and reliability of our software, particularly
in  response  to  competitive  offerings  by other  companies.  There  can be no
assurance  that we will  successfully  respond  quickly,  cost  effectively  and
sufficiently to these developments.

         In addition,  the widespread  adoption of new technologies or standards
could  require  substantial  expenditures  to modify or adapt our  products  and
services  and which  could  have a  material  adverse  effect  on our  business,
financial  condition and results of  operations.  Furthermore,  our new software
enhancements  may  contain  design  flaws  or other  defects  that  limit  their
marketability.

                                       12
<PAGE>

         There  can also be no  assurance  that  research  and  development  and
discoveries  by others will not render some or all of our  products or potential
product  offerings  uncompetitive  or  obsolete.  We  compete  with a number  of
entities that are currently  developing  and  producing  software  products that
compete with our current and proposed  products.  Many of these competitors have
substantially greater capital resources,  research and development capabilities,
and production and marketing resources, capabilities and experience than we have
available to us. These  competitors may succeed in developing  products that are
more  effective  or less costly than any products  that we may develop,  or that
gain market acceptance prior to any of our products,  making market  penetration
more difficult for us.

Although our license  terms limit our liability  for product  liability  claims,
there can be no assurance that such a claim will not be brought in the future.

         We have not experienced product liability claims to date. However,  our
products include programs designed for mission critical  applications,  creating
the risk that the failure or  malfunction  of our products may result in serious
damage or loss and open us to a claim for damages. Although contract terms limit
our  exposure,  there  can be no  assurance  that a court  would  not rule  such
provisions  to be invalid  or  unenforceable,  or that  changes in the law would
render  such  terms  void or  unenforceable.  A  successful  claim  could have a
material adverse effect on our operations and finances. Furthermore, the cost of
defending against a claim, even  successfully,  could be material and could have
an adverse  effect on our  results of  operations  and an adverse  effect on the
marketing of our products.

Trading in our common  stock is thin,  and there is a limit to the  liquidity of
our common stock.

         Our common stock is quoted on the Nasdaq OTC Bulletin Board. The volume
of  trading  in our  common  stock is  limited  and  likely  dominated  by a few
individuals.  Because of the thinness of the market for our stock,  the price of
our common stock may be subject to manipulation by one or more shareholders.  In
addition,  the  limited  volume of trading  limits  significantly  the number of
shares that one can purchase or sale in a short period of time. Consequently, an
investor may find it more  difficult to dispose of shares of our common stock or
obtain a fair price for our common stock in the market.

Our founders and officers hold a significant  number of our outstanding  shares,
which  will  allow  them to  influence  the  outcome  of  matters  submitted  to
stockholders for approval.

         Our founders,  most of whom are no longer  affiliated with the Company,
and Caldera  Holdings,  L.C.  collectively own and have the power to vote 23% of
our issued and outstanding  common stock.  In addition,  our management owns and
has the power to vote  approximately  16% of our issued and  outstanding  common
stock. As a result,  these  stockholders  have substantial  control over matters
requiring  approval by our  stockholders,  such as the election of directors and
approval of significant corporate transactions.  In addition, this concentration
of  ownership  may also have the effect of  delaying or  preventing  a change in
control.

Our shareholder rights plan and certain provisions in the Delaware corporate law
may permit our board to block a takeover  attempt and adversely affect the value
of our common stock.

                                       13
<PAGE>

         Our board of directors adopted a shareholder  rights plan, and declared
a  dividend  of an  associated  right,  which are  expected  to have the  effect
deterring any takeover of the Company that is not preceded by board  approval of
the proposed  transaction.  The  existence of such  shareholder  rights plan may
deter potential tender offers for our common stock or other  acquisition  offers
and may have the effect of delaying or preventing a change of control.

         In addition,  the Delaware  General  Corporation Law prohibits  certain
mergers,  consolidations,  sales of assets  or  similar  transactions  between a
corporation on the one hand and another company which is, or is an affiliate of,
a beneficial holder of 15% or more of such  corporation's  voting power (defined
as an  "Interested  Stockholder")  for three years after the  acquisition of the
voting power, unless the acquisition of the voting power was approved beforehand
by the  corporation's  board of  directors or the  transaction  is approved by a
majority  of  such   corporation's   shareholders   (excluding   the  Interested
Stockholder).  These provisions prohibiting Interested Stockholder  transactions
could also preserve management's control of ARKONA.

Obtaining  additional  capital  through the sale of common  stock will result in
dilution of shareholder interests.

         We plan to raise additional  funds in the future by issuing  additional
shares of common stock,  or securities  such as options or warrants or preferred
stock,  that are convertible into common stock. Any such sale of common stock or
other  securities  will lead to  further  dilution  of the equity  ownership  of
existing holders of our common stock.

Our stock price is volatile and subject to manipulation.

     The market price of our common stock,  like that of the securities of other
development stage companies,  may be highly volatile. Our stock price may change
dramatically as the result of various factors, including the following:

o        Manipulation of our stock price by existing or future shareholders;
o        Announcements   by   us   or   competitors   concerning   technological
         innovations,  new  products  or  procedures  developed  by  us  or  our
         competitors,
o        The  adoption or  amendment  of  governmental  regulations  and similar
         developments in the United States and foreign countries that affect our
         products or markets specifically or our markets generally,
o        Disputes relating to patents or proprietary rights,
o        Publicity  regarding  actual or potential  results  relating to product
         candidates under development by us or a competitor,
o        Delays in product development,
o        Slow acceptance of our products in new or existing markets,
o        A  general  lack of  trust in the  financial  markets  as a  result  of
         accounting scandals or for other reasons, and
o        Economic  and  other  external  factors,  as well  as  period-to-period
         fluctuations in financial results.

Our ability to issue  preferred  stock may  significantly  dilute  ownership and
voting power and negatively affect the price of our common stock.

         Under our Certificate of Incorporation,  as amended,  we are authorized
to issue up to 10,000,000  shares of preferred stock. Our Board of Directors has
the authority to create various  series of preferred  stock with such voting and


                                       14
<PAGE>

other  rights  superior  to those of our  common  stock and to issue  such stock
without shareholder approval. This issuance of such preferred stock would dilute
the ownership and voting power of the holders of our common stock and may have a
negative effect on the price of our common stock

We have not declared any dividends with respect to our common stock.

         We have never paid cash  dividends  on our common  stock.  We intend to
retain earnings,  if any, to finance the operation and expansion of our business
and,  therefore,  we do not expect to pay cash dividends on our shares of common
stock in the foreseeable future.

Our common stock may be a "low-priced  stock" and subject to certain  regulatory
action that limits or restricts the market for such stock.

         Shares of our common stock may be deemed to be "penny stock," resulting
in increased  risks to our investors and certain  requirements  being imposed on
some brokers who execute  transactions in our common stock. In general,  a penny
stock is a an equity security that:

o        Is priced under five dollars;

o        Is not traded on a national stock exchange,  the Nasdaq National Market
         or the Nasdaq SmallCap Market;

o        May be listed in the "pink  sheets" or the NASDAQ OTC  Bulletin  Board;
         and

o        Is issued by a company  that has less than $5  million  dollars  in net
         tangible  assets (if it has been in business  less than three years) or
         has less than $2 million dollars in net tangible assets (if it has been
         in business for at least three years); and

o        Is  issued  by a  company  that has  average  revenues  of less than $6
         million for the past three years.

         Our common  stock has a trading  price below five  dollars;  our common
stock is not  trading on an  exchange  or  NASDAQ;  we have less than $2 million
dollars in net  tangible  assets and we have  average  revenues  of less than $6
million.  Accordingly,  we believe  that our common  stock is presently a "penny
stock." At any time the common stock  qualifies as a penny stock,  the following
requirements, among others, will generally apply:

         o        Certain  broker-dealers  who recommend  penny stock to persons
                  other than established customers and accredited investors must
                  make a  special  written  suitability  determination  for  the
                  purchaser and receive the purchaser's  written  agreement to a
                  transaction prior to sale.

         o        Prior to executing  any  transaction  involving a penny stock,
                  certain  broker-dealers  must deliver to certain  purchasers a
                  disclosure  schedule  explaining  the risks involved in owning
                  penny stock,  the  broker-dealer's  duties to the customer,  a
                  toll-free   telephone   number   for   inquiries   about   the
                  broker-dealer's   disciplinary  history,  and  the  customer's
                  rights and remedies in case of fraud or abuse in the sale.

         o        In connection with the execution of any transaction  involving
                  a penny stock,  certain broker dealers must deliver to certain
                  purchasers  the  following:  o bid and offer price  quotes and
                  volume information; o the broker-dealer's compensation for the
                  trade; o the compensation received by certain salespersons for
                  the  trade;  o monthly  accounts  statements;  and o a written
                  statement of the customer's financial situation and investment
                  goals.

                                       15
<PAGE>

These  requirements  significantly  add to the burden of the  broker-dealer  and
limit the market for penny stocks.  These regulatory burdens may severely affect
the liquidity and market price for our common stock.

Item 2.  Description of Property

         We own no real  property.  We  currently  lease a  11,800  square  foot
facility  located at 10542 South Jordan Gateway,  Suite 200, South Jordan,  Utah
84005. We conduct all of our corporate, administrative, research and development
activities  at this  facility.  The lease of the  facility  will expire July 31,
2005, and our base monthly lease payment is $18,743.50 per month. The facilities
are in good condition, and we believe they will adequately serve us for at least
another year. Because our current facilities are adequate,  we do not anticipate
any expansion of existing facilities or any acquisition of additional facilities
for at least one year.

Item 3.  Legal Proceedings

         None.

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

         No matter was  submitted to a vote of the security  holders  during the
fourth quarter of the fiscal year covered by this report.

                                     PART II

Item 5.   Market for Common Equity and Related Stockholder Matters

Market Price

         The table below sets forth, for the period indicated,  the high and low
bid  quotations  for our common  stock as  reported  on the Nasdaq OTC  Bulletin
Board.  Our common  stock began  trading on the OTC  Bulletin  during the fourth
calendar quarter of 2000. Prior to the time the OTC Bulletin Board began quoting
our common stock,  our common stock was traded only on the "pink  sheets." We do
not have access to price information for those periods.

 Fiscal Year Ended March 31, 2001                       Low             High
                                                    -----------    -----------
 Quarter ended December 31, 2000                     $0.19               $0.56
 Quarter ended March 31, 2001                        $0.34               $1.09

 Fiscal Year Ended March 31, 2002                       Low             High
                                                    -----------    -----------
 Quarter ended June 30, 2001                         $0.21               $0.47
 Quarter ended Sept. 30, 2001                        $0.18               $0.35
 Quarter ended Dec. 31, 2001                         $0.26               $0.45
 Quarter ended March 31, 2002                        $0.21               $0.95

 Fiscal Year Ending March 31, 2003                      Low             High
                                                    -----------    -----------
Quarter  ended June 30, 2002  (through  June
 27, 2002)                                           $0.38               $0.63

                                       16
<PAGE>

         The quotations  set forth above reflect  inter-dealer  prices,  without
retail  mark-up,  mark  down  or  commission,   and  may  not  represent  actual
transactions.  The last sale price of our common  stock,  as reported on the OTB
Bulletin Board on June 27, 2002 was $.38 per share.

Outstanding Shares and Number of Shareholders

         As of March 31, 2002, there were approximately 23,842,798 shares of our
common  stock  issued  and  outstanding,  which were held by  approximately  500
holders of record.  We have never issued preferred stock. We have never declared
or paid dividends on any class of our equity securities, and we currently intend
to retain any future  earnings  for use in our  business  and do not  anticipate
paying any dividends on our outstanding common stock in the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans
------------------------------------------------------------------

<TABLE>
<CAPTION>

                      Equity Compensation Plan Information

                                                                                     Number of securities
                                                                                    remaining available for
                                                                                     future issuance under
                              Number of securities to       Weighted-average          equity compensation
                              be issued upon exercise       exercise price of          plans (excluding
                              of outstanding options,     outstanding options,      securities reflected in
                                warrants and rights        warrants and rights            column (a))
       Plan category         -------------------------  -------------------------  -------------------------
---------------------------             (a)                        (b)                        (c)
<S>                                   <C>                         <C>                          <C>
Equity compensation plans
  approved by security
  holders                             240,000                     $2.04                        0

Equity compensation plans
  not approved by security
  holders(1)                         2,445,000                    $0.30                    3,555,000

Total                                2,445,000                    $0.30                    3,555,000
</TABLE>

         (1) Does not  includes  secondary  options  with  respect to  1,475,000
shares of our common stock granted to our  officers,  directors and employees by
shareholders  of the Company.  In 1999,  certain  founding  shareholders  of our
company entered into an agreement with Caldera Holding Company,  L.C., an entity
which is independent of Arkona, pursuant to which Caldera was given the right to
grant  secondary  options to third  parties with respect to 1,550,000  shares of
common  stock owned by the founders in order to encourage  the  development  and
increased  productivity of Arkona.  Under the agreement  between Caldera and the
founders,  the secondary  options are required to have an exercise price of $.30
per share and expire no later than December 31, 2006.  Because these options are
granted by shareholders of the Company with respect to outstanding  stock,  upon
the  exercise of these  options,  the Company  will not receive any proceeds and
will not issue any additional shares of common stock.

                                       17
<PAGE>

Recent Sales of Unregistered Securities
---------------------------------------

         During  the fiscal  year  ended  March 31,  2002,  we offered  and sold
9,433,886  shares  of  common  stock  in  transactions  that  were  exempt  from
registration  under the  Securities  Act of 1933,  as amended  (the  "Securities
Act"). Of such shares,  6,641,388 shares sold for cash proceeds of $1,828,500 at
a average price of approximately $0.28 per share to 18 accredited investors, and
2,792,498  were issued in accordance  with  conversion  provisions  contained in
$530,574 of convertible  debt. In conjunction  with the sale of 1,862,122 of the
shares of common  stock  sold for cash,  we  issued an  aggregate  of  1,562,122
warrants with an exercise  price of $0.33 and 100,000  warrants with an exercise
price of $0.60.

         Except for the sales occurring during the quarter ended March 31, 2002,
which are disclosed in the following paragraph, information regarding such sales
is included in the  Quarterly  Report on Form 10Q-SB  relating to the quarter in
which such sales occurred.

         During the quarter  ended March 31, 2002, we offered and sold shares of
common stock and warrants as follows:

         o We offered and sold 606,061  shares of common  stock,  together  with
606,061 warrants to purchase common stock at an exercise price $.33 per share at
any time during a five-year  term,  to single  accredited  investors at purchase
price of $0.35 per unit of one share and one warrant.

         o We offered and sold 650,000  shares of common  stock,  together  with
350,000 warrants to purchase common stock at an exercise price $.33 per share at
any time during a five-year  term,  to single  accredited  investors at purchase
price of $0.35 per unit of one share and .53 warrant.

         o We offered and sold 100,000  shares of common  stock,  together  with
100,000 warrants to purchase common stock at an exercise price $.60 per share at
any time during a five-year  term,  to single  accredited  investors at purchase
price of $0.60 per unit of one share and one warrant.

         o We offered and sold an aggregate of 293,334 shares of common stock to
4 accredited investors at a weighted-average purchase price of $0.35 per share.

         The  offer  and sale of the  shares of our  common  stock and  warrants
described  in the  preceding  paragraph  were  effected  in  reliance  upon  the
exemption for sales of securities not involving a public offering,  as set forth
in  Section  4(2) of the  Securities  Act of 1933,  as  amended,  based upon the
following:  (a)  the  investors  confirmed  to us  that  they  were  "accredited
investors,"  as  defined  in Rule 501 of  Regulation  D  promulgated  under  the
Securities  Act and had such  background,  education and experience in financial
and  business  matters  as to be able to  evaluate  the  merits  and risks of an
investment  in the  securities;  (b)  there was no public  offering  or  general
solicitation with respect to each offering; (c) the investors were provided with
certain disclosure materials and all other information requested with respect to
the Company, (d) the investors  acknowledged that all securities being purchased
were  "restricted  securities" for purposes of the Securities Act, and agreed to
transfer such securities only in a transaction  registered  under the Securities
Act or exempt from  registration  under the Securities Act; and (e) a legend was
placed on the certificates  representing  each such security stating that it was
restricted and could only be transferred if  subsequently  registered  under the
Securities Act or transferred in a transaction  exempt from  registration  under
the Securities Act.

                                       18
<PAGE>

Item 6.   Management's Discussion and Analysis

Overview

         ARKONA,  Inc.  (formerly  The Thorsden  Group and Sundog  Technologies,
Inc.) was  organized in 1996 as a data base  technology  company with  Universal
Update(TM) as its primary product. Universal Update(TM) allows rapid integration
of business  information  systems  throughout the enterprise and easy sharing of
critical  information with remote,  occasionally  connected workers and partners
around the world.  Prior to 2001,  we  primarily  worked to develop and sell the
Universal Update(TM) technology. We have since determined to suspend development
and marketing of Universal Update(TM).

         Following our acquisition of the assets of Ensign Information System in
late 2000,  our focus and direction  has changed from our  Universal  Update(TM)
products and the mobile  computing  industry to our newly acquired Arkona Dealer
Management Solutions (ADMS) and the automobile  dealership  management industry.
When we acquired  the assets of Ensign,  their  predecessor  to our ADMS product
already  had a  customer  base  and was a  proven  product.  At the  time of the
acquisition,  Ensign had  installed  9 systems  in the prior 12  months.  We are
currently installing 6 systems per month.

Results of Operations

Fiscal Year Ended March 31, 2002  ("FY2002")  Compared With Year Ended March 31,
2001 ("FY2001")

         Revenues  for the FY2002 were  $2,338,176,  compared  to  $327,015  for
FY2001.  Approximately  $1,357,131  of  this  increase  is  attributable  to our
increasing  the  number  of  installations  of  our  ADMS  product  in  new  car
dealerships  to six or more each month.  This year we plan to grow the number of
installations of our ADMS product to 10 per month. The remainder of our increase
in revenue is  attributable  to the fact that we  acquired  the assets of Ensign
Information System,  including associated revenue streams, after FY 2001 was 60%
complete,  and had insignificant revenues prior to the acquisition of the Ensign
assets.

         Revenues for FY2002 were generated through the sale and installation of
ADMS,  our  automobile  dealer  management   solution  and  reoccurring  monthly
maintenance  fees from dealers using ADMS.  Currently,  the value of reoccurring
monthly  maintenance  fees from all of our  customers in the  aggregate  exceeds
$100,000  per month.  We expect to increase  the  reoccurring  fees by $8,000 to
$15,000 per month during the fiscal year ended March 31, 2003 ("FY 2003").  With
the planned increases in installations and our reoccurring monthly  maintenance,
we expect to reach achieve positive cash flow by the end of September 2002.

         Cost of sales  totaled  $1,411,893  in FY2002,  compared to $183,447 in
FY2001.  As a percentage of revenues,  cost of sales was 60 percent for FY 2002,
compared  to 56 percent  of FY 2001.  The  increase  in cost of sales was due to
increases  in the number of  installations,  increased  head count and  training
costs  associated  with the  increases  in head count.  We expect  training  and
installation costs in FY 2003 to increase as a result of expected growth. We are
hiring and training new support and installation personnel as quickly as we can,
and the demand for our product continues to out pace our ability to grow.

         Operating  expenses  for  FY2002  totaled  $7,852,885  as  compared  to
$7,253,869 for FY2001.  Operating  expenses  decreased in every category  except
cost of sales.

                                       19
<PAGE>

         Marketing,  general and  administrative  expenses totaled $3,124,748 in
FY2002,  compared to $3,358,901 in FY2001 - a decrease of $234,153 or 6 percent.
Depreciation   and   amortization,   a  component  of  marketing,   general  and
administrative   expenses   increased   $117,230  in  FY2002.  The  increase  in
depreciation and  amortization is due to the increase in depreciable  assets and
amortization  of goodwill and technology  associated with the purchase of Ensign
Information  Systems.  If depreciation and amortization had remained constant in
FY2002 the decrease in marketing, general and administrative expenses would have
been 10 percent.  The  decrease in marketing  and sales  expense was a result of
more  effective and successful  sales  efforts.  We estimate that in FY 2001 our
sales  cycle was  between  90 and 180 days.  In FY 2002,  that  cycle  decreased
dramatically,  to between 30 and 75 days,  and with this  shortening of the sale
cycle,  our costs of selling has  decreased.  One of the primary  causes for the
decrease  in the sales  cycle and  selling  expense  is  customer  referral  and
recommendations.

          Research and development  expenses decreased $163,020 from $576,021 in
FY2001 to $412,994 in FY2002.  The decrease was due to the  re-allocation of our
engineering  resources  from  product  development  (which  is  classified  as a
research and development  expense) to product  customization (which is a cost of
sales).  We  expect  to  continue  to  allocate  an  increasing  amount  of  our
engineering resources,  and associated expenses, to product customization rather
than development in FY 2003.

         The Company also recognized  $2,903,250 of deferred compensation during
FY2002 as compared with  $3,135,500 for FY 2001. The deferred  compensation is a
result of options  granted  prior to FY2002 at a price  lower  than fair  market
value on the date of grant that vested during FY2002.  Most of this compensation
expense is not  attributable  to options granted by the Company;  rather,  it is
attributable to the grant by Caldera Holdings,  L.C. to employees of the Company
of secondary options to purchase  outstanding  common stock owned by founders of
the  Company.  (See "Item 5. Market for Common  Equity and  Related  Stockholder
Matters--Securities Authorized for Issuance Under Equity Compensation Plans").

         On June 5, 1998, we formed a new  subsidiary  called,  Qui Vive Inc. QV
was engaged in the development of e-mail security software. On April 7, 2000, we
sold  our  interest  in  QV  to  Envision  Development  Corporation,  a  Florida
corporation  in exchange for  1,482,500  shares of Envision  common  stock.  The
$21,531,554  grain  on  disposal  of  segment  reflected  on  our  Statement  of
Operations  during FY 2001 was the result of this  exchange.  During  late 2000,
following  a  restatement  of  its  assets  and  a  liquidity  crisis,  Envision
discontinued operations. As a result, we wrote down to zero all of our shares of
Envision common stock. The $20,465,829 loss on disposal of investment securities
reflected on our Statement of Operations  for FY 2001 is the result of our write
off the value of our shares of Envision common stock.

         Our net loss for the year ended March 31, 2002 was $5,548,416 (or $0.30
per share)  compared  to a loss of  $6,907,595  (or $0.46 per share) in the year
ended March 31,  2001.  This  decrease in net loss was  primarily  the result of
decreased deferred compensation expenses and increases in revenue.

         We expect  significant  positive changes to take place at ARKONA during
FY 2003 and expect  sales to continue  to  increase at a rapid pace.  With these
increases,  we expect cost of sales to decrease as a  percentage  of sales as we
become more  proficient  and as we increase the  experience of our  installation
teams.  Also,  we do not expect to amortize  significant  deferred  compensation
expenses  in  FY2003.   In  FY2002,   we  amortized  $2.9  million  in  deferred
compensation   expense  and  in  FY2001  we  amortized  $3.1  million   deferred
compensation  expense,  most of which  was  attribute  to  options  to  purchase
outstanding  shares of common stock held by our founders granted to officers and
employees of the Company by shareholders of the Company.  If we exclude expenses


                                       20
<PAGE>

related to amortization of deferred  compensation,  FY2002 operating losses were
$2,645,166  (compared to $5,548,416 with amortization of deferred  compensation)
and FY2001  operating  losses  were  $3,135,500  (compared  to  $5,907,595  with
amortization of deferred compensation in FY2001)

Liquidity and Capital Resources

         At March 31,  2002,  we had cash and cash  equivalents  of  $120,290 as
compared  to cash and cash  equivalents  of  $35,221 as of March 31,  2001.  The
increase in cash is due to an increase in cash on hand.

         Our current  cash and cash  equivalents  are  insufficient  to fund our
existing current liabilities and our activities during the coming year. Although
we expect our monthly revenues to equal or exceed our monthly operating expenses
beginning  sometime  around  September  2002,  we  nonetheless  expect  to  need
additional financing in order to pay off existing liabilities and potentially in
order to  financing  expansion  efforts.  We expect to  obtain  such  additional
financing  through  the  private  placement  of equity  securities  and  through
unsecured loans the Company. We caution, however, that, particularly in light of
the  current  instability  and  downward  trends  in the  equity  markets,  such
financing may not be available on favorable terms, or at all.

         Although  we do not  expect  to make any  purchases  of new  facilities
during the coming year, we do plan to purchase additional computer equipment for
our ASP hosting facility and research and development  efforts. We also continue
to  evaluate  new  product  opportunities  and may,  if  necessary,  seek to add
equipment  and  personnel  to pursue such  opportunities  in the  future.  If we
purchase  significant  amounts of  additional  computer  equipment or expand our
operations to develop new products,  we may need to seek  additional  financing.
There can be no assurance that additional  funding will be available as required
or on terms that are favorable to the Company.

         Our  consolidated  financial  statements  have  been  prepared  on  the
assumption  that the Company will continue as a going concern.  Our  independent
public accountants have issued their report dated June 30, 2002 that includes an
explanatory paragraph stating that our recurring losses and accumulated deficit,
among other things,  raise  substantial doubt about our ability to continue as a
going  concern.  Our product line is limited,  and it has been necessary to rely
upon financing from the sale of its equity  securities to sustain  operations in
the past. Additional financing will be required if we are to continue as a going
concern.  If such additional  funding cannot be obtained,  we may be required to
scale back or discontinue our operations.  Even if such additional  financing is
available,  there can be no assurance that it will be on terms  favorable to the
Company.  In any event,  such  financing  will result in immediate  and possibly
substantial dilution to existing shareholders.

Item 7.   Financial Statements

         The Company's  consolidated  financial  statements and associated notes
are set forth on pages F-1 through F-14 of this report.

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

         None.


                                       21
<PAGE>


                                    PART III

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

         The  information  required by this Item is incorporated by reference to
the Company's definitive proxy statement to be filed with the Commission.

Item 10.  Executive Compensation

         The  information  required by this Item is incorporated by reference to
the Company's definitive proxy statement to be filed with the Commission.

Item 11.   Security Ownership of Certain Beneficial Owners and Management

         The  information  required by this Item is incorporated by reference to
the Company's definitive proxy statement to be filed with the Commission.

Item 12.  Certain Relationships and Related Transactions

         The  information  required by this Item is incorporated by reference to
the Company's definitive proxy statement to be filed with the Commission.

Item 13.  Exhibits and Reports on Form 8-K

         (a)      Exhibits.

<TABLE>
<CAPTION>

   Exhibit

    Number                       Title of Document                                  Location
---------------    ----------------------------------------------    ---------------------------------------

<C>                <C>                                               <C>
2.1                Asset  Purchase  and Sale  Agreement  between     Incorporated by reference to the
                   the Company and Ensign Information Systems        Company's Quarterly Report on Form
                                                                     10-QSB filed with the SEC on November
                                                                     14, 2000

2.2                Agreement  and  Plan of  Merger  between  the     Incorporated by reference to the
                   Company and Arkona, Inc. (a Utah corporation)     Company's Quarterly Report on Form
                                                                     10-QSB filed with the SEC on February
                                                                     13, 2001

3.1                Certificate of Incorporation                      Incorporated by reference to
                                                                     Company's registration statement on
                                                                     Form 10-SB, File No. 0-24372

3.2                Amendment to Certificate of Incorporation         Incorporated by reference to
                                                                     Definitive Information Statement on
                                                                     Form 14C filed with the SEC on May 6,
                                                                     1998

3.3                Certificate of Designation  regarding  Series     Incorporated   by   reference  to  the
                   A Preferred Stock                                 Current  Report on Form 8-K filed with
                                                                     the SEC on January 18, 2001.
</TABLE>

                                       22
<PAGE>
<TABLE>
<CAPTION>

   Exhibit

    Number                       Title of Document                                  Location
---------------    ----------------------------------------------    ---------------------------------------

<C>                <C>                                               <C>
3.4                Amendment  to  Certificate  of  Incorporation     Incorporated by reference to the
                   (reverse stock split; name change)                Company's Quarterly Report on Form
                                                                     10-QSB filed with the SEC on February
                                                                     13, 2001

3.5                Certificate  of Merger  (Company  and  Arkona     Incorporated by reference to the
                   Utah)                                             Company's Quarterly Report on Form
                                                                     10-QSB filed with the SEC on February
                                                                     13, 2001

3.6                Bylaws                                            Incorporated by reference to
                                                                     Company's registration statement on
                                                                     Form 10-SB, File No. 0-24372

4.1                Specimen Stock Certificate                        Incorporated by reference to
                                                                     Company's registration statement on
                                                                     Form 10-SB, File No. 0-24372

4.2                Form of Warrant used in 2002                      Filed herewith

10.1               1992 Stock Option Plan                            Incorporated by reference to
                                                                     Company's registration statement on
                                                                     Form 10-SB, File No. 0-24372

10.2               1999 Stock Option Plan                            Incorporated  by  reference  to  the
                                                                     Company's   Annual  Report  on  Form
                                                                     10-KSB for the year ended  March 31,
                                                                     1999, filed with the SEC on June 29,
                                                                     1999

10.3               Form  of   Employee   Confidentiality,   Work     Incorporated by reference to the
                   Product and Non-competition Agreement             Company's Quarterly Report on Form
                                                                     10-QSB for the quarter ended December
                                                                     31, 1997, as amended, filed with the
                                                                     SEC on May 7, 1998

10.4               2001 Stock Option Plan                            Filed herewith

10.5               Amended and Restated Stock Acquisition            Incorporated by reference to the
                   Agreement by and among Envision Development       Company's Current Report on Form 8K
                   Corporation, Qui Vive Acquisition                 filed with the SEC on April 24, 2000
                   Corporation, the Company and
                   RockMountain                    Ventures
                   Fund, LP, dated as of March 31, 2000.

10.6               Master Lease between Parkway Tower, L.L.C.        Incorporated by reference to Annual
                   and the Company.                                  Report on Form 10-KSB filed with the
                                                                     SEC on July 14, 2000

10.7               Rights Agreement dated December 22, 2000          Incorporated by reference to the
                                                                     Current Report on form 8-K filed with
                                                                     the SEC on January 18, 2001

10.8               Employment Agreement dated November 2000          Incorporated by reference to the
                   with Richard Holland                              Quarterly Report on Form 10-QSB filed
                                                                     with the SEC on November 21, 2000
10.9               Employment Agreement dated November 2000          Incorporated by reference to the
                   with Blake Nielson                                Quarterly Report on Form 10-QSB filed
                                                                     with the SEC on November 21, 2000
</TABLE>

                                       23
<PAGE>

         (b)      Reports on Form 8-K

         The  Company  did not file any  reports on Form 8-K during the  quarter
ended March 31, 2002.

                                       24
<PAGE>

                                   SIGNATURES

         In  accordance  with the  requirements  of  Section  13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-KSB
to be signed on its behalf by the  undersigned,  thereunto duly  authorized,  on
July 3, 2002.

                      ARKONA Technologies, Inc.


                      By:               /s/   Alan S. Rudd
                                        ----------------------------------------
                                             Alan S. Rudd

                                             President, Chief Executive Officer

                   POWER OF ATTORNEY AND ADDITIONAL SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this Form 10-KSB has been signed by the following  persons in the capacities and
on the dates indicated.  Each person whose signature to this Form 10-KSB appears
below hereby  constitutes and appoints Alan S. Rudd and Stephen Russo,  and each
of them, as his true and lawful  attorney-in-fact  and agent, with full power of
substitution,  to sign on his behalf  individually  and in the  capacity  stated
below  and to  perform  any  acts  necessary  to be done in  order  to file  all
amendments and  post-effective  amendments to this Form 10-KSB,  and any and all
instruments or documents filed as part of or in connection with this Form 10-KSB
or the  amendments  thereto and each of the  undersigned  does hereby ratify and
confirm all that said  attorney-in-fact and agent, or his substitutes,  shall do
or cause to be done by virtue hereof.
<TABLE>
<CAPTION>

                 Signature                                      Title                               Date
                 ---------                                      -----                               ----
<S>                                                  <C>                                         <C>
                                                     Chief Executive Officer and                 July 3, 2002
           /s/ Alan S. Rudd                          Director (Principal Executive
          --------------------------                 Officer)

               Alan S. Rudd

           /s/ Richard Holland                       President,   Vice   President   of          July 3, 2002
          --------------------------                  Engineering and Director
               Richard Holland

           /s/ Stephen Russo                         Chief Financial Officer                     July 3, 2002
          --------------------------                 (Principal Financial and
               Stephen Russo                          Accounting Officer)


          /s/ Bryan Allen                            Director                                    July 3, 2002
          --------------------------
              Bryan Allen

</TABLE>

                                       25
<PAGE>


                                  ARKONA, INC.

                                 March 31, 2002

                       [WITH INDEPENDENT AUDITORS' REPORT]

<PAGE>

<TABLE>
<CAPTION>

                                               ARKONA, INC.

                                            TABLE OF CONTENTS

                                                                                                        Page
                                                                                                        ----

<S>                                                                                                        <C>
Independent Auditors' Report                                                                             F-1
Balance Sheet -- March 31, 2002                                                                          F-2
Statements  of  Operations  and  Comprehensive  Income  for the years  ended  March  31,  2002 and
2001                                                                                                     F-3
Statement of Stockholders' Equity/(Deficit) for the years ended March 31, 2002 and 2001
                                                                                                         F-4

Statements of Cash Flows for the years ended March 31, 2002 and 2001                                     F-5
Notes to Financial Statements                                                                         F-6- F-13
</TABLE>



<PAGE>

Independent Auditors' Report

The Board of Directors and Shareholders
ARKONA, Inc.

We have audited the accompanying  balance sheet of ARKONA,  Inc., formerly known
as Sundog  Technologies,  Inc., as of March 31, 2002, and the related statements
of operations,  stockholders'  equity,  and cash flows for the years ended March
31, 2002 and 2001.  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.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  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 ARKONA,  Inc., as of March 31,
2002,  and the results of operations  and cash flows for the periods ended March
31, 2002 and 2001, 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 10 to the
financial  statements,  the Company has experienced losses from operations since
its  inception and has  significant  negative  cash flow from  operations  which
raises  substantial  doubt about the  ability to  continue  as a going  concern.
Management's plans in regard to these matters are also described in Note 10. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


  /s/ MANTYLA McREYNOLDS
  ------------------------
      MANTYLA McREYNOLDS
      Salt Lake City, Utah
      June 30, 2002

                                       F-1
<PAGE>

<TABLE>
<CAPTION>

                                  ARKONA, INC.
                                  Balance Sheet
                                 March 31, 2002

                                     ASSETS
                                     ------

<S>                                                                                 <C>
Current Assets
  Cash & cash equivalents - Notes 1 & 2                                            $    120,290
                                                                                   ------------
  Accounts receivable, net of allowance of $6,008                                       182,200
  Employee advances                                                                      12,050
                                                                                   ------------
                        Total Current Assets                                            314,540
                                                                                   ============
Property and Equipment - Note 6
  Property and equipment                                                                607,148
  Less: Accumulated depreciation                                                       (405,474)
                                                                                        201,674
                                                                                   ============
                     Net Property and Equipment
Other Assets
  Deposits - Note 9                                                                      17,779
  Goodwill from Ensign purchase (net) - Note 7                                          156,622
  Intellectual property (net) - Note 7                                                   89,157
  Intangible assets - Note 4                                                             34,845
                                                                                   ------------
                         Total Other Assets                                             298,403
                                                                                   ------------
                            TOTAL ASSETS                                           $    814,617
                                                                                   ============
                  LIABILITIES & STOCKHOLDERS' EQUITY/(DEFICIT)
                  --------------------------------------------

Current Liabilities
  Accounts payable                                                                 $    453,487
  Accrued liabilities                                                                   210,384
  Deferred revenue                                                                      108,750
  Current portion of capital leases - Note 5                                             32,394
                                                                                   ------------
                         Total Current Liabilities                                      805,015
Long-Term Liabilities
  Capital leases payable - Note 5                                                        45,283
  Note payable - related party - Note 16                                                100,537
  Less current portion of capital leases                                                (32,394)
                                                                                   ------------
                        Total Long-Term Liabilities                                     113,426
                                                                                   ------------
                             Total Liabilities                                          918,441
                                                                                   ------------
Stockholders'  Equity/(Deficit)  -- Notes 8, 11 &  15-17 Preferred stock
   -- 10,000,000 shares authorized, $.001 par
    value; no shares issued and outstanding                                                   0
  Capital stock -- 50,000,000 shares authorized, $.001 par
    value; 23,842,798 shares issued and outstanding                                      23,843
  Additional paid-in capital                                                         20,672,508
  Accumulated unrealized losses on investments                                          (16,942)
  Deficit accumulated during the development stage                                  (20,783,233)
                                                                                   ------------
                   Total Stockholders' Equity/(Deficit)                                (103,824
                                                                                   ------------
            TOTAL LIABILITIES & STOCKHOLDERS' EQUITY/(DEFICIT)                     $    814,617
                                                                                   ============
</TABLE>

                 See accompanying notes to financial statements


                                       F-2
<PAGE>


                                  ARKONA, INC.
                Statements of Operations and Comprehensive Income
                   For the Years Ended March 31, 2002 and 2001

                                               Year            Year
                                              ended           ended
                                             3/31/02         3/31/01
                                          ------------    ------------
Revenues - Note 1                         $  2,338,176    $    327,015

Cost of sales                                1,411,893         183,447
Research and development                       412,994         576,021
Marketing, general and administrative        3,124,748       3,358,901
 Amortization of unearned compensation
                                             2,903,250       3,135,500
                                          ------------    ------------
  Total Operating Expenses                   7,852,885       7,253,869
                                          ------------    ------------
        Net Loss from Operations            (5,514,709)     (6,926,854)
                                          ------------    ------------
Other Income/(Expense)
  Interest income                         $          3    $      6,609
  Interest expense                             (33,710)        (53,571)
  Other income                                       0             496
  Loss  on  disposal of   investment
securities                                           0     (20,465,829)
                                          ------------    ------------

      Total Other Income/(Expense)             (33,707)    (20,512,295)

        Net Loss From Continuing

          Operations                        (5,548,416)    (27,439,149)
  Gain on disposal of segment                        0      21,531,554
                                          ------------    ------------
Net Loss                                  $ (5,548,416)   $ (5,907,595)
Other comprehensive income:
   Unrealized holding gains(loss)               (1,410)         (1,950)
                                          ------------    ------------
Comprehensive Income (Loss)                 (5,549,826)     (5,909,545)
                                          ============    ============
Basic & Diluted Loss/share - Note 1

  Continuing Operations                   $      (0.30)   $     (2.12)
  Gain on disposal of segment                     0.00           1.66
                                          ------------    ------------
     Basic & Diluted Net Loss per share          (0.30)         (0.46)
                                          ------------    ------------

Weighted average number shares              18,575,326      12,919,299
                                          ============    ============

                 See accompanying notes to financial statements

                                       F-3
<PAGE>


<TABLE>
<CAPTION>

                                  ARKONA, INC.

                   Statement of Stockholders' Equity/(Deficit)

                   For the Years Ended March 31, 2002 and 2001

                                                                              Accum.                                      Total
                                                             Additional    Unrealized     Unearned                       Stckhldrs'
                                Shares         Common         Paid-In        Loss on       Compen-       Accum. Loss      Equity/
                                Issued         Stock          Capital      Investment      Sation        Devel Stage      Deficit
                               -----------  -----------    ------------    ----------   ------------    ------------    -----------
<S>                             <C>           <C>          <C>             <C>          <C>             <C>              <C>
Balance, March 31, 2000         23,825,521    $  23,826    $ 14,147,648    $ (13,582)   $ (5,443,750)   $ (9,327,222)    $ (613,080)
One for two  reverse  split
of common shares               (12,031,719)      12,032)         12,032         --              --              --               0
Cancelled treasury shares       (1,740,250)      (1,740)        (33,065)        --              --              --          (34,805)
Issued  shares  in  private
placement at $ 4.00  per
share                               37,500           37         149,963         --              --              --          150,000

Options  exercised at $1.00
per post-split share                30,000           30          29,970         --              --              --           30,000
Options  exercised at $4.01
per post split share                46,632           47         187,104         --              --              --          187,151
Issued  shares  for  Ensign
asset purchase                   1,500,000        1,500         627,870         --              --              --          629,370
Issued  shares  for debt at
$2.00 per share                    767,728          768       1,534,688         --              --              --        1,535,456
Issued  shares  to  officer
at $0.27 per share               1,087,500        1,087         292,538         --              --              --          293,625
Issued  shares  in  private
placement  at $ 0.75 per           400,000          400         299,600         --              --              --          300,000
share
Issued  shares  in  private
placement at $ 1.00 per            480,000          480         479,520         --              --              --          480,000
share
Granted stock options,
record unearned comp                  --           --           595,000         --          (595,000)           --                0
Adjustment to  unrealized
loss on investments                   --           --              --         (1,950)           --              --           (1,950
Compensation expense
stock options granted                 --           --              --           --         3,135,500            --        3,135,500
Gifted  stock  to  trust of
employee                             6,000            6               6
Net loss  for  the  year
ended March 31, 2001                  --           --              --           --              --        (5,907,595)    (5,907,595)
                               -----------  -----------    ------------    ----------   ------------    ------------    -----------
Balance, March 31, 2001         14,408,912       14,409      18,322,868      (15,532)     (2,903,250)    (15,234,817)       183,678
Issued  shares  for Cash at      1,052,632        1,052         198,948         --              --              --          200,000
$0.19 per share
Issued  shares  for debt at      2,792,498        2,793         527,781         --              --              --          530,574
$0.19 per share
Issued  shares  for Cash at      2,701,110        2,701         672,299         --              --              --          675,000
$0.25 per share
Issued  shares  for Cash at         90,909           91          19,909         --              --              --           20,000
$0.22 per share
Issued  shares  for Cash at        384,615          385          99,615         --              --              --          100,000
$0.26 per share
Issued  shares  for Cash at        316,667          317          94,683         --              --              --           95,000
$0.30 per share
Issued  shares  for Cash at      1,862,122        1,862         612,638         --              --              --          614,500
$0.33 per share
Issued  shares  for Cash at        100,000          100          43,900         --              --              --           44,000
$0.44 per share
Issued  shares  for Cash at        133,333          133          79,867         --              --              --           80,000
$0.60 per share
Adjustment to realized
loss on investments                   --           --              --         (1,410)           --              --           (1,410)
Compensation expense  for
stock options granted                 --           --              --           --         2,903,250            --        2,903,250
Net loss for  the  year               --           --              --           --              --        (5,548,416)    (5,548,416)
ended March 31, 2002
                               -----------  -----------    ------------    ----------   ------------    ------------    -----------
Balance, March 31, 2002         23,842,798  $    23,843    $ 20,672,508    $ (16,942)   $          0    $(20,783,233)   $  (103,824)
                               ===========  ===========    ============    ==========   ============    ============    ===========
</TABLE>


                 See accompanying notes to financial statements

                                      F-4
<PAGE>


                                  ARKONA, INC.

                            Statements of Cash Flows

                   For the Years Ended March 31, 2002 and 2001
<TABLE>
<CAPTION>

                                                                      Year ended          Year ended
                                                                       3/31/02              3/31/01
                                                                    ---------------     ---------------
Cash Flows from Operating Activities
<S>                                                                 <C>                  <C>

Net Loss                                                            $ (5,548,416)        $ (5,907,595)
Minority interest net loss                                                     0                    0
Adjustments  to  reconcile  net  income  to net cash
provided by operating activities:
    Depreciation and amortization                                        384,214              266,984
    Amortization of stock options                                      2,903,250            3,135,500
     Bad debt expense                                                      6,008                 --
    Gain on sale of property                                                   0                 (496)
    Recorded gain on disposal of segment                                       0          (21,531,554)
    Loss on disposal of securities                                             0           20,465,829
    Decrease/(increase) in accounts receivable                          (110,033)             (90,223)
    Increase/(decrease) in accounts payable                               59,991              215,262
    Increase/(decrease) in other current liabilities                     168,180              (50,815)
    Increase/(decrease) in deferred income                               (65,903)             173,153
    Decrease in prepaid expenses                                          10,787               13,528
                                                                    ------------         ------------
          Net Cash Used for Operating Activities                      (2,191,922)          (3,310,427)
Cash Flows from Investing Activities
  Long-term security deposits                                                  0                3,413
  Sale of Marketable Securities                                                0                    0
  Patent costs                                                                 0               (4,687)
  Proceeds from sale of property                                               0                6,293
  Capital expenditures                                                   (56,985)            (167,438)
                                                                    ------------         ------------
          Net Cash Used for Investing Activities                         (56,985)            (162,419)
Cash Flows from Financing Activities

  Bank overdraft in discontinued operation
  Principal payments on leased equipment                                 (25,098)             (22,033)
  Proceeds from issuance of common shares                              2,359,074            2,940,803
  Proceeds from borrowing                                                      0              100,000
                                                                    ------------         ------------
Net Cash Provided by Financing Activities                              2,333,976            3,018.770
                                                                    ------------         ------------
              Net Increase/(Decrease) in Cash                             85,069             (454,076)
Beginning Cash Balance                                                    35,221              489,297
                                                                    ------------         ------------
Ending Cash Balance                                                 $    120,290         $     35,221
                                                                    ============         ============

Supplemental Disclosure of Cash Flow Information:

  Cash paid during the year for interest                            $     33,710         $     44,437
  Cash paid during year for income/franchise taxes                  $      2,419         $      2,120
Noncash Financing Activities:

  Issued stock for Ensign assets                                    $          0         $    630,000

</TABLE>


                 See accompanying notes to financial statements

                                       F-5

<PAGE>


                                  ARKONA, INC.

                          Notes to Financial Statements
                                 March 31, 2002

Note 1   Organization and Summary of Significant Accounting Policies

         (a) Organization

         ARKONA,  Inc. [the Company] was originally  incorporated under the laws
of the State of Delaware in 1992 as The Thorsden Group, Ltd., for the purpose of
seeking and  acquiring  business  opportunities.  In October  1997,  the Company
merged with Arkona,  Inc.,  a Utah  corporation  (formerly  Arkona,  LLC),  in a
reverse  triangular  merger,  accounted for as a purchase.  After the merger and
until  November 1, 2000,  the Company  continued  the business of Arkona,  Inc.;
developing,  marketing,  and selling software  products which  incrementally and
automatically  update  database  content,  reference  documents,  and enterprise
applications required by organizations with distributed business centers,  field
professionals,  telecommuters,  partners,  and customers.  On March 25, 1999 the
Company changed its name to Sundog Technologies,  Inc., effective June 10, 1999.
On February 22, 2001 the Company changed its name to ARKONA, Inc. On November 1,
2000 the Company purchased  substantially  all the assets of Ensign  Information
System  including its intellectual  property.  Shortly after the Ensign purchase
the  Company  turned  its  business  focus to the  revenue  generating  products
acquired from Ensign.  The ultimate  success of the Company will be dependent on
its ability to adequately  fund,  develop and market its products.  In the prior
year, the Company was considered to be in the development stage.

         (b) Income Taxes

         The Company applies the provisions of Statement of Financial Accounting
Standards No. 109 [the Statement],  "Accounting for Income Taxes." The Statement
requires an asset and liability approach for financial  accounting and reporting
for income taxes, and the recognition of deferred tax assets and liabilities for
the temporary differences between the financial reporting bases and tax bases of
the  Company's  assets and  liabilities  at enacted tax rates  expected to be in
effect when such amounts are realized or settled.

         (c) Net Loss Per Common Share

         In accordance with Financial  Accounting  Standards No. 128,  "Earnings
Per Share," basic loss per common share is computed  using the weighted  average
number of common  shares  outstanding.  Diluted  earnings  per share is computed
using  weighted  average  number of common  shares plus  dilutive  common  share
equivalents  outstanding  during the period  using the  treasury  stock  method.
Common stock  equivalents were not included in the computation of loss per share
for the periods presented because their inclusion is antidilutive.

         (d) Cash & Cash Equivalents

         For purposes of the  statements  of cash flows,  the Company  considers
cash on deposit in the bank and other  unrestricted  investments  with  original
maturities  of  three  months  or  less  at the  time  of  purchase  to be  cash
equivalents.

         (e) Use of Estimates in Preparation of Financial Statements

         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;
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements;  and the  reported  amounts  of  revenues  and  expenses  during the
reporting period. Actual results could differ from those estimates.

                                       F-6
<PAGE>

                                  ARKONA, INC.

                          Notes to Financial Statements
                                 March 31, 2002

         (f) Revenue Recognition

         The Company  recognizes  revenue in accordance  with the Securities and
Exchange   Commission,   Staff  Accounting  Bulletin  (SAB)  no.  101,  "Revenue
Recognition in Financial Statements." SAB 101 clarifies application of generally
accepted  accounting  principles to revenue  transactions.  During the course of
business the Company recognizes revenue for the following  activities:  Support,
Hardware Sales, Consulting,  and Implementation of Products. Support charges are
billed  monthly and are  recognized as earned and  stipulated in contracts  with
customers.  Hardware Sales revenue is recognized when the goods are delivered to
the customer.  Consulting fees are recognized as services are rendered.  Product
Installation  revenue is recognized in accordance  with terms of each  contract,
generally on a percentage of completion basis. Advance deposits are deferred and
recognized  over the life of the contract  which is often complete in one month.
Components  of the Product  Installation  process  include  software  licensing,
training, forms programming data conversion, and hardware installation.

         (g) Patents

         The Company has  obtained  various  patents for certain  aspects of its
products.  The costs of obtaining  patents are  capitalized  as incurred and are
amortized  over  estimated  useful  lives.   Amortization  is  computed  on  the
straight-line  method.  One patent has been issued as of March 31, 2002,  and is
being amortized over seven years (see Note 4).

         (h) Investment in Marketable Securities

         Investments in marketable securities are  "available-for-sale"  and are
recorded  at fair market  value with the  associated  adjustment  recorded as an
unrealized  gain or loss. The  unrealized  loss is based on the original cost of
the securities  verses current market value.  The March 31, 2002 unrealized loss
on investments of $1,410 is related to securities that have been written off but
not disposed.

         (i) Software Costs

         Costs incurred to establish the  technological  feasibility of software
products to be sold, leased or otherwise marketed by the Company are expensed as
research and development.  Once technological feasibility is established,  costs
are capitalized until the product is available for general release to customers.
Capitalized  costs  are  amortized  on  a  product-by-product  basis  and  using
straight-line methods over the established economic life of the product.

         (j) Advertising Costs

         Advertising costs of the Company are charged to expense as incurred.

Note 2 Concentration

         The Company is limited in that its product and service are specifically
designed  for  customers  in the auto  dealership  industry.  However,  sales of
Company  products and services are not limited to any  geographic  area.  If the
industry environment were to experience  significant  negative  conditions,  the
Company could also be affected.

                                       F-7
<PAGE>

                                  ARKONA, INC.

                          Notes to Financial Statements
                                 March 31, 2002

         The Company maintains cash balances in a financial  institution located
in Salt Lake City, Utah. Accounts at this institution are insured by the Federal
Deposit Insurance  Corporation up to $100,000. As of March 31, 2002, the Company
had approximately $20,000 in excess of the insured amount at this institution.

Note 3 Income Taxes

         The  Company  has  the  following   temporary   differences   and  loss
carryforward  amounts  as of the  balance  sheet  date.  The  timing  difference
multiplied by the estimated tax rate,  for the period the temporary  differences
are expected to reverse, becomes a deferred tax asset or liability.
<TABLE>
<CAPTION>

                       Description                                            Tax        Rate
                                                           -----------    ----------  -----------
            <S>                                            <C>            <C>             <C>
            Net operating loss (expires thru 2022)         $17,201,890    $6,708,737      39%
            Stock compensation                               7,546,250     2,943,038      39%
            Valuation allowance                                           (9,651,775)
                                                                          ----------
                 Deferred tax asset 3/31/2002                             $        0
                                                                          ----------

</TABLE>


         The allowance has increased  $3,296,150 from $6,355,625 as of March 31,
2001.  For the  years  ending  March  31,  2002  and  2001  the  Company  had no
significant  income tax expense or liability as a result of net operating losses
incurred.  Currently,  there is no reasonable assurance that the Company will be
able to take advantage of deferred tax assets, thus, an offsetting allowance has
been established for the deferred asset.

Note 4  Intangible Assets

         The  Company has applied and been  granted  patent  protection  for its
proprietary  technology  relating to Universal Update. The patent was granted on
December  7,  1999.  Since  that  time the  Company  has  applied  and  received
additional protection for its patent.  Amortization of cost began on December 7,
1999.  Amortization  expense  for the years  ended  March 31,  2002 and 2001 was
$7,760 and $7,351 respectively.  Unamortized patent costs, related to continuing
operations, as of March 31, 2001, is $34,845.

Note 5  Leases

         The Company has various capital lease  agreements  collateralized  with
property  and  equipment as of March 31,  2002.  These  leases bear  interest at
various  interest  rates and have  remaining  terms of one to two years.  Future
minimum lease payments are as follows:

<TABLE>
<CAPTION>
                                                                  Minimum
         Year Ending                                           Lease Payments       Principal         Interest
                                                          --------------------------------------------------------
<S>      <C>                                                      <C>                <C>               <C>
         3/31/2003                                                $38,282            $32,394           $5,888
         3/31/2004                                                 13,736             12,889              847
                                                          --------------------- ----------------------------------
         Total                                                    $52,018            $45,283            6,735
                                                          --------------------- --------------- ------------------
</TABLE>

         The Company has operating leases for its office facilities which expire
at various times through June 2005.

                                      F-8
<PAGE>

                                  ARKONA, INC.

                          Notes to Financial Statements
                                 March 31, 2002



                                                          Minimum
                            Year Ending                Lease Payments
                         ---------------            --------------------
                            3/31/2003                           $235,774
                            3/31/2004                            241,793
                            3/31/2005                            247,632
                   3/31/2005 and thereafter                       83,853
                                                    ---------------------
                            Total                               $809,052
                                                    ---------------------

         Rent  expense  during the year was  $211,592  for 2002 and $193,226 for
2001.

         The  Company  has  also  entered  two  operating  leases  with  IBM for
equipment.  The terms require payments on a month-to-month  basis in the amounts
of $3,231 and  $1,135.  Upon  written  notice,  the Company is able to return or
exchange the equipment at its option.

Note 6  Property and Equipment

         Property and  equipment  are  summarized  by major  classifications  as
follows:

<TABLE>
<CAPTION>
                                                                              Accumulated
                                                       Acquisition            Amortization/        Net Book
                                                       Cost                   Depreciation         Value
                                              --------------------- -------------------- ----------------
<S>                                                    <C>                  <C>                 <C>
         Office Furniture                              $  71,546            $  31,667           $  39,879
         Computer Software                                60,843               57,558               3,285
         Computer Equipment                              419,996              297,780             122,216
         Leasehold Improvements                           54,763               18,469              36,294
                                               -------------------- -------------------- ----------------
                  Total                                $ 607,148            $ 405,474           $ 201,674
                                              ===================== ==================== ================
</TABLE>

         The Company  acquired  approximately  $119,674  in  computer  equipment
financed   through  capital   leases.   Depreciation   expense,   including  the
amortization  of assets  acquired by capital  lease,  amounted  to $119,198  and
$125,947  during the years  ended  March 31,  2002 and 2001,  respectively.  The
Company computes depreciation using the straight-line method over three years.

Note 7  Ensign Intangible Assets

         With the  acquisition  of Ensign (see note 17),  the  Company  recorded
Goodwill and an intangible  asset for the  technology.  The original cost of the
technology is being  amortized on a straight line basis over two years while the
goodwill is being amortized over three years, straight line. Current book values
are summarized as follows:
<TABLE>
<CAPTION>

Asset                        Original Cost Basis          Accumulated Amortization          Net Current Value
------------------------ ---------------------------- --------------------------------- -----------------------
<S>                                <C>                            <C>                           <C>
Technology                         305,682                        216,525                       89,157
Goodwill                           313,244                        156,622                      156,622

</TABLE>
         The Company will adopt FASB 142 Goodwill  and Other  Intangible  Assets
for FY2003.  This statement will eliminate the amortization of goodwill and will
require the Company to test the asset annually for impairment.

                                       F-9
<PAGE>

                                  ARKONA, INC.

                          Notes to Financial Statements
                                 March 31, 2002

Note 8  Private Placement Memorandum/Stock Issuances

         During the fiscal year ended March 31, 2001, the Company issued 287,500
shares of common stock  pursuant to a series of private  placements at the price
of $2.00 per share for aggregate proceeds of $575,000.

         During fiscal year March 31, 2002, the Company issued  9,433,886 shares
of common stock; 6,641,388 shares were sold for cash proceeds of 1,828,500 at an
average price of approximately  $0.28 per share in transactions that were exempt
from registration  under the Securities Act of 1933, as amended (the "Securities
Act"),  2,792,498  shares were issued in accordance with  conversion  provisions
contained in $530,575 of convertible debt.

         In conjunction  with the sale of 1,862,122  shares of common stock sold
to investors  during  fiscal year 2002 for cash,  the Company  issued  1,562,122
warrants with an exercise  price of $0.33 and 100,000  warrants with an exercise
price of  $0.60  all of which  are  exercisable  over a  five-year  period.  One
December  21, 2001,  1,212,122  warrants  were issued with an exercise  price of
$0.33 which was equal to the market  value of the  Company's  common  stock.  On
January 24, 2002,  350,000  warrants were issued with an exercise price of $0.33
per share  and the  market  value of the  Company's  common  stock was $0.66 per
share. On February 4, 2002,  100,000 warrants were issued with an exercise price
of $0.60 per share  while the market  value of the  Company's  common  stock was
$0.85.

         Due to the volatility of the Company's stock price,  its low volume and
the risk associated  with stock traded on the OTC Bulletin  Board,  the value of
the warrant on the date of issuance is not determinable.

         As of March 31, 2002 none of the warrants had been exercised. As of the
date of this  report,  303,031  warrants  were  exercised  at $0.33 per share or
$100,000.

Note 9  Deposits

         In  conjunction  with its facility lease  obligations,  the Company has
placed  security  deposits with its two  landlords.  Deposits  total $17,779 for
office space as of March 31, 2002.

Note 10  Going Concern

         The  Company  has  incurred  losses  from  inception  to March 31, 2002
amounting  to  $20,783,233.  Financing  the  Company's  activities  to date  has
primarily been the result of private placement offerings.  The Company's ability
to achieve a level of  profitable  operations  and/or  additional  financing may
impact its ability to  continue  as it is  presently  organized.  Management  is
expanding operations and anticipates reaching a level of profitable  operations.
To the extent that cash flow requirements are not met by operations,  management
intends to raise additional capital through private placement offerings.

Note 11  Stock Option Plans

         In December 2001 the Company  established a new stock option plan.  The
2001 plan was  established  to provide  incentives to its  directors,  officers,
employees  and  advisors  to do  business  with the  company,  and to enable the
Company to obtain and retain the  services of the type of  directors,  officers,
advisors and employees considered essential for long-range success.  Granting of
options is at the  discretion  of the Stock Option  Committee of the Board.  The
Committee may determine the terms and conditions of options, consistent with the
Plan. The plan currently has authorized 6,000,000 shares.

                                       F-10
<PAGE>

                                  ARKONA, INC.

                          Notes to Financial Statements
                                 March 31, 2002

         Prior to the  establishing  the 2001 plan, the Company had  established
two Stock Option Plans (1992 and 1999) to provide  incentives to its  directors,
officers,  employees and advisors to do business with the Company, and to enable
the  Company  to  obtain  and  retain  the  services  of the type of  directors,
officers, advisors and employees considered essential for long-range success.

         All options  granted  under the 1992 and 1999 stock  option  plans have
expired,  been cancelled or been  converted into options  granted under the 2001
plan except for  115,000  options  granted  under the 1999 plan with an exercise
price of $1.00 and 125,000  options granted under the 1992 plan with an exercise
price of $3.00.  Options  granted to existing  employees under the 1992 and 1999
stock option plans were  converted to options  under the 2001 stock option plan.
All of the 240,000  outstanding  options  granted under the 1992 option plan and
1999 option plan have vested.

         Through  March 31, 2002,  there were  outstanding  a total of 2,445,000
stock options to purchase  Company common stock granted under the 2001 Plan, all
of which have an exercise  price of $0.30 per share.  Options  granted under the
2001 plan vest over a one to three year period. Of the options granted under the
2001 plan, 355,396 have vested as of March 31, 2002.

         Compensation  cost for stock options is measured as the excess, if any,
of the estimated  fair market value of the Company's  stock at the date of grant
over  the  amount  the  recipient  must  pay  to  acquire  the  stock.  Unearned
compensation, which is recorded as a separate component of stockholders' equity,
as a result of compensatory stock options is generally amortized to expense over
the vesting  periods of the underlying  stock options.  The amount  amortized to
expense through March 31, 2002 was $5,090,308.  Unearned compensation represents
the intrinsic value of stock options granted but not yet vested. The Company has
no unearned compensation as of March 31, 2002.

         The Company  has adopted  only the  disclosure  provisions  of FASB 123
(Accounting for Stock Based Compensation) and applies APB Opinion 25 (Accounting
for Stock Issued to Employees) to stock options.

         Information  on  stock  options   outstanding  at  March  31,  2002  is
summarized as follows:

<TABLE>
<CAPTION>

                               Options Outstanding                                Options Exercisable
Range of exercise          Number           Weighted Average        Weighted            Number            Weighted
      prices            Outstanding            Remaining             Average         Exercisable          Average
                                            Contractual Life        Exercise                              Exercise
                                                                      Price                                Price
----------------------------------------------------------------------------------------------------------------------
<S>   <C>                   <C>                <C>                    <C>                  <C>             <C>
      $0.30                 2,445,000          117 months             $0.30                355,396         $0.30
      $1.00                   115,000          17 months              $1.00                115,000         $1.00
      $3.00                   125,000           6 months              $3.00                125,000         $3.00
-------------------    ---------------    ---------------------    ------------     ---------------    ---------------
                            2,685,000          107 months             $0.46                595,396         $1.00
</TABLE>

Note 12  401K Profit Sharing Plan

         The Company has an employee benefit program consisting of a 401K Profit
Sharing  Plan.  The 401K Plan  provides for  employees to contribute on a pretax
basis, employer matching, and a broad portfolio of investment options within the
plan to be selected by the employee. Employer matching contributions are made at
the sole discretion of management.  Profit sharing expense recognized under this
plan was  $3,568  and  $62,233  for the years  ended  March  31,  2002 and 2001,
respectively.

                                       F-11
<PAGE>

                                  ARKONA, INC.

                          Notes to Financial Statements
                                 March 31, 2002

Note 13  Sale of Qui Vive, Inc.

         In June of 1998,  the Company  formed a subsidiary  company,  Qui Vive,
Inc., through which they developed technology. On February 10, 2000, the Company
sold the subsidiary to Envision Development  Corporation for 1,492,000 shares of
restricted  Envision  common  stock.  Pursuant  to the sale of this  segment  of
business the Company  recognized a gain of $21,531,554.  However,  the shares of
stock  subsequently  became  valueless and the Company  recognized a loss on the
disposal  of those  shares  during  the  fiscal  year  ended  March 31,  2001 of
$20,465,829.

Note 14  Purchase of Ensign Information Systems

         On November 9, 2000 the Company entered into an Asset Purchase and Sale
Agreement   ("Agreement")  with  Ensign  Information  Systems   ("Ensign").   In
accordance  with the Agreement,  the Company issued  1,500,000  shares of common
stock  (adjusted  to reflect the  reverse  split) for  substantially  all of the
assets of Ensign,  including  intellectual  property. The Company structured the
acquisition to be non-dilutive to shareholders. In order to make the transaction
non-dilutive,  the Company  purchased  from certain key  shareholders  1,740,250
shares of  outstanding  common stock at a price of $0.02 per share  (adjusted to
reflect the reverse split).

Note 15  Reverse Stock Split

         On November  19,  2000,  the  shareholders  of the  Company  approved a
proposed  amendment to the  Certificate  of  Incorporation  to reverse split the
stock 2 for 1 effective  as of  December  15,  2000.  The purpose of the reverse
stock split was to decrease the number of outstanding  shares of Common Stock in
order to increase the market price of the Common Stock and make the Company more
attractive for future  investment.  The reverse stock split became  effective on
December 15, 2000.

Note 16  Related Party Transactions/Stock Options

         Certain founding  shareholders  acquired common stock of the Company in
return for contributions and development of the Company's  predecessor,  Arkona,
L.L.C.  These  founding  shareholders  received a total of  7,000,000  shares of
common stock and then,  collectively,  entered  into an  agreement  with Caldera
Holding Company,  L.C.,  wherein Caldera was given the right to grant derivative
options to third  parties  with  respect to 1,550,000 of such shares in order to
encourage  the  development  and  increased  productivity  of the  Company.  The
derivative options have an exercise price of $0.30 per share and expire no later
than December 31, 2006.  Holders of the shares underlying the derivative options
are entitled to dividends  and  distributions  with respect to such shares until
the options are exercised.  However, Caldera has been granted dispositive voting
power with  respect to all shares  subject to its  agreement  with the  founding
shareholders so long as the agreement  remains in place.  The agreement  between
Caldera and such founders expires upon the earlier of January 2003 and Caldera's
award of the last of the derivative  options, at which time voting power returns
to  the  founding  shareholders.  Under  this  derivative  options  program,  an
aggregate of 1,475,000  options have been granted by Caldera to ten persons,  of
which  843,750 have vested.  Exercise of these options will not yield any assets
to the Company.

         The Company has accrued unpaid compensation to an officer in the amount
of $98,480.  The balance is payable on demand,  is  unsecured  and  non-interest
bearing.

         Two  shareholders  have  advanced  funds to the Company to provide cash
flow in the amount of $100,537.  These  advances are unsecured and bear interest
at 12%. The notes  provide for  conversion to stock at the option of the holder.
Interest expense of $1,000 is paid monthly.

                                       F-12
<PAGE>

                                  ARKONA, INC.

                          Notes to Financial Statements
                                 March 31, 2002

Note 17  Preferred Stock Rights

         Effective as of January 31, 2001, the Board of Directors of the Company
declared a dividend of one Right for each  outstanding  share of Common Stock of
the  Company to  shareholders  of record at the close of business on January 31,
2001. Each Right entitles the registered holder to purchase from the Company one
one-hundredth  of a share of Series A  Preferred  Stock at a  purchase  price of
$60.00.  The  description and terms of the Rights are set forth in a Shareholder
Rights Agreement  between the Company and Atlas Stock Transfer  Corporation,  as
Rights Agent.

         At the time it approved the Shareholders Rights Agreement, the Board of
Directors of the Company believed that the market price of Arkona's common stock
did not reflect the real value of our common  stock.  In light of the low market
price of common stock, management and the Board had been concerned that a person
may seek to acquire  the Arkona at a price that is in line with  current  market
value,  but not the real  value  of the  common  stock.  The  structure  of such
acquisition offers can often be coercive and leave shareholders no choice but to
participate  even if they believe the offer price is too low. The purpose of the
Shareholder Rights Plan is to encourage any person  contemplating an acquisition
of Arkona to  negotiate  with the Board of Directors  first,  prior to making an
offer to  shareholders,  so that the Board of Directors can consider whether the
price and other terms of the offer are fair to all shareholders.

                                      F-13