UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               Amendment No. 1 on
                                  FORM 10-KSB/A

[x]  Annual report under section 13 or 15(d) of the  Securities  Exchange Act of
     1934 for the fiscal year ended March 31, 2006

[ ]  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                  (IRS Employer Identification No.)
of incorporation or organization)




                         10757 South River Front Parkway
                                   Suite #400
                            South Jordan, Utah 84095
               (Address of principal executive offices) (Zip Code)

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


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

Name of exchange on which registered:                   N/A

Securities registered under Section 12(g)
  of the Act:                                      Common Stock, par value $.001

Name of exchange on which registered:              OTC Bulletin Board


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 $11,212,171.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of June 6, 2006 was $14,651,530.  The number of shares outstanding
of the issuer's common stock,  par value $.001 per share, as of June 6, 2006 was
32,492,323 shares, of which 22,540,816 were held by  non-affiliates.  The market
price of the common stock as of June 6, 2006 was $0.65 per share.

                       DOCUMENTS INCORPORATED BY REFERENCE

None.


Transitional Small Business Disclosure Format (Check one):  Yes [ ]   No  [X]


<PAGE>

                                EXPLANATORY NOTE


         This   Amendment  No.  1  to  Annual  Report  on  Form  10-KSB/A  (this
"Amendment")  is being filed by Arkona,  Inc. (the  "Company") in order to amend
and  restate  certain  items of its Annual  Report on Form 10-KSB for the fiscal
year  ended  March 31,  2006  filed  with the SEC on June 29,  2006  (the  "Form
10-KSB").
         This  Amendment  is being  filed  primarily  in order to amend "Item 7.
Financial  Statements" in order to restate the financial  statements included in
the Form 10-KSB.  The Company has also amended "Item 6.  Management'  Discussion
and Analysis," which contains cross references to the financial  statements,  in
order to correct those cross  references and related  explanations of accounting
policies and other matters.  The Company has also amended "Item 8A. Controls and
Procedures" in order to modify and update the determinations set forth therein.

Explanation of Restatement of Financial Statements

          Historically,  the Company  recognized  the  connection fee associated
with the setup of a virtual  private  network,  or VPN, for its new customers at
the time it completed its installation of the Arkona dealer  management  system,
or ADMS,  at the  customer's  dealership.  Fees for  this VPN  connection,  also
referred  to as a  license  fee,  generally  range  from 0% to 20% of the  total
installation charge.  Following  discussions and analysis stemming from comments
received from the SEC staff, the Company determined that VPN connection fees are
not a separate deliverable (i.e., do not have stand-alone value) and, therefore,
should be recognized over the expected period of performance  under the customer
service agreement, rather than upon the completion of installation.

          The  Company has  recognized  VPN  connection  fee revenue at the time
installation  is complete since  commencing our ADMS business in late 2000. As a
result of this change in accounting  policy  (effective  July 1, 2006),  revenue
that was  recognized  in early  periods  is now being  deferred  and  recognized
ratably  over  the  expected  period  of  performance  of the  customer  service
agreement which, as of December 31, 2006,  approximates 70 months - see "Note 14
- Prior Period Adjustments."


                                      -1-
<PAGE>

                           FORWARD LOOKING STATEMENTS

         This  Annual  Report  on  Form  10-KSB/A   (this   "Report")   contains
forward-looking  statements  within the meaning of Section 27A of the Securities
Act  of  1933,  as  amended  (the  "Securities  Act"),  and  Section  21E of the
Securities  Exchange  Act  of  1934,  as  amended  (the  "Exchange  Act").  Such
statements  can be  identified  by the  use of  forward-looking  words  such  as
"anticipate,"  "estimate," "project," "likely," "believe," "intend," "expect" or
similar words.  These statements relate to our, and, in some cases, our clients'
or business  partners' future plans,  objectives,  expectations,  intentions and
financial  performance and the assumptions that underlie these  statements.  All
forward-looking  statements  included  in this  Report  are  made as of the date
hereof,  based on information  available to us as of such date, and we assume no
obligation  to update any  forward-looking  statements.  It is important to note
that such  statements  may not prove to be accurate and that our actual  results
and  future  events  will  differ,  and  could  differ  materially,  from  those
anticipated  in such  statements.  Among the  factors  that could  cause  actual
results to differ materially from our expectations are those described under the
caption  "Certain  Risk  Factors."  You are also  encouraged to review our other
filings with the Securities and Exchange Commission (the "SEC") describing other
factors  that may affect our future  results.  All  subsequent  written and oral
forward-looking  statements  attributable  to us or persons acting on our behalf
are  expressly  qualified in their  entirety by this  section and other  factors
included elsewhere in this Report.

Item 6.   Management's  Discussion  and  Analysis  of  Financial  Condition  and
          Results of Operations

         The  following  discussion  should  be read  in  conjunction  with  our
Financial  Statements and Notes thereto included elsewhere in this Report.  This
discussion   contains   forward-looking   statements   that  involve  risks  and
uncertainties.  Any statements in this section about our expectations,  beliefs,
plans,  objectives,   assumptions  or  future  events  or  performance  are  not
historical  facts and are  forward-looking  statements.  You can identify  these
forward-looking  statements  by the use of words or phrases  such as  "believe,"
"could," "may,"  "anticipate,"  "intend,"  "expect," "will," "plan," "estimate,"
"continue,"  "should" or  "would."  Among the  factors  that could cause  actual
results  to  differ  materially  from  those  indicated  in the  forward-looking
statements  are risks and  uncertainties  inherent  in our  business  including,
without  limitation,  the discussions set forth under the caption  "Certain Risk
Factors."

         Although   we  believe   that  the   expectations   reflected   in  our
forward-looking  statements are reasonable,  we cannot guarantee future results,
events,  levels  of  activity,  performance  or  achievement.  We  undertake  no
obligation to publicly update or revise any forward-looking statements,  whether
as a result of new information, future events or otherwise.

Overview

         We  develop  and sell  access to  management  software  for  automobile
dealerships.  The operating  similarities  between  automobile,  marine,  RV and
powersports   dealerships  make  our  software  attractive  to  marine,  RV  and
powersport dealerships as well.

                                      -2-
<PAGE>

         Our primary  product is our  software-based  Arkona  Dealer  Management
Suite or ADMS. The ADMS is a fully integrated  automobile  dealership management
software system that allows automobile  dealerships to manage  substantially all
aspects of their business  operations.  It is a modular  system,  which makes it
scalable for different  types and sizes of  dealerships.  A key advantage of the
ADMS is its ability to run on an ASP model.  An ASP model  involves the software
provider  running  software  and  maintaining  data  at  central  locations  and
customers  accessing  and using the software  over the  Internet.  The ASP model
significantly reduces most upfront and ongoing hardware costs for the dealership
because the  significant  processing is done on computers  maintained at offsite
locations that are maintained by us. The dealership needs only standard personal
computers with reliable Internet access. The ASP model also reduces the need for
technical  computer  personnel  because the  software  and related  hardware are
managed by us at our  offsite  location.  Our ADMS  integrates  with many of the
major  automobile  manufacturers,  and we are  continuing  our efforts to obtain
cooperation from the others to integrate with their systems.  In connection with
the ADMS, we provide installation and post-installation  training and consulting
and, for a monthly fee, hosting  services,  technical support and 24x7 access to
the ADMS.

         The market for automobile dealer management systems is dominated by two
major  players:  Automatic  Data  Processing,  Inc.  or ADP,  and  Reynolds  and
Reynolds.  According to a 2005 market study by Ward's Dealer  Business,  ADP and
Reynolds  together  control  about  80%  of the  market  for  automobile  dealer
management  systems.  ADP and Reynolds are large,  well-financed  organizations.
They have good brand name  recognition and their systems  integrate with all the
major  automobile  manufacturers.  Their market  dominance  creates  significant
barriers to entry for us because many  dealerships are hesitant to abandon their
existing  systems and switch to a new system  provided by a smaller company with
limited resources. However, we offer a system that we believe is technologically
superior  at a price that is  generally  substantially  lower than the  standard
pricing of both ADP and Reynolds.

         Our revenues continue to grow at a rapid rate, increasing 53.6% between
the fiscal year ended  March 31, 2005 and the fiscal year ended March 31,  2006.
We earn more than half of our revenues from recurring  support and  maintenance.
These  recurring  revenues grew at a rate in excess of 3% monthly  during fiscal
year 2006 and help provide long term stability for us.

         We believe that we have reached a critical point in our development. We
have  established  a strong sales  pipeline for our primary  product,  our ADMS,
after a significant  investment in sales,  installation and technical personnel.
We are experiencing  accelerated  growth in our revenues and profitability  from
operations.  We believe,  however, that our size relative to our competitors and
in  comparison  to other public  companies  continues to be an impediment to our
efforts to expand sales and to increase the market value of our common stock. We
are  considering  various  options for  accelerating  our growth and  increasing
interest in our common stock.  These options include,  without  limitation,  the
following:

         o    We are continuing to lay the foundation for a possible move to the
              American Stock  Exchange or the Nasdaq  Capital  Market  (formerly
              known  as  the  Nasdaq  SmallCap  Market).   We  believe  that  an
              appropriately  time move onto an exchange or Nasdaq  market  would
              increase institutional and other interest in our common stock.

         o    We have entered into a long term  relationship  with a stockholder
              relationship  consulting  firm in an  attempt  to  leverage  their
              expertise in assisting us to increase  stockholder  value. We held
              our first  earnings  call on June 29, 2006 and have held  earnings
              calls for each subsequent quarter.

                                      -3-
<PAGE>

         o    We are in discussions regarding possible acquisition transactions,
              licensing  transactions,   coordinated  roll-outs  to  significant
              customer  groups and other  transactions  designed  to  accelerate
              revenue  growth.  All of these  discussions are in various stages,
              and we  are  uncertain  whether  any  will  lead  to a  definitive
              transaction.

         o    We are considering  adapting, or working on the adaptation of, our
              ADMS  product  for other  vertical  markets  (in either an ADMS or
              shrink-wrap  version) and are developing  and  evaluating  various
              related  products are services  that we could offer to our current
              customer base or a core customer base.

As we move  forward  on one or  more  of  these  initiatives  we may  experience
increasing  expenses and a need to raise additional  capital,  as well as normal
pressures and disruptions associated with major transactions and expansions.  We
believe,   however,   that  when  and  if  implemented,   any  initiative  under
consideration will  significantly  enhance the long-term status and value of the
company.

Results of Operations for the Fiscal Years Ended 2006 and 2005

         Revenues - Revenues increased $3,910,216 to $11,212,171 for fiscal year
2006 or 53.6% over fiscal  year 2005.  These  increases  continue to reflect our
success in replacing existing  competitors' systems with the ADMS. Growth in our
revenues  over the five year  period  from  fiscal year 2002 to fiscal year 2006
exceeded 404.0%,  from $2,222,688 for fiscal year 2002 to $11,212,171 for fiscal
year 2006.

         We  earn  our  revenues  through  installation  and   post-installation
services.  Installation  services consist of pre-installation  functions such as
G/L setup, data conversion and VPN connections, forms programming, and training.
Installation  services are generally  performed  over a four (4) week period and
provide a customer with the tools and  knowledge  necessary in order for them to
access and use the ADMS on a go-forward basis. Post-installation services, which
are billed on a month to month basis,  include the right to continuous access to
the latest version of the ADMS hosted on our servers,  to have their data hosted
on  our  servers,   to  24x7  maintenance  and  security  of  the  servers,   to
post-contract phone support services, and to manufacturers' parts price updates.
Additional  revenues are earned from the sales of hardware and  peripherals  and
from post-installation consulting services.

         For  fiscal  year  2006,  revenues  from  ADMS  installation   services
increased  $1,127,210  to  $3,817,701  or  41.9%  over  fiscal  year  2005.  The
significant  increase in installation  services  revenue is due primarily to the
increased sales and marketing  personnel and continued market  acceptance of the
ADMS as a cost-effective  alternative to the technology of our competitors.  Our
customer  base grew from 389  installed  customers  as of March 31,  2005 to 563
installed  customers as of March 31, 2006.  We believe that we will  continue to
grow our  customer  base through the  replacement  of  competitors'  systems and
installation into new dealerships.

                                      -4-
<PAGE>

         For fiscal year 2006, revenues from recurring monthly post-installation
services increased $1,786,291 to $5,783,424 or 44.7% over fiscal year 2005. This
increase reflects  continued growth in our installed  customer base, which grew,
as noted above,  to 563 customers as of March 31, 2006.  It's  important to note
that  post-installation  customer contracts are entered into on a month-to-month
basis.  Customers have the right to cancel our services at any time upon written
notice,  without penalty. We must earn the customer's on-going business each and
every   month.   Our  revenue   growth,   especially   our   recurring   monthly
post-installation  services,  indicates  our  continued  success at earning  our
customers' business each month.

           We are actively  pursuing  sales of hardware  equipment in connection
with our  installation  service.  For fiscal year 2006,  revenues  from hardware
sales increased $690,725 to $1,026,373 or 205.8% over fiscal year 2005.

         Post-installation  consulting services also continue to grow due to the
increasing  installed  customer  base.  For  fiscal  year  2006,  revenues  from
consulting  services  increased  $314,090 to $578,525 or 118.8% over fiscal year
2005.

         Cost  of  Sales  - For  fiscal  year  2006,  cost  of  sales  increased
$1,608,680  to  $5,858,545  or 37.9% over fiscal  year 2005.  Cost of sales as a
percentage  of revenues  decreased  5.9% for fiscal year 2006 compared to fiscal
year 2005.

         The 5.9%  increase in gross  margin for fiscal year 2006 is a result of
our hiring  additional  installation and support  technicians  during the end of
fiscal year 2005 to properly  prepare for expected  growth in our customer base.
This  relative  hiring  increase was not  necessary  during fiscal year 2006. We
continue to gain, through experience,  installation  efficiencies.  For example,
our  post-installation  service  includes having one individual from the support
department  dedicated  to a new  dealership  for  two  to  six  weeks  after  an
installation.   By  having  a  dedicated  individual  provide  post-installation
support,  potential  problems can be anticipated and solved by someone  familiar
with the customer's needs in a timely and cost-efficient  manner.  After the two
to six weeks of post-installation  monitoring, new customers are transitioned to
normal customer support.

         Operating  Expenses - Operating  expenses are comprised of research and
development expense and sales,  marketing and general  administrative  expenses.
For  fiscal  year  2006,  total  operating  expenses  increased   $1,089,812  to
$4,440,780 or 32.5% over fiscal year 2005. Operating expenses as a percentage of
revenue decreased 6.3% for fiscal year 2006 over fiscal year 2005.

         Research and development  expense  increased by $301,948 to $962,708 or
45.7% for fiscal year 2006 due to the hiring of additional  software  developers
near the end of fiscal year 2005, a continued  focus on research and development
activities,  and developing and  maintaining  software  compatible with original
equipment  manufacturers.  As a percentage of revenue,  research and development
expense  decreased  0.4% for fiscal year 2006 over fiscal year 2005.  We believe
research and development will play an important roll in our future success.  Our
goal  is to  keep  our  software  and  processes  technologically  ahead  of the
competition and we expect  research and development  expense to continue to grow
in the future.

                                      -5-
<PAGE>

         Sales, marketing and general administrative expense increased in fiscal
year 2006 by  $787,864  or 29.3% over  fiscal  year  2005.  As a  percentage  of
revenue,  sales, marketing and general administrative expense decreased 5.8% for
fiscal  year 2006 over  fiscal  year 2005.  Total  sales and  marketing  expense
increased  due to the  hiring  of  additional  regional  sales  representatives,
resulting in our  increased  revenue.  We recently  announced the opening of new
sales  territories and will continue to expand our sales and marketing  presence
as we grow. General administrative expenses remained relatively constant between
the two  years as is  reflective  in the  overall  decrease  in total  operating
expenses as a percent of revenues.

         Net Income - For fiscal year 2006,  we recorded  net income  before tax
benefit of $903,435  compared  with a net loss before tax benefit in fiscal year
2005 of $(252,032).  We recorded a tax benefit (principally due to net operating
loss carry  forwards) for fiscal years 2006 and 2005 of $1,244,000 and $152,682,
respectively.  The overall  recognition  of profits in fiscal year 2006 has been
due  primarily  to  the  increased   customer   base,   resulting  in  increased
installation and post-installation recurring revenues.

Liquidity and Capital Resources

         Our  liquidity  position has improved  during the year. As of March 31,
2006 and 2005,  our  working  capital  (current  assets  in  excess  of  current
liabilities)  totaled  $509,970 and  $(347,316),  respectively.  The increase in
working  capital as of March 31, 2006 is principally a result of increasing cash
flows  from  operations  and  increased   receivables  from   installations  and
post-installation services growth. Cash and cash equivalents were $570,766 as of
March 31, 2006.

         We have utilized long-term lease financing to purchase office furniture
and computer  systems.  As of March 31, 2006, notes payable,  including  capital
lease obligations,  totaled $278,686. During fiscal year 2006, we entered into a
$250,000 line of credit with a financial  institution.  As of March 31, 2006, we
had not utilized any funds available under the line of credit  agreement.  As of
March 31, 2006, included in notes payable is a demand note for $50,000,  payable
to a related party, on which we make interest only payments at 12% monthly.

         In order to meet operating costs during the fiscal year ended March 31,
2006,  we were able to rely upon cash provided  from  operations.  There were no
significant funds received from the sale of equity securities.

         We do not have a significant cash reserve.  If we experience a material
adverse  event,  expand our  operations  in any  significant  way not  currently
contemplated,  engage in a significant acquisition transaction or otherwise need
additional  cash, we would need to raise  additional  capital.  We believe that,
absent the  occurrence  of a  material  adverse  event,  we could  raise  needed
additional capital through the offer and sale of convertible notes, warrants and
equity  securities  or through  commercial  financing  arrangements.  We do not,
however,  have any commitments from any party to provide such capital, and there
is a risk that we would not be able to raise capital, or may be compelled to pay
a very high  price for  additional  capital,  under  certain  circumstances.  If
adequate capital is not available,  our ability to expand our operations,  or to
continue normal operations, may be limited.

                                      -6-
<PAGE>

         Capital  expenditures,  principally for computer related  equipment and
office  cubicles,  for the fiscal year ended March 31,  2006  totaled  $459,638.
There are no planned capital  expenditures  for the upcoming fiscal year outside
of normal operating equipment needs.

Critical Accounting Policies and Estimates

         Management is basing the discussion and analysis of financial condition
and results of operations on our financial statements.  The preparation of these
financial statements requires the use of estimates and judgments that affect the
reported amounts of assets,  liabilities,  revenue and expenses, as well as, the
related  disclosure of contingent assets and liabilities.  On an on-going basis,
management  evaluates our critical accounting policies and estimates,  including
those related to revenue recognition,  property, plant and equipment,  goodwill,
capitalization  of  software  expense  and income  taxes.  Management  bases our
estimates on  historical  experience  and on various other  assumptions  that we
believe are reasonable  under the  circumstances,  the results of which form the
basis for making  judgments  about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

         We believe the following critical  accounting  policies affect the more
significant  judgments and estimates  used in the  preparation  of our financial
statements.  These judgments and estimates affect the reported amounts of assets
and  liabilities  and the reported  amounts of revenues and expenses  during the
reporting  periods.  Changes to these  judgments and estimates  could  adversely
affect future results of operations and cash flows.

         o    Revenue Recognition.  During the course of business,  we recognize
              revenue  from the  following  activities:  Installation  Services;
              Post-installation   Services;   Hardware  Sales;   and  Consulting
              Services.

              Installation Services include fees for G/L setup, data conversion,
              VPN connection,  forms  programming,  and training.  Each of these
              activities are separately stated on a customer's Sales and Service
              Agreement and individually  priced.  The  Installation  Service is
              generally  performed  over a four (4) week  period and  provides a
              customer with the tools and knowledge  necessary in order for them
              to access and use the ADMS on a  go-forward  basis.  We  recognize
              installation   services   revenue  in  accordance   with  American
              Institute of Certified  Public  Accountants  Statement of Position
              97-2,  "Software  Revenue  Recognition"  or SOP 97-2. We recognize
              revenue  when  persuasive   evidence  of  an  arrangement  exists,
              delivery has occurred or services  have been  rendered,  the sales
              price is fixed or determinable,  and collection is probable. Under
              SOP  97-2,  we  determine  whether a  Service  Agreement  includes
              multiple  elements  as defined in  Emerging  Issues Task Force No.
              00-21, "Revenue Arrangements with Multiple  Deliverables," and, if
              so, whether  vendor-specific  objective evidence, or VSOE, of fair
              value  exists  for  each  of  those  elements.   G/L  setup,  data
              conversion,  forms  programming  and  training  are each  separate
              deliverables  with each  having  stand-alone  value and revenue is
              recognized as the services are performed and completed, based upon
              the VSOE of fair value for each element.  The VPN connection  does
              not have  stand-alone  value and,  therefore,  VPN  connection fee
              revenue is  recognized  over the  expected  period of  performance
              under the customer Service Agreement.

                                      -7-
<PAGE>

              Service Agreements generally require the payment of non-refundable
              security deposits. These deposits are generally in an amount equal
              to 25% of the combined  installation  fees and represent  security
              against the labor and travel  related  costs we will incur even if
              the  contract  is  terminated  prior  to  the  completion  of  the
              installation  process.  These  deposits  are  recorded as deferred
              revenue  until  the   installation   services  are  completed  and
              invoiced.  At that time,  the  deposits  are  recorded as payments
              against the related receivable and recognized as explained above.

              Post-installation  Services  provide  the  customer  the  right to
              continuous  access to the latest version of the ADMS hosted on our
              servers,  to have their data hosted and stored on our servers,  to
              24x7  maintenance  and security of the servers,  to  post-contract
              phone technical  support services,  and to receive  manufacturers'
              parts price updates. The post-installation  services are available
              and  billed  on  a   month-to-month   basis  and  also  separately
              identified   and  priced  on  a  customer's   Service   Agreement.
              Post-installation  services fees are  recognized  ratably over the
              period that the services are performed.

              Hardware Sales include the sales of standard  computer systems and
              peripherals  and  revenues are  recognized  when title passes upon
              shipment to the  customer.  Installation  of the  hardware  and/or
              peripherals is not a required component of the Service Agreement.

              Consulting   Services   generally   include   fees   charged   for
              post-installation  training  and forms  programming.  We recognize
              consulting services fees under the percentage-of-completion method
              over the period in which the services are provided.

         o    Equipment.   We  utilize   significant  amounts  of  equipment  in
              providing service to our customers. Equipment is depreciated using
              the  straight-line  method over the  estimated  useful life of the
              equipment. Changes in technology or changes in the intended use of
              equipment  may cause the  estimated  period of use or the value of
              these assets to change.  Management performs an annual analysis to
              confirm the appropriateness of estimated economic useful lives for
              each category of equipment.

         o    Goodwill.  Management  annually  evaluates  goodwill for potential
              impairment   indicators.   If  impairment  indicators  exist,  the
              impairment is measured in accordance  with  Statement of Financial
              Accounting  Standards,  or SFAS,  No.  142,  "Goodwill  and  Other
              Intangible Assets."  Management's judgment regarding the existence
              of impairment indicators are based on legal factors and market and
              operational  conditions.  Future events could cause  management to
              conclude that impairment indicators exist and that the goodwill is
              impaired.  Goodwill  is not  amortized,  but instead is subject to
              impairment tests quarterly.

         o    Capitalization  of Software  Expense.  Costs incurred to establish
              the  technological  feasibility  of software  products to be sold,
              leased or  otherwise  marketed by us are  expensed as research and
              development. Once technological feasibility is established,  costs
              are  capitalized in accordance  with SFAS No. 86,  "Accounting for
              the Costs of Computer  Software to Be Sold,  Leased,  or Otherwise
              Marketed"  until the product is available  for general  release to
              customers.  Judgment is required in determining when technological
              feasibility of a product is established.  Capitalized costs, which
              consist  primarily of payroll and benefits of both  employees  and
              outside  contractors,  have been amortized on a product-by-product
              basis using the straight-line method over the established economic


                                      -8-
<PAGE>

              life of the products. In addition,  capitalized software costs are
              tested for impairment each year in accordance with SFAS No. 142.

         o    Income Taxes. We apply the provisions of SFAS No. 109, "Accounting
              for Income  Taxes." SFAS No. 109  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 basis and
              tax basis of our assets  and  liabilities,  at  enacted  tax rates
              expected  to be in  effect  when  such  amounts  are  realized  or
              settled.  The  deferred  tax asset  valuation  allowance  has been
              determined  pursuant to the provisions of SFAS No. 109,  including
              our estimation of future taxable income,  where necessary,  and is
              adequate to reduce the total net  deferred  tax asset to an amount
              that  will  more  likely  than  not  be  realized.  The  valuation
              allowance is an accounting  estimate being made by our management.
              We have considered all available negative and positive evidence in
              determining the amount of the valuation allowance.

Certain Risk Factors

         Our short-term and long-term  success is subject to certain risks, many
of which are  substantial  in  nature.  The  following  risk  factors  should be
carefully considered, in addition to other information contained in this report,
when  evaluating an  investment  in our common  stock.  Any one of these factors
could cause actual  results of operations to differ  materially  from  projected
results.

         We may not continue to experience net income in the future.
         -----------------------------------------------------------------------

         Any projection of continued profitability assumes that we will continue
to add new  customers  at a constant or  increased  rate and that our  operating
expenses will increase slower than our revenues.  We may not be able to continue
to add new  customers  at a constant or  increased  rate,  and we may even begin
losing  customers.  Even if we add more customers,  our labor costs,  server and
other  capital  equipment  costs  and  other  expenses  may  begin  to  increase
dramatically,  or we may  experience  unexpected  costs  related to  litigation,
insurance,  acquisitions, product development, or other items that may cause our
expenses  to  increase  at a faster  rate than  expected.  We may not be able to
maintain profitability or to increase profitability in the future.

         We may  require  additional  capital  to  continue  development  of our
         products, pursue our expansion plan and fund our operations.
         -----------------------------------------------------------------------

         We do  not  have  a  significant  cash  reserve.  If we  experience  an
unexpected  need for cash,  expand  our  operations  in any  significant  way or
otherwise need  additional  cash, we expect to continue to rely primarily on the
offer and sale of convertible  notes,  warrants and equity  securities to obtain
such  cash.  If  financing  is  needed,  we cannot  assure  you that  additional
financing  may 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 expand our operations, or to continue normal operations, may be limited.

                                      -9-
<PAGE>

          We may be unable to continue to increase the number of customers using
          our ADMS product or other future offerings.
          ----------------------------------------------------------------------

         Our ADMS is  relatively  new and we are operating in a market where two
competitors (ADP and Reynolds)  control 80% of the market and have a significant
advantage  relative  to  market  acceptance.  Any  projections  or  expectations
regarding  the number of  customers  that will accept  installation  of our ADMS
product is subject to the risk that  end-users may determine not to purchase our
ADMS product at the rate projected because of our insignificant  position in the
market, concerns over our ability to continue as a going concern, concerns about
our product and related  services or various other reasons.  If we are unable to
increase  our monthly  installations  of our ADMS  product in the future,  it is
unlikely that we will be able to maintain profitability.

          Our  competitors  have greater  resources than we do, which may permit
          them to  rapidly  develop  or  purchase  new  technologies,  undertake
          significant marketing campaigns or price more aggressively than we do.
          ----------------------------------------------------------------------

         The market for automobile  dealership data management systems 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  systems
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.

          We are subject to various  regulatory  regimes,  and may be  adversely
          affected by allegations that we have not complied with governing rules
          and laws.
          ----------------------------------------------------------------------

         We are subject to a variety of laws and regulatory  regimes as a result
of our  status as a public  company,  in  addition  to those  applicable  to all
businesses   generally.   Laws  and  rules  governing  public  companies  change
frequently,  and are often complex. In connection with such laws, we are subject
to periodic audits, inquiries and investigations. Any such audits, inquiries and
investigations  may  divert  considerable  financial  and  human  resources  and
adversely  affect our execution of our business plan. In addition,  through such
audits,  inquiries and investigations,  we or a regulator have from time to time
determined,  and may in the future determine, that we are out of compliance with
one or more governing rules or laws. In fact, we are restating certain financial
statements,  as described  above,  in connection with the filing of this Report.
Remedying such non-compliance has, during the last few months diverted,  and may
continue to divert additional financial and human resources. In addition, we may
be subject to a formal charge or determination that we have materially  violated
a  governing  law,  rule  or  regulation.   Any  charge,  and  particularly  any
determination, that we had materially violated a governing law would likely have
a material  adverse  effect on the market  price of our  stock,  our  ability to
execute  our  business  plan and our  ability  to retain and  attract  qualified
management.

                                      -10-
<PAGE>

         Our services are subject to system failure and security risks.
         -----------------------------------------------------------------------

         Our operations,  particularly  our ASP service,  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 single co-location  facility provided by MCI.  Notwithstanding
precautionary  measures  that  we and  our  co-location  host  have  taken,  the
occurrence of a natural disaster or other unanticipated  system or power failure
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, bankruptcy, 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  other   factors  that  could  cause
interruptions in service,  reduced capacity for our customers and claims against
us. 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 customers may experience  interruptions in service as a
              result of the accidental or malicious  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
              our ASP product.

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

          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. Our future
performance  will depend,  in part, upon our ability to increase  sales,  manage
growth  effectively,  and 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


                                      -11-
<PAGE>

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 or 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 ADMS, 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  there under may not provide any  competitive  advantage.  In  addition,
others  may   independently   develop   substantially   equivalent   proprietary
information  and  techniques  or otherwise  gain access to our trade secrets and
know-how.  We could also incur  substantial  costs in asserting our intellectual
property  or  proprietary  rights  against  others,  including  any such  rights
obtained from third parties.  Although each of our employees and  consultants is
asked to enter 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.

          Third-party claims that we infringe upon their  intellectual  property
          rights could be costly to defend or settle.
          ----------------------------------------------------------------------

         Litigation  regarding  intellectual  property  rights  is common in the
software and software-based  service industry.  We expect that software products
and services may be increasingly  subject to third-party  infringement claims as
the number of competitors in our industry segment grows and the functionality of
products in different  industry  segments  overlaps.  We may, from time to time,
encounter disputes over rights and obligations concerning intellectual property.
Third parties may bring claims of infringement against us, which may be with, or
without,  merit. We could be required,  as a result of an intellectual  property
dispute, to do one or more of the following:

         o    Cease  selling,  incorporating  or using products or services that
              rely upon the disputed intellectual property;

         o    Obtain  from  the  holder  of the  intellectual  property  right a
              license to sell or use the disputed intellectual  property,  which
              license may not be available on reasonable terms;

         o    Redesign   products  or   services   that   incorporate   disputed
              intellectual property; and/or

         o    Pay significant monetary damages to the holder of the intellectual
              property right.

         The occurrence of any of these events could result in substantial costs
and  diversion of resources or could  severely  limit the services we can offer,
which  could  seriously  harm our  business,  operating  results  and  financial
condition.

                                      -12-
<PAGE>

         In addition,  we have agreed, and may agree in the future, to indemnify
certain of our customers  against  claims that our software  infringes  upon the
intellectual  property  rights of others.  We could incur  substantial  costs in
defending ourselves and our customers against  infringement claims. In the event
of a claim of  infringement,  we and our customers may be required to obtain one
or more  licenses from third  parties.  We, or our  customers,  may be unable to
obtain  necessary  licenses from third parties at a reasonable  cost, or at all.
Defense of any  lawsuit or failure to obtain any such  required  licenses  could
harm our business, operating results and financial condition.

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

         Our primary product, the ADMS, is a software-based  product. The market
for software and software-based  products 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.

         Research and  development  and discoveries by others may 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.

         We may be subject to claims  based upon  allegations  that our products
         are defective.
         -----------------------------------------------------------------------

         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,  a court may rule such provisions to
be invalid or unenforceable,  or changes in the law could 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.

                                      -13-
<PAGE>

         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 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 increase or decrease  significantly as a result of a single
trade by a single stockholder. In addition, the limited volume of trading limits
significantly  the  number of shares  that one can  purchase  or sell in a short
period of time without adversely  affecting the market price.  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 management  owns a significant  number of our  outstanding  shares,
         which will allow them to influence the outcome of matters  submitted to
         stockholders for approval.
         -----------------------------------------------------------------------

         Our  officers and  directors  own  approximately  30% of our issued and
outstanding common stock.  Eight additional  stockholders have the power to vote
approximately 12% 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  stockholder  rights plan and certain  provisions  of the  Delaware
         corporate  law may  permit our Board of  Directors  to block a takeover
         attempt and adversely affect the value of our common stock.
         -----------------------------------------------------------------------

         Our Board of Directors adopted a stockholder  rights plan, and declared
a dividend  of an  associated  right,  which are  expected to have the effect of
deterring any takeover of the company that is not preceded by Board  approval of
the proposed  transaction.  The  existence of such  stockholder  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  Corporations Law prohibits  certain
mergers,  consolidations,  sales of assets  or  similar  transactions  between a
corporation  and another  company  which is, or is an affiliate of, a beneficial
holder of 15% or more of such  corporation's  voting  power  (referred  to 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  stockholders (excluding the Interested  Stockholder).  These
provisions prohibiting  Interested Stockholder  transactions could also preserve
management's control of the company.

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

         We may  raise  additional  funds in the  future by  issuing  additional
shares  of common  stock or  securities,  such as  convertible  notes,  options,
warrants or preferred stock that are convertible  into or exercisable for 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.

                                      -14-
<PAGE>

         The  market  price for our  common  stock is  volatile  and may  change
dramatically at any time.

         The market price of our common  stock,  like that of the  securities of
other early stage companies,  may be highly volatile. Our stock price may change
dramatically  as the  result of  announcements  of our  quarterly  results,  new
products  or  innovations  by  us or  our  competitors,  significant  customers'
contracts,  significant  litigation  or other  factors  or events  that would be
expected to affect our business or financial  condition,  results of  operations
and other factors  specific to our business and future  prospects.  In addition,
the market  price for our common  stock may be affected  by various  factors not
directly related to our business, including the following:

         o    intentional  manipulation of our stock price by existing or future
              stockholders;

         o    short   selling  of  our  common   stock  or  related   derivative
              securities;

         o    a  single   acquisition  or   disposition,   or  several   related
              acquisitions or dispositions, of a large number of our shares;

         o    the interest of the market in our business sector,  without regard
              to our financial condition or results of operations;

         o    the adoption of governmental  regulations and similar developments
              in the United  States or abroad  that may  affect  our  ability to
              offer our products and services or affect our cost structure;

         o    disputes  relating  to patents or other  significant  intellectual
              property  rights  held by others  that we,  our  suppliers  or our
              customers use;

         o    developments in the automobile or automobile  dealership industry;
              and

         o    economic  and other  external  market  factors,  such as a general
              decline  in  market  prices  due to poor  economic  indicators  or
              investor distrust.

         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. There are presently 575,000
shares of Series B preferred  stock  issued and  outstanding,  convertible  into
2,875,000  shares of common  stock.  Our Board of Directors has the authority to
create various series of preferred stock with such voting, dividend, conversion,
liquidation  and other rights superior to those of our common stock and to issue
such stock without stockholder  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.

                                      -15-
<PAGE>

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

         We have never paid a cash  dividend 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.

Item 7.     Financial Statements

         Our restated  financial  statements and associated  notes are set forth
following the signature page beginning on Page F-1.

Item 8A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

         Under the  supervision  and with the  participation  of our management,
including our principal  executive officer and principal  financial officer,  we
conducted an evaluation of our disclosure controls and procedures,  as such term
is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of
1934 as of March 31, 2006.  Based on this  evaluation,  our principal  executive
officer and principal  financial  officer  concluded that, for the reason and in
the manner set forth in the following  paragraph,  our  disclosure  controls and
procedures  were not  effective  in  ensuring  that  information  required to be
disclosed  by the  Company in the  reports  that it files or  submits  under the
Exchange Act is recorded,  processed,  summarized and reported,  within the time
periods specified in the Commission's rules and forms.

         Following discussions and analysis stemming from comments received from
the SEC  staff,  we  determined  that VPN  connection  fee  revenues  should  be
recognized  over the expected period of performance  under the customer  Service
Agreement,   rather  than  upon  the  completion  of  installation  as  we  have
historically recognized these revenues. As a result of this change in accounting
policy (effective July 1, 2006), revenue that was recognized in early periods is
now  being  deferred  and  recognized   ratably  over  the  expected  period  of
performance of the customer  Service  Agreement  which, as of March 31, 2006 and
2005  approximated  60 and 48 months,  respectively.  Information  regarding the
correction is disclosed in Note 14 to the restated financial statements included
herewith.

         Based upon these occurrences,  we have taken steps to facilitate timely
and  comprehensive  discussions  with  management  of the  Company  and with our
independent registered public accounting firm regarding issues that arise in the
course of developing financial statements for public disclosure.

Changes in Internal Controls over Financial Reporting

         With the participation of our principal executive officer and principal
financial  officer,  our management has, as required by Rule 13a-15(d) under the
Exchange Act, determined that there were no changes during the fiscal year ended
March 31, 2006 in our  internal  control  over  financial  reporting  that would
materially  affect,  or would be  reasonably  likely to materially  affect,  our
internal control over financial reporting.

                                      -16-
<PAGE>

                                    PART III

Item 13.  Exhibits.
<TABLE>
<CAPTION>

   Exhibit
    Number                       Title of Document                                      Location
---------------    ----------------------------------------------    ------------------------------------------------
<S>                <C>                                               <C>
     3.1           Certificate of Incorporation, as amended to       Incorporated by reference to the Company's
                   date                                              Quarterly Report on Form 10-QSB filed with the
                                                                     SEC on August 14, 2003, File No. 0-24372

     3.2           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           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, File No. 0-24372

     10.1          2001 Stock Incentive Plan, as amended             Incorporated by reference to the Company's
                                                                     Annual Report on Form 10-KSB filed with the
                                                                     SEC on July 14, 2005, File No. 0-24372

     10.2          Master Lease between Parkway Tower, L.L.C.        Incorporated by reference to Annual Report on
                   and the Company.                                  Form 10-KSB filed with the SEC on July 14,
                                                                     2000, File No. 0-24372

     10.3          Office Lease between RiverPark Three, LLC         Incorporated by reference to the Company's
                   and the Company                                   Annual Report on Form 10-KSB filed with the
                                                                     SEC on July 14, 2005, File No. 0-24372

     10.4          Employment Agreement with Richard Holland         Incorporated by reference to the Company's
                                                                     Quarterly Report on Form 10-QSB filed with the
                                                                     SEC on November 14, 2000, File No. 0-24372

     10.5          Employment Agreement with Blake Nielson           Incorporated by reference to the Company's
                                                                     Quarterly Report on Form 10-QSB filed with the
                                                                     SEC on November 14, 2000, File No. 0-24372

     23.1          Consent of Independent Registered Public          Filed herewith
                   Accounting Firm

     24.1          Power of Attorney                                 Set forth on the signature page hereof

     31.1          Certification of Chief Executive Officer          Filed herewith
                   pursuant to Section 302 of the
                   Sarbanes-Oxley Act of 2002

     31.2          Certification of Chief Financial Officer          Filed herewith
                   pursuant to Section 302 of the
                   Sarbanes-Oxley Act of 2002

     32.1          Certifications of Chief Executive Officer         Filed herewith
                   pursuant to Section 906 of the
                   Sarbanes-Oxley Act of 2002

     32.2          Certifications of Chief Financial Officer         Filed herewith
                   pursuant to Section 906 of the
                   Sarbanes-Oxley Act of 2002
</TABLE>



                                      -17-
<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/A  to be  signed  on  its  behalf  by  the  undersigned,  thereunto  duly
authorized.

                                            ARKONA, INC.

                                            By:       /s/   Alan Rudd
                                                 -------------------------------
                                                     Alan Rudd
                                                     Chief Executive Officer

Date: April 24, 2007

                   POWER OF ATTORNEY AND ADDITIONAL SIGNATURES

         In accordance with the  requirements of the Securities  Exchange Act of
1934, this report has been signed by the following persons in the capacities and
on the dates  indicated.  Each person,  whose  signature  to this Form  10-KSB/A
appears below, hereby constitutes and appoints Alan Rudd and Leland H. Boardman,
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/A, and any and all
instruments  or  documents  filed as part of or in  connection  with  this  Form
10-KSB/A  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                April 24, 2007
           /s/ Alan Rudd                             Director (Principal Executive
--------------------------------------------
     Alan Rudd                                       Officer)


           /s/ Richard Holland                       President and Director                     April 24, 2007
--------------------------------------------
     Richard Holland


           /s/ Leland H. Boardman                    Chief Financial Officer                    April 24, 2007
--------------------------------------------         (Principal Financial and
     Leland H. Boardman                              Accounting Officer)



     /s/ Marc A. Fuller                              Director                                   April 24, 2007
--------------------------------------------
     Marc A. Fuller

          /s/ Paul Henriod                           Director                                   April 24, 2007
--------------------------------------------
     Paul Henriod

          /s/ Kent A. Misener                        Director                                   April 24, 2007
--------------------------------------------
     Kent A. Misener
</TABLE>



                                      -18-
<PAGE>



                                  Arkona, Inc.

                                 March 31, 2006

             Report of Independent Registered Public Accounting Firm

                                       and

                          Restated Financial Statements



<PAGE>








<TABLE>
<CAPTION>

                                  Arkona, Inc.

                                TABLE OF CONTENTS

                                                                                           Page
                                                                                           ----

<S>                                                                                          <C>
Report of Independent Registered Public Accounting Firm....................................F-2

Restated Balance Sheet as of March 31, 2006................................................F-3

Restated Statements of Operations for the Years Ended March 31, 2006 and 2005..............F-5

Restated Statements of Stockholders' Equity for the Years Ended
       March 31, 2006 and 2005.............................................................F-6

Restated Statements of Cash Flows for the Years Ended March 31, 2006 and 2005..............F-7

Notes to Restated Financial Statements.....................................................F-9
</TABLE>


                                              F-1
<PAGE>


                                  Arkona, Inc.



             Report of Independent Registered Public Accounting Firm



The Board of Directors and Shareholders of Arkona, Inc.:

We have audited the accompanying  balance sheet of Arkona, Inc., as of March 31,
2006 and the statements of operations,  stockholders' equity, and cash flows for
the  years  ended  March  31,  2006  and  2005 (as  restated).  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company has determined that it
is not  required  to  have,  nor were we  engaged  to  perform,  an audit of its
internal control over financial reporting.  Our audit included  consideration of
internal  control  over  financial  reporting  as a basis  for  designing  audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the  effectiveness of the Company's  internal  controls
over  financial  reporting.  Accordingly,  we express no such opinion.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Arkona,  Inc., as of March 31,
2006 and the results of operations  and cash flows for the years ended March 31,
2006 and 2005 (as restated),  in conformity with accounting principles generally
accepted in the United States of America.


/s/ MANTYLA McREYNOLDS, LLC
MANTYLA McREYNOLDS, LLC
Salt Lake City, Utah
May 18, 2006, except for Note 14 to which the date is April 11, 2007.

<TABLE>
<CAPTION>

                                  Arkona, Inc.
                             Restated Balance Sheet
                                 as of March 31,


                                                                          Notes             2006

ASSETS
<S>                                                                    <C>               <C>
Current Assets:
     Cash and Cash Equivalents                                              1            $  570,766
     Accounts Receivable, including unbilled amounts
         of $111,470 (less allowance for doubtful
         accounts of $25,000)                                               1               904,001
     Prepaid Expenses                                                                        73,693
     Notes Receivable - current portion                                     1                77,324
     Other                                                                                    1,899
                                                                                         ----------
     Total Current Assets                                                                 1,627,683
                                                                                         ----------
Property and Equipment - net                                                5               623,505
                                                                                         ----------
Other Assets:
     Deferred Tax Asset                                                  1, 2, 14         1,560,000
     Capitalized Software Costs - net                                      1, 3           1,215,041
     Goodwill                                                               6               156,622
     Intellectual Property                                                  6                76,420
     Security Deposits                                                      8                75,690
     Notes Receivable                                                       1                40,192
                                                                                         ----------
     Total Other Assets                                                                   3,123,965
                                                                                         ----------

Total Assets                                                                             $5,375,153
                                                                                         ==========
</TABLE>








See accompanying notes to restated financial statements.


                                      F-3
<PAGE>
<TABLE>
<CAPTION>

                                  Arkona, Inc.
                             Restated Balance Sheet
                                 as of March 31,


                                                                Notes                2006

LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
<S>                                                         <C>                  <C>
     Accounts Payable                                                             $    159,901
     Accrued Liabilities                                                               411,230
     Current Portion Deferred Contract Revenue                   1                     434,019
     Note Payable to Related Party                              13                      50,000
     Current Portion Long-Term Notes Payable                    13                      62,563
                                                                                  ------------
     Total Current Liabilities                                                       1,117,713
                                                                                  ------------

Long-Term Deferred Contract Revenue                             1                      287,743
Long-Term Notes Payable                                        13                      166,123
                                                                                  ------------

Total Liabilities                                                                    1,571,579
                                                                                  ------------
Stockholders' Equity:                                     10, 11, 12
     Preferred Stock ($.001 par value; authorized
         10,000,000 shares; issued and outstanding
         575,000 shares)                                        7                          575
     Common Stock ($.001 par value; authorized
         75,000,000 shares; issued and outstanding
         32,489,670)                                            7                       32,490
     Additional Paid-In Capital                                                     23,479,767
     Unearned compensation - stock options                      9                       (5,848)
     Accumulated Deficit                                     9, 14                 (19,703,410)
                                                                                  ------------
     Total Stockholders' Equity                                                      3,803,574
                                                                                  ------------

Total Liabilities & Stockholders' Equity                                          $  5,375,153
                                                                                  ============
</TABLE>






See accompanying notes to restated financial statements.



                                      F-4
<PAGE>
<TABLE>
<CAPTION>

                                  Arkona, Inc.
                        Restated Statements of Operations
                          for the Years Ended March 31,

                                      Notes                      2006             2005
                                      -----                      ----             ----

<S>                                   <C>                   <C>               <C>
Revenues:                             1, 14
     Installation Services                                  $  3,817,701      $  2,690,491
     Post-Installation Services                                5,783,424         3,997,133
     Hardware Sales                                            1,026,373           335,648
     Consulting Services                                         578,525           264,435
     Other                                                         6,148            14,248
                                                            ------------      ------------
     Total Revenues                                           11,212,171         7,301,955
Cost of Sales                       1, 3, 4                    5,858,545         4,249,865
                                                            ------------      ------------
Gross Profit                                                   5,353,626         3,052,090

Operating Expenses:                 1, 4, 5
     Sales, Marketing & General
         Administrative                                        3,478,072         2,690,208
     Research & Development                                      962,708           660,760
                                                            ------------      ------------
     Total Operating Expenses                                  4,440,780         3,350,968
                                                            ------------      ------------
Income (Loss) from Operations                                    912,846          (298,878)
Other (Expense) Income - net                                      (9,411)           46,846
                                                            ------------      ------------
Income (Loss) Before Income Taxes                                903,435          (252,032)
Income Tax Benefit                     1, 2                    1,244,000           152,682
                                                            ------------      ------------
Net Income (Loss)                                           $  2,147,435      $    (99,350)
                                                            ============      ============
Basic Earnings per Common Share:       15
     Income (Loss) from Operations                          $      0.028      $     (0.009)
     Net Income (Loss)                                      $      0.067      $     (0.003)
     Average Number of Shares
           Outstanding                                         32,278,717        31,956,688
Diluted Earnings per Common Share:     15
     Income (Loss) from Operations                          $      0.023      $     (0.009)
     Net Income (Loss)                                      $      0.054      $     (0.003)
     Average Number of Shares
           Outstanding                                        39,404,151        31,956,688

</TABLE>

See accompanying notes to restated financial statements.


                                      F-5
<PAGE>
<TABLE>
<CAPTION>

                                  Arkona, Inc.
              Restated Statements of Stockholders' Equity (Deficit)
                   for the Years Ended March 31, 2006 and 2005








                       Preferred      Preferred        Common         Common
                         Shares         Stock          Shares         Stock
                      ------------   ------------   ------------   ------------
<S>                    <C>           <C>            <C>            <C>
Balance, March 31,
2004                   575,000       $        575     31,565,670         31,566

Prior period
adjustments - see
Note 14                       --             --             --             --

Issued shares for
options exercised at
$.20 and $.30 per
share                         --             --          474,000            474

Issued shares for
cash and services at
$.40 to $.51 per
share                         --             --          130,000            130

Unearned compensation         --             --             --             --

Compensation earned           --             --             --             --

Stock investment
write-off                     --             --             --             --

Net (loss)                    --             --             --             --
                      ------------   ------------   ------------   ------------

Balance, March 31,         575,000   $        575     32,169,670         32,170

Issued shares for
options exercised at
$.20 to $.66 per
share                         --             --          320,000            320

Unearned compensation         --             --             --             --

Compensation earned           --             --             --             --

Options forfeited             --             --             --             --

Net income                    --             --             --             --
                      ------------   ------------   ------------   ------------
Balance, March 31,         575,000   $        575     32,489,670   $     32,490
</TABLE>


See accompanying notes to restated financial statements.


                                      F-6(a)
<PAGE>
<TABLE>
<CAPTION>

                                          Arkona, Inc.
                         Restated Statements of Stockholders' Equity (Deficit)
                              for the Years Ended March 31, 2006 and 2005


                                                          Accumu-
                                          Unearned        lated
                         Additional        Comp. -        Unrealized                       Total
                           Paid-In          Stock         Losses on      Accumulated    Stockholders'
                           Capital         Options        Investment      Deficit          Equity
                        ------------    ------------    ------------    ------------    ------------
<C>                     <C>             <C>             <C>             <C>             <C>
Balance, March 31,
2004                    $ 23,188,211            --           (16,942)    (19,698,942)      3,504,468

Prior period
adjustments - see
Note 14                         --              --              --        (2,052,553)     (2,052,553)

Issued shares for
options exercised at
$.20 and $.30 per
share                        127,726            --              --              --           128,200

Issued shares for
cash and services at
$.40 to $.51 per
share                         52,420            --              --              --            52,550

Unearned compensation         26,275         (26,275)           --              --              --

Compensation earned             --             6,918            --              --             6,918

Stock investment
write-off                       --              --            16,942            --            16,942

Net (loss)                      --              --              --           (99,350)        (99,350)
                        ------------    ------------    ------------    ------------    ------------
Balance, March 31,
2005                    $ 23,394,632    $    (19,357)   $          0     (21,850,845)   $  1,557,175



Issued shares for
options exercised at
$.20 to $.66 per
share                         98,010            --              --              --            98,330

Unearned compensation          1,100          (1,100)           --              --                 0

Compensation earned             --             8,955            --              --             8,955

Options forfeited            (13,975)          5,654            --              --            (8,321)

Net income                      --              --              --         2,147,435       2,147,435
                        ------------    ------------    ------------    ------------    ------------
Balance, March 31,      $ 23,479,767    $     (5,848)   $          0     (19,703,410)   $  3,803,574
</TABLE>



See accompanying notes to restated financial statements.



<PAGE>
                                              F-6(b)
<TABLE>
<CAPTION>

                                  Arkona, Inc.
                        Restated Statements of Cash Flows
                          For the Years Ended March 31,

                                                             2006           2005
                                                         -----------    -----------
<S>                                                      <C>            <C>
Cash Flows from Operating Activities:
     Net Income (Loss)                                   $ 2,147,435    $   (99,350)
     Adjustments to Reconcile Net Income
         (Loss) to Net Cash Provided by Operating
         Activities:
            Depreciation Expense                             195,620        115,760
            Amortization Expense                             302,678        248,181
            Bad Debt (Write Offs)                            (50,000)       (10,134)
            Loss on Asset Disposition                            323           --
            Stock Compensation Expense (Income)                  634          6,918
            Realized Gain on Investments                        --          (55,973)
            Deferred Income Tax Benefit                   (1,248,000)      (156,000)
            Decrease (Increase) in Accounts Receivable      (372,814)       (36,451)
            Decrease (Increase) in Prepaid Expenses          (73,693)        11,621
            Decrease (Increase) in Other                       1,600         38,169
            Decrease (Increase) in Notes Receivable         (117,516)          --
            Decrease (Increase) in Security Deposits          46,390        (42,500)
            Increase (Decrease) in Accounts Payable            3,826         (1,704)
            Increase (Decrease) in Accrued Liabilities       169,792         44,962
            Increase (Decrease) in Deferred Revenue          (75,282)        68,283
                                                         -----------    -----------
     Net Cash Provided by Operating Activities               930,993        131,782
                                                         -----------    -----------
Cash Flows from Investing Activities:
     Acquisition of Property and Equipment                  (459,638)      (254,792)
     Cash from Sale of Intangible Asset                         --          100,000
     Software Development Costs                             (368,784)      (378,400)
                                                         -----------    -----------
     Net Cash Used in Investing Activities                  (828,422)      (533,192)
                                                         -----------    -----------
Cash Flows from Financing Activities:
     Net increase in Notes Payable                           228,686           --
     Proceeds from Issuance of Common Stock                   98,330        180,750
                                                         -----------    -----------
     Net Cash Provided by Financing Activities               327,016        180,750
                                                         -----------    -----------

Net Increase (Decrease) in Cash                              429,587       (220,660)

Beginning Cash and Cash Equivalents Balance                  141,179        361,839
                                                         -----------    -----------
Ending Cash and Cash Equivalents Balance                 $   570,766    $   141,179
                                                         ===========    ===========
</TABLE>



See accompanying notes to restated financial statements.

                                      F-7
<PAGE>

<TABLE>
<CAPTION>

                                  Arkona, Inc.
                        Restated Statements of Cash Flows
                          for the Years Ended March 31,


                                                            2006             2005
<S>                                                      <C>            <C>
Supplemental Disclosure Information:
     Cash Paid for Interest                              $    17,275    $     9,126
     Cash Paid for Income Taxes                          $     3,318    $     3,695
</TABLE>











See accompanying notes to restated financial statements.


                                      F-8
<PAGE>


                                  Arkona, Inc.
                     Notes to Restated Financial Statements


1.      Organization and Summary of Significant Accounting Policies

        Organization - Arkona,  Inc.  ("Arkona" or the "Company") was originally
        incorporated  under  the laws of the  State of  Delaware  in 1992 as The
        Thorsden  Group,  Ltd.  ("Thorsden"),  for the  purpose of  seeking  and
        acquiring  business  opportunities.  In 1997,  Thorsden acquired Arkona,
        Inc., a Utah corporation, as a wholly-owned subsidiary. Arkona, Inc. was
        in the business of developing  software for remote  synchronization  and
        replication of databases.  In 1999,  Thorsden changed its name to Sundog
        Technologies, Inc. ("Sundog"). In 2000, Sundog acquired the business and
        assets  of  Ensign  Information   Systems,   which  developed  and  sold
        automobile  dealership  software.  In 2001,  Sundog abandoned its remote
        synchronization  business,  merged  with  its  wholly-owned  subsidiary,
        Arkona, Inc., and changed its name to Arkona.

        Income  Taxes  - The  Company  applies  the  provisions  of  SFAS  #109,
        "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 basis and tax
        basis of the  Company's  assets and  liabilities  at  enacted  tax rates
        expected to be in effect when such amounts are realized or settled.

        Net  Income  (Loss)  Per Common  Share - In  accordance  with SFAS #128,
        "Earnings per Share" basic  earnings per common share is computed  using
        the  weighted  average  number of  common  shares  outstanding.  Diluted
        earnings per common share is computed using the weighted  average number
        of common  shares plus  dilutive  common share  equivalents  outstanding
        during the period using the treasury stock method.

        Cash & Cash  Equivalents - For purposes of the statements of cash flows,
        the Company  considers  cash on deposit in banks and other  unrestricted
        investments with original  maturities of three months or less to be cash
        equivalents.  The Company  maintains cash balances in a local  financial
        institution.  Accounts  at this  institution  are insured by the Federal
        Deposit Insurance  Corporation up to $100,000. As of March 31, 2006, the
        Company  had cash in excess of the insured  amounts at this  institution
        totaling $470,766.

        Use of  Estimates  in the  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,
        the 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.

        Revenue  Recognition  - During  the  course  of  business,  the  Company
        recognizes revenue from the following activities: Installation Services;
        Post-installation Services; Hardware Sales; and Consulting Services.

                                      F-9
<PAGE>

       Installation  Services include fees for G/L setup,  data conversion,  VPN
       connection, forms programming, and training. Each of these activities are
       separately  stated on a  customer's  Sales  and  Service  Agreement  (the
       "Service Agreement") and individually priced. The Installation Service is
       generally  performed  over a four (4) week period and provides a customer
       with the tools and  knowledge  necessary  in order for them to access and
       use the ADMS on a go-forward basis. The Company  recognizes  installation
       services  revenue in  accordance  with  American  Institute  of Certified
       Public  Accountants   ("AICPA")   Statement  of  Position  ("SOP")  97-2,
       "Software  Revenue  Recognition."  The Company  recognizes  revenue  when
       persuasive  evidence of an arrangement  exists,  delivery has occurred or
       services have been  rendered,  the sales price is fixed or  determinable,
       and  collection  is  probable.  Under SOP 97-2,  the  Company  determines
       whether a Service  Agreement  includes  multiple  elements  as defined in
       Emerging Issues Task Force ("EITF") #00-21,  "Revenue  Arrangements  with
       Multiple  Deliverables,"  and, if so, whether  vendor-specific  objective
       evidence  ("VSOE") of fair value exists for each of those  elements.  G/L
       setup, data conversion,  forms programming and training are each separate
       deliverables with each having stand-alone value and revenue is recognized
       as the services are performed and completed,  based upon the VSOE of fair
       value for each  element.  The VPN  connection  does not have  stand-alone
       value and,  therefore,  VPN connection fee revenue is recognized over the
       expected period of performance under the customer Service Agreement.

       Service  Agreements  generally  require  the  payment  of  non-refundable
       security deposits. These deposits are generally in an amount equal to 25%
       of the combined  installation  fees and  represent  security  against the
       labor  and  travel  related  costs the  Company  will  incur  even if the
       contract  is  terminated  prior  to the  completion  of the  installation
       process.  These  deposits  are  recorded  as deferred  revenue  until the
       installation  services are  completed  and  invoiced.  At that time,  the
       deposits  are  recorded as payments  against the related  receivable  and
       recognized as explained above.

       Post-installation  Services  provide the customer the right to continuous
       access to the latest version of the ADMS hosted on the Company's servers,
       to have their data hosted and stored on the  company's  servers,  to 24x7
       maintenance and security of the servers, to post-contract phone technical
       support  services,   and  to  manufacturers'  parts  price  updates.  The
       post-installation  services are  available and billed on a month to month
       basis and also separately  identified and priced on a customer's  Service
       Agreement.  Post-installation  services fees are recognized  ratably over
       the period that the services are performed.

       Hardware  Sales  include  the  sales of  standard  computer  systems  and
       peripherals  and revenues are recognized  when title passes upon shipment
       to the customer. Installation of the hardware and/or peripherals is not a
       required component of the Service Agreement.

       Consulting Services generally include fees charged for  post-installation
       training  and  forms  programming.   The  Company  recognizes  consulting
       services fees under the  percentage-of-completion  method over the period
       in which the services are provided.

                                      F-10
<PAGE>

        Accounts  and  Notes   Receivable  -  The  Company   regularly   reviews
        receivables  and records an allowance for doubtful  accounts  based on a
        specific  identification  basis for those accounts that they consider to
        be  uncollectible.  As of March 31,  2006,  the  allowance  for doubtful
        accounts was $25,000.

        During  fiscal  year  2006,  the  Company   financed   several  customer
        installations on long-term notes. Accordingly,  the Company has recorded
        the principal  payments that extend into future  periods as  non-current
        assets. The Company believes these notes are fully collectible.

        Revenues  earned on  contracts  in progress  in excess of  billings  are
        classified as current assets and included in Accounts Receivable.

        Software   Development   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 in accordance  with SFAS #86,  "Accounting  for the Costs of
        Computer Software to Be Sold,  Leased, or Otherwise  Marketed" until the
        product is  available  for  general  release to  customers.  Judgment is
        required in determining when  technological  feasibility of a product is
        established.  Capitalized  software  costs,  which consist  primarily of
        payroll and benefits of both  employees  and outside  contractors,  have
        been  amortized on a  product-by-product  basis using the  straight-line
        method over the established economic life of the products (determined to
        be five years). In addition,  with the issuance of SFAS #142,  "Goodwill
        and Other Intangible Assets",  capitalized software costs are tested for
        impairment  each  quarter  along  with  other  intangible   assets.   If
        impairment is determined, the amount of the impairment is written off in
        that period.

        Advertising Costs - Advertising costs are charged to expense as services
        are provided.  For the years ended March 31, 2006 and 2005,  the Company
        expensed  $106,724 and $34,584,  respectively,  in  advertising  related
        costs.

        Reclassifications  - Certain  reclassifications  have been made to prior
        year balances in order to conform to current year classifications.

        Recent  Accounting  Pronouncements  - In December  2004, the FASB issued
        SFAS #123(R),  "Share-Based  Payments."  SFAS #123(R)  amends SFAS #123,
        "Accounting for Stock-Based  Compensation," and APB #25, "Accounting for
        Stock  Issued to  Employees."  SFAS  #123(R)  requires  that the cost of
        share-based  payment  transactions  (including  those with employees and
        non-employees) be recognized in the financial  statements at fair value.
        On April 14, 2005, the SEC issued a rule allowing small business issuers
        to delay  implementation  of this statement until the beginning of their
        first  fiscal  year after  December  15, 2005 rather than at the interim
        period. The Company will implement this pronouncement effective April 1,
        2006.

        In December 2004, the FASB issued SFAS #153,  "Exchanges of Non-monetary
        Assets - An  Amendment  of APB  Opinion  #29." The  guidance in APB #29,
        "Accounting for  Non-monetary  Transactions,"  is based on the principle
        that  exchanges of  non-monetary  assets should be measured based on the


                                      F-11
<PAGE>

        fair value of the assets  exchanged.  The  guidance,  however,  included
        certain  exceptions  to that  principle.  SFAS  #153  amends  APB #29 to
        eliminate the exception for non-monetary exchanges of similar productive
        assets  and  replaces  it with a  general  exception  for  exchanges  of
        non-monetary  assets  that  do  not  have  commercial   substance.   The
        provisions of SFAS #153 are effective for  non-monetary  asset exchanges
        occurring  in  fiscal  periods  beginning  after  June 15,  2005.  Early
        application   is  permitted  and  companies   must  apply  the  standard
        prospectively.  The  adoption of the  standard is not expected to have a
        material  effect on the  company's  results of  operations  of financial
        position.

        In May 2005,  the FASB issued SFAS #154,  "Accounting  Changes and Error
        Corrections," which replaces APB Opinion #20, "Accounting  Changes," and
        supersedes FASB #3, "Reporting  Accounting  Changes in Interim Financial
        Statements - an amendment of APB #28." SFAS #154 requires  retrospective
        application  to  prior  periods'  financial  statements  of  changes  in
        accounting  principle,  unless it is impractical to determine either the
        period-specific  effects or the cumulative effect of the change. When it
        is  impracticable  to  determine  the  period-specific   effects  of  an
        accounting  change on one or more  individual  prior periods  presented,
        SFAS #154 requires that the new  accounting  principle be applied to the
        balances of assets and  liabilities  as of the beginning of the earliest
        period for which  retrospective  application is  practicable  and that a
        corresponding  adjustment  be made to the  opening  balance of  retained
        earnings  for that  period  rather  than  being  reported  in an  income
        statement.  When it is impracticable to determine the cumulative  effect
        of applying a change in accounting principle to all prior periods,  SFAS
        #154 requires that the new accounting principle be applied as if it were
        adopted  prospectively  from the earliest  date  practicable.  SFAS #154
        shall be effective for accounting changes and corrections of errors made
        in fiscal years  beginning after December 15, 2005. The adoption of this
        standard  is not  expected  to have  material  effect  on the  Company's
        results of operations or financial position.

        In February  2006,  the FASB issued SFAS #155,  "Accounting  for Certain
        Hybrid Financial  Instruments,  an amendment of FASB Statements #133 and
        #140." This statement permits fair value  re-measurement  for any hybrid
        financial instrument that contains an embedded derivative that otherwise
        would require  bifurcation.  It  establishes  a requirement  to evaluate
        interests in securitized financial assets to identify interests that are
        freestanding  derivatives or that are hybrid financial  instruments that
        contain an embedded derivative requiring bifurcation.  This statement is
        effective  for all  financial  instruments  acquired or issued after the
        beginning of an entity's  first fiscal year that begins after  September
        15, 2006. The adoption of this standard is not expected to have material
        effect on the Company's results of operations or financial position.

        In March  2006,  the  FASB  released  statement  #156,  "Accounting  for
        Servicing  of  Financial  Assets,  an amendment of FASB #140." SFAS #156
        requires that all separately recognized servicing assets and liabilities
        in  accordance  with SFAS #140 be initially  measured as fair value,  if
        practicable.  Furthermore,  this standard permits, but does not require,
        fair value  measurement for separately  recognized  servicing assets and
        liabilities in subsequent reporting periods. This statement is effective


                                      F-12
<PAGE>

        after the  beginning of an entity's  first fiscal year that begins after
        September  15, 2006.  The  adoption of this  standard is not expected to
        have a  material  effect  on the  Company's  results  of  operations  of
        financial position.

2.      Income Taxes

        The tax effects of temporary  differences  that give rise to significant
        portions of the deferred  tax asset and deferred tax  liability at March
        31, 2006, are presented below.

       Deferred Tax Assets:
          Net operating loss carryforward                     $ 4,977,235
         Non-current deferred revenues                            112,220
          Intangibles, due to differences in
             amortization                                          70,034
                                                              -----------
         Gross Deferred Tax Assets                              5,159,489
          Less valuation allowance                             (3,262,406)
                                                              -----------
          Total Deferred Tax Assets                             1,897,083

       Deferred Tax Liabilities:
          Capitalized software costs, due to
             differences in amortization                         (330,099)
          Property and equipment, due to
             differences in depreciation                           (6,984)
                                                               ----------
       Total Net Deferred Tax Assets                           $1,560,000
                                                               ==========

       Current Net Deferred Tax Assets                         $        0
       Long Term Net Deferred Tax Assets                        1,560,000
                                                               ----------
       Total Net Deferred Tax Assets                           $1,560,000
                                                               ==========

       The deferred tax asset valuation allowance decreased  $1,641,956 from the
       previous  year's  account  balance.  The  allowance  has been  determined
       pursuant  to  the  provisions  of  SFAS  #109,  including  the  Company's
       estimation of future taxable income, where necessary,  and is adequate to
       reduce  the total  net  deferred  tax  asset to an amount  that will more
       likely than not be realized.  The  valuation  allowance is an  accounting
       estimate  being  made  by  management.   Management  has  considered  all
       available negative and positive evidence in determining the amount of the
       valuation allowance.

                                      F-13
<PAGE>


        Reconciliation between income taxes at statutory tax rates (39%) and the
        actual income tax provision from continuing operations are as follows:
<TABLE>
<CAPTION>

                                                         03/31/2006                03/31/2005
<S>                                                     <C>                       <C>
       Expected provision (benefit) based
          on statutory rates                            $    352,340              $     (98,292)
       Effect of:
          Change in valuation allowance                   (1,641,956)                   (83,547)
          Minimum state franchise tax                          4,000                      3,318
          Nondeductible differences                           41,616                     25,839
                                                        ------------              -------------
       Provision (Benefit) for Income Tax               $ (1,244,000)             $    (152,682)
                                                        ============              ==============

       The components of the provision (benefit) for income tax are as follows:

                                                         03/31/2006                03/31/2005
       Current provision (benefit):
          Federal                                       $    231,919               $   (156,879)
          State                                               38,106                    (19,753)

       Deferred provision (benefit):
          Federal                                         (1,319,919)                    20,879
          State                                             (194,106)                     3,071
                                                         -----------                -----------
       Provision (Benefit) for Income Tax                $(1,244,000)              $   (152,682)
                                                       =============               ============
</TABLE>

        Net  operating  loss  carry  forwards  expire  thru  2025.  Subsequently
        recognized tax benefits relating to the valuation allowance for deferred
        tax  assets as of March 31,  2006 will be  reported  as a  reduction  of
        income tax expense from continuing operations.

3.      Capitalized Software Costs

        The  Company  capitalizes  certain  costs  of  developing  its  software
        products  in  accordance  with  SFAS #86,  "Accounting  for the Costs of
        Computer  Software  to  be  Sold,   Leased,   or  Otherwise   Marketed."
        Amortization  expense,  charged to cost of sales,  totaled  $302,678 and
        $248,181 for the years ended March 31, 2006 and 2005, respectively.  For


                                      F-14
<PAGE>

         the  year  ended  March  31,  2006,   capitalized  software  costs  and
         accumulated amortization was as follows:

                                                                    2006

                  Capitalized Software Costs                   $ 1,990,146
                  Accumulated Amortization                        (775,105)
                                                               -----------
                  Net                                          $ 1,215,041
                                                               ===========

4.      Operating Leases

        The  Company  has an  operating  lease for its office  facilities  which
        expires July 31, 2010.  The  following  table  summarizes  the remaining
        obligation under the operating lease.

                     Year                                Minimum
                    Ending                           Lease Payments
                  03/31/2007                            $   475,056
                  03/31/2008                                487,556
                  03/31/2009                                500,052
                  03/31/2010                                512,552
                  03/31/2011                                172,240
                                                        -----------
                  Total                                 $ 2,147,456
                                                        ===========

        Rent expense under the facility  lease was $396,718 and $277,093 for the
        years ended March 31, 2006 and 2005, respectively.

        The Company has operating leases with a major vendor for computer server
        equipment.  The terms require  payments,  on a month-to-month  basis, in
        amounts  approximating  $4,500. Upon written notice, the Company is able
        to return or exchange the equipment at its option.

                                      F-15
<PAGE>


5.      Property and Equipment

        Property  and  equipment  are  summarized  by major  classifications  as
        follows:

                                               2006       Method / Life
           Office Furniture                $   342,290        SL / 5
           Computer Software                   195,293        SL / 3
           Computer Equipment                  931,051        SL / 3
           Leasehold Improvements                9,235        SL / 5
           Automobile                           16,403        SL / 5
                                           -----------
           Total                             1,494,272
           Accumulated Depreciation           (870,767)
                                           -----------
           Net                             $   623,505
                                           ===========

        Depreciation expense was $195,620 and $115,760 for the years ended March
        31, 2006 and 2005, respectively.  The Company has property and equipment
        that serves as collateral  on capital  leases in the amount of $248,486.
        Accumulated  depreciation  on this equipment  totals $14,842 as of March
        31, 2006.

        The Company charges repairs and maintenance to expense as incurred,  and
        capitalizes  replacements and  improvements  when these costs extend the
        useful life of the assets.

6.      Goodwill and Intellectual Property

        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 for  substantially  all of the assets of Ensign,  including
        intellectual property.

        With the  acquisition  of  Ensign,  the  Company  recorded  goodwill  of
        $313,244.  Through  fiscal  year 2002 and into  fiscal  year  2003,  the
        Company had amortized $156,622, or half of the original book balance. In
        addition, the Company acquired from Ensign intellectual property related
        to the core management system software of $305,682.  Through fiscal year
        2002 and into fiscal year 2003,  the Company had  amortized  $229,262 of
        the asset. In fiscal year 2003, the Company adopted SFAS  #142,"Goodwill
        and Other Intangible Assets". This statement eliminates the amortization
        of goodwill and other intangible assets and requires the Company to test
        the assets for  impairment,  which the  Company  performs on a quarterly
        basis.  Based on management's  analysis and testing for  impairment,  no
        adjustment in the asset values was recorded for the year ended March 31,
        2006.

                                      F-16
<PAGE>



7.      Preferred and Common Stock

        During fiscal year 2003, the Company raised  $575,000 by selling 575,000
        shares of Series B Convertible  Preferred Stock (the "Preferred  Stock")
        to unrelated  parties at $1.00 per share.  Each Preferred Stock share is
        convertible  to five (5) common  shares at the  option of the  preferred
        shareholder.  Each Preferred  Stock share receives the same dividends as
        common stock on an as converted basis.

        The Preferred Stock shares carry a liquidation  preference  equal to the
        price  per  share  of the  Preferred  Stock,  plus  accrued  and  unpaid
        dividends on each share. In the event of a "liquidation," the balance of
        proceeds  is paid to common  stock.  A merger,  reorganization  or other
        transaction in which control of the Company is transferred is treated as
        a liquidation. If not earlier converted into common stock, the Preferred
        Stock shares are redeemable with 30 days advance notice at the option of
        the Company after June 30, 2008.

        Each  Preferred  Stock  share has one (1) vote and votes  together  as a
        class with common stock except that the Preferred Stock votes alone as a
        class  for  (i)  any  adverse  change  to the  rights,  preferences  and
        privileges of the Preferred Stock,  (ii) any increase or decrease in the
        number of authorized Preferred Stock shares.

        In December  2005,  the  stockholders  of the Company  voted in favor of
        amending the Company's  Certificate  of  Incorporation,  increasing  the
        number of authorized common shares to 75,000,000.

8.      Security Deposits

        In  conjunction  with its  facility  lease  obligation,  the Company has
        placed a security deposit with its landlord totaling $42,500 as of March
        31, 2006. In addition to the facility deposit,  the Company has placed a
        security deposit for computer servers totaling $33,190.

9.      Stock Options and Warrants

        In December  2001,  the  Company  established  a stock  option plan (the
        "Plan") 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-term success. The
        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
        9,000,000 shares for distribution.

        As of March 31, 2006,  there were outstanding a total of 6,793,667 stock
        options to purchase  Company common stock granted under the Plan, all of
        which  have an  exercise  price of  between  $0.20 and $0.75 per  share.
        Options  granted under the Plan vest over a one to four year period.  Of
        the options outstanding under the Plan, 4,650,667 are vested as of March
        31, 2006.

                                      F-17
<PAGE>

        The Company  applies the  provisions of APB #25,  "Accounting  for Stock
        Issued  to  Employees"  to stock  option  grants.  Compensation  cost 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, is amortized to expense
        over the  vesting  periods of the  underlying  stock  options.  Unearned
        compensation represents the intrinsic value of stock options granted but
        not yet vested. As of March 31, 2006, the Company had $5,848 in unearned
        compensation.

        For fiscal year 2006, the Company adopted only the disclosure provisions
        of SFAS #123,  "Accounting for Stock Based Compensation" and applied APB
        #25 to stock options. To determine the pro forma impact of applying SFAS
        #123,  the  Company  estimated  the fair  value  of  options  using  the
        Black-Scholes option valuation model. Assumptions used for the valuation
        model are set forth below:

                           Expected volatility factor         126.0%

                           Risk-free interest rate              3.0%

        The following table  illustrates the effect on net income and net income
        per share if the provisions of SFAS #123 had been applied to stock-based
        incentives using the Black-Scholes valuation model:

                                                          Year Ended March 31,
                                                         2006            2005

                   Net income (loss), as reported    $ 2,147,435    $   (99,350)

                   Add: stock-based employee
                   compensation expense
                   included in reported net income           634          6,918

                   Deduct:  total stock-based
                   employee compensation expense
                   determined under fair value
                   based method for all awards          (204,721)       (56,480)
                                                     -----------    -----------
                   Pro Forma Net Income (Loss)       $ 1,943,348    $  (148,912)
                                                     ===========    ===========
                   Net Income (Loss) Per Share:
                     Basic - pro forma               $     0.060    $    (0.005)
                     Diluted - pro forma             $     0.049    $    (0.005)


                                      F-18
<PAGE>


        Information  on stock options and warrants  outstanding  as of March 31,
        2006 and 2005 is as follows:
<TABLE>
<CAPTION>

                                            Number of                     Weighted
                             Range of      Options and       Average       Average                    Weighted
              Year           Exercise        Warrants       Remaining     Exercise       Number        Average
             Ended            Prices       Outstanding        Life          Price      Exercisable      Price

<S>         <C>             <C>                <C>           <C>            <C>           <C>           <C>
            03/31/06        $0.20-0.75         9,492,759     90 mos.        $0.37         7,350,759     $0.29

            03/31/05        $0.20-0.65         8,770,759     90 mos.        $0.33         3,497,000     $0.32
</TABLE>

        The Company issued an additional  1,311,000  options and warrants during
        the fiscal year ended March 31,  2006.  Options  and  warrants  totaling
        589,000 expired or were cancelled during the same period.

10.     401K Profit Sharing Plan

        The Company has an employee benefit program  consisting of a 401K Profit
        Sharing Plan (the "401K Plan").  The 401K Plan provides for employees to
        contribute on a pretax basis, provides employer matching, and presents a
        broad  portfolio of  investment  options to be selected by the employee.
        Employer  matching  contributions  are  made at the sole  discretion  of
        management.  The Company has not contributed to the 401K Plan during the
        years ended March 31, 2006 or 2005.

11.     Related Party Transactions

        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 7,523,000
        shares of common stock and then, collectively, entered into an agreement
        with Caldera  Holding  Company,  L.C.  ("Caldera"),  wherein Caldera was
        given the right to grant secondary 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 secondary  options have an
        exercise price of $0.30 per share and expire December 31, 2006.  Holders
        of the shares underlying the secondary 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.  Certain of the
        secondary options have been granted to officers of the Company. Exercise
        of these secondary  options will not yield any assets to the Company nor
        dilute the Company's equity position.

12.     Preferred Stock Rights

        Effective  January  31,  2001,  the Board of  Directors  of the  Company
        declared a dividend of one  Preferred  Stock 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  Preferred  Stock 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


                                      F-19
<PAGE>

        of $60.00.  The  description and terms of the Preferred Stock Rights are
        set forth in a Shareholder  Rights Agreement (the  "Agreement")  between
        the Company and Atlas Stock Transfer Corporation, as Rights Agent.

        At the time it approved  the  Agreement,  the Board of  Directors of the
        Company believed that the market price of the Company's common stock did
        not reflect its real value.  In light of the low market  price of common
        stock,  management  and the Board of  Directors  were  concerned  that a
        person may seek to acquire substantially all of the Company's stock 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 Agreement is
        to encourage any person  contemplating  an acquisition of  substantially
        all of the  Company's  stock 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.

13.     Notes Payable

        The Company has a demand note payable with a related party in the amount
        of $50,000.  The note has an interest rate of 12% and is unsecured.  The
        principal payments are at the discretion of the Company.  During each of
        the years  ended  March 31,  2006 and 2005 the  Company  paid  $6,000 in
        interest.

        The Company has an unused,  unsecured line of credit (interest at prime)
        with a local bank in the amount of $250,000.  The line of credit expires
        on September 30, 2006.

        The  Company  has long term  capital  lease  obligations  related to the
        purchase  of  office  furniture  and  computers.  The  weighted  average
        interest rate on these  borrowings is 7.0%. The following table reflects
        the future minimum lease payments:

                      Year                         Minimum
                    Ending                     Lease Payments

                  03/31/2007                   $      62,563
                  03/31/2008                          63,046
                  03/31/2009                          50,534
                  03/31/2010                          38,945
                  03/31/2011                          13,598
                                               -------------
                  Total                        $     228,686
                                               =============

                                      F-20
<PAGE>
14.    Prior Period Adjustments

       During  fiscal  year 2006,  in the course of  preparing  a response  to a
       routine SEC comment letter,  the Company determined that their accounting
       for software development costs was erroneously reported in prior periods.
       The Company had expensed all software  development costs during the years
       ended March 31, 2001, 2002 and 2003. Beginning with the fiscal year ended
       March 31,  2004,  the  Company  capitalized  software  development  costs
       related  to  automobile  manufacturer   integration  software  that  were
       incurred  between the date technical  feasibility was established and the
       date the software  became ready for its intended  use.  Similar  expenses
       incurred  during  fiscal  years  2001,  2002 and 2003  should  have  been
       consistently capitalized.  Accordingly,  the Company has booked $119,165,
       $389,988 and $376,497 in fiscal years 2001, 2002 and 2003,  respectively,
       to retroactively capitalize the asset.

       The Company amortizes  capitalized software development expenses over the
       useful life of the underlying  software,  deemed to be five years. Having
       capitalized certain software development expenses as described above, the
       Company  recalculated  amortization expense for the years ended March 31,
       2003,  2004  and  2005,  beginning  with  the  completion  of  the  first
       integration software in May 2002.

       As part of the review  described  above,  the Company  discovered that it
       mistakenly  combined a software asset capitalized through the acquisition
       of Ensign (see Notes 1 and 6) with the capitalized  software  development
       costs  described  above.  This  combination  resulted  in  an  inaccurate
       reporting of software  assets and an  inaccurate  calculation  of related
       accumulated amortization.

       As a result of the above  review  and as part of its  enhancement  of its
       internal  controls and procedures  related to financial  statements,  the
       financial  staff of the  Company  reviewed  and  attempted  to  reconcile
       certain  revenue,  cash and other  entries in the  general  ledger of the
       Company for fiscal years 2005 and 2004 with  previously  filed reports on
       Form 10-KSB. It was determined that certain  reclassifications of expense
       items  between cost of sales and  operating  expenses  were  necessary to
       properly reflect classifications adopted for fiscal year 2006.

       In addition, the Company determined to restate downward the amount of the
       income tax benefit recorded in fiscal years 2005 and 2004.

       The effect on certain line items to the financial  statements  for fiscal
       year 2005, as reported with the Company's  10-KSB/A filed on November 16,
       2005,  affected by these  adjustments is identified  through the "Initial
       Adjustments" line item set forth below.

       Subsequent  to the filing of the Form 10-KSB for fiscal year 2006 and in
       connection  with  communications  with  the  SEC in  response  to the SEC
       comment  letter  described   above,  the  Company   determined  that  the
       accounting  for VPN  connection  fees was  improperly  reported  in prior
       periods.  The Company had recognized these fees over the installation and
       training period.  In accordance with SAB Topic 13, these fees should have
       been  recorded  over  the  expected  period  of  performance   under  the
       customers' Service Agreement, which, as of December 31, 2006 approximates
       70 months.

       The effect on certain line items to the financial  statements  for fiscal
       year 2006 and 2005, as reported  with the Company's  10-KSB filed on June
       29, 2006, affected by the adjustment to VPN connection fees is identified
       through the "Subsequent Adjustments" line item set forth below.

                                      F-21
<PAGE>

                                                       As of          As of
                                                     03/31/06       03/31/05
         Deferred Tax Asset
              As initially reported                               $5,039,237
              Initial adjustments                                 (4,727,237)
              Subsequent adjustments                                       0
                                                                  ----------
              As amended                                          $  312,000

         Current Portion Deferred
         Contract Revenue
              As initially reported                 $   207,417   $  200,326
              Initial adjustments                             0            0
              Subsequent adjustments                    226,602      325,342
                                                     ----------   ----------
              As amended                            $   434,019   $  525,668

         Long-Term Deferred
         Contract Revenue
              As initially reported                 $         0   $        0
              Initial adjustments                             0            0
              Subsequent adjustments                    287,743      271,376
                                                    -----------   ----------
              As amended                            $   287,743   $  271,376





                                      F-22
<PAGE>

                                                    For the            For the
                                                  Year Ended         Year Ended
                                                    03/31/06         03/31/05
Revenues
     As initially reported                        $ 11,129,798    $  7,254,661
     Initial adjustments                                     0          54,269
     Subsequent adjustments                             82,373          (6,975)
                                                  ------------    ------------
     As amended                                   $ 11,212,171    $  7,301,955

Cost of Sales
     As initially reported                                --      $  4,059,955
     Initial adjustments                                  --           189,910
     Subsequent adjustments                               --                 0
                                                                  ------------
     As amended                                           --      $  4,249,865

Operating Expenses
     As initially reported                                --      $  3,545,418
     Initial adjustments                                  --          (194,450)
     Subsequent adjustments                               --                 0
                                                  ------------    ------------
     As amended                                           --      $  3,350,968

Net Loss Before Tax
     As initially reported                                --      $   (303,865)
     Initial adjustments                                  --            58,809
     Subsequent adjustments                               --                 0
                                                                  ------------
     As amended                                           --      $   (245,056)

Tax Benefit
     As initially reported                                --      $  3,479,237
     Initial adjustments                                  --        (3,326,555)
     Subsequent adjustments                               --                 0
                                                  ------------    ------------
     As amended                                           --      $    152,682

Net Income (Loss)
     As initially reported                        $  2,065,062    $  3,175,372
     Initial adjustments                                  --        (3,267,746)
     Subsequent adjustments                             82,373          (6,976)
                                                  ------------    ------------
     As amended                                   $  2,147,435    $    (99,350)


                                      F-23
<PAGE>


                                                    For the          For the
                                                   Year Ended       Year Ended
                                                    03/31/06         03/31/05

Basic Earnings (Loss) per Share
     As initially reported                        $      0.064    $      0.099
     Initial adjustments                                  --            (0.102)
     Subsequent adjustments                              0.003            --
                                                  ------------    ------------
     As amended                                   $      0.067    $     (0.003)

Diluted Earnings (Loss) per Share
     As initially reported                        $      0.053    $      0.082
     Initial adjustments                                                (0.085)
     Subsequent adjustments                              0.001            --
                                                  ------------    ------------
     As amended                                   $      0.054    $     (0.003)

15.     Earnings per share

        The following is a reconciliation  of the numerators and denominators of
        the basic and diluted EPS computations:

                                                       Year Ended March 31,
                                                       2006           2005

Net Income (Loss)                                 $  2,147,435   $    (99,350)
                                                  ============   ============
Shares used in Basic per Share amounts:
   Weighted average common shares outstanding       32,278,717     31,956,688

Shares used in Diluted per Share amounts:
   Diluted warrants and options                      4,250,434           --
  Dilutive preferred stock                           2,875,000           --
                                                  ------------   ------------
   Dilutive Weighted Average Common Shares
     Outstanding                                    39,404,151     31,956,688
                                                  ============   ============

Basic Net Income (Loss) per Share                 $      0.067   $     (0.003)
                                                  ============   ============

Diluted Net Income (Loss) per Share               $      0.054   $     (0.003)
                                                  ============   ============
Anti-dilutive Weighted Average Common Shares
   Outstanding                                          73,622      4,316,413
                                                  ============   ============

                                      F-24
<PAGE>

16.      Subsequent Events

       On May 10, 2006,  the Company  entered into an agreement with an investor
       relations  firm. In connection  with this  agreement,  the Company issued
       warrants to purchase  100,000 shares of the Company's  restricted  common
       stock in two separate  series of 50,000 warrants each at $0.68 per share.
       The first  series  allows for 6,000  warrants to vest upon the signing of
       the agreement with the remaining shares vesting at 4,000 shares per month
       commencing  on July 1, 2006 until  fully  vested.  The  second  series of
       50,000 shares vest based upon the following contingencies:

              12,500  shares  vest on  September  30,  2006,  provided  that the
              Company's  stock  price has been  quoted at or above  $1.00 at any
              time  during any  particular  day for at least 20 days  during the
              period June 30, 2006 to September 30, 2006.

              12,500  shares  vest on  December  31,  2006,  provided  that  the
              Company's  stock  price has been  quoted at or above  $1.00 at any
              time  during any  particular  day for at least 20 days  during the
              period October 1, 2006 to December 31, 2006.

              12,500 shares vest on March 31, 2007,  provided that the Company's
              stock  price has been  quoted at or above $1.00 at any time during
              any  particular day for at least 20 days during the period January
              1, 2007 to March 31, 2007.

              12,500  shares vest on June 30, 2007,  provided that the Company's
              stock  price has been  quoted at or above $1.00 at any time during
              any particular day for at least 20 days during the period April 1,
              2007 to June 30, 2007.



                                      F-25