SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                                 March 31, 2003

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


                         Commission File Number 0-24372

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

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



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




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

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


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

Name of exchange on which registered: N/A


Securities   registered  under  to  Section  12(g)  of  the 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 $3,072,282.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of June 26, 2003 was $3,672,411.  The number of shares outstanding
of the issuer's common stock, par value $.001 per share, as of June 26, 2003 was
28,435,828 shares, of which 21,602,419 were held by non-affiliates.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  Registrant's  Proxy Statement to be used in connection with the
solicitation  of  proxies  voted at the  Registrant's  2003  Annual  Meeting  of
Shareholders are incorporated by reference in Part III as specified.


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


<PAGE>

<TABLE>
<CAPTION>

                                              Table of Contents


<S>                                                                                                              <C>
PART I............................................................................................................1


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


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


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


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


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


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


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


   Item 7.   Financial Statements................................................................................23


   Item 8. Changes in and Disagreement With Accountants on Accounting and Financial Disclosure...................23


PART III.........................................................................................................23


   Item 9.  Directors,  Executive  Officers,  Promoters  and Control  Persons;
            Compliance  with Section  16(a) of the Exchange Act..................................................23


   Item 10.  Executive Compensation..............................................................................23


   Item 11.   Security Ownership of Certain Beneficial Owners and Management.....................................23


   Item 12.  Certain Relationships and Related Transactions......................................................23


   Item 13.  Exhibits and Reports on Form 8-K....................................................................23


   Item 14.  Controls and Procedures.............................................................................25


   Item 15.  Principal Accountant Fees and Services..............................................................25

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





<PAGE>


                                     PART I

Item 1.   Description of Business

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

Introduction

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

Our Principal Product: The ARKONA Dealer Management Suite

Overview
--------

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

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

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

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

                                       1
<PAGE>

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

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

o Vehicle Sales: The Business Office  application  supports the sales department
and features deal desking, deal contracting,  managing front and back-end gross,
vehicle inventory management,  customer follow-up and prospect management. Under
the deal screen,  real-time  vehicle costs  including  detail for repair orders,
purchase orders and parts invoices, are provided.  Every customer and associated
activity is tracked within all departments of the dealership.

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

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

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

o Parts,  Inventory and Invoicing:  The Parts Inventory & Invoicing  application
supports the parts  department  and features  parts  inquiry,  billing,  special
orders, integrated purchase orders, demand tracking, recommended stock orders, a
physical  inventory  system,  phase-in/phase-out,   factory  parts  information,
comprehensive sales and inventory analysis reporting,  and full integration with
the General Ledger and accounts  receivable.  ADMS includes a paperless  special
order  system  that  makes  parts  ordering  quick and easy.  As with other ADMS
modules,  the Parts,  Inventory & Invoicing  application  includes  analysis and
reporting  capabilities  that make extracting all data in almost any format easy
to do.

o Portfolio Management: The Portfolio Management application integrates with the
business  office and allows the  dealership  to  initiate  and  service  finance
contracts  in the  Buy-here/Pay-here  format.  It  also  includes  tracking  and
reporting  functions that simplify the process of selling financing contracts or
obtaining contract-backed outside financing.

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

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


                                       2
<PAGE>

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

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


Flexibility And Full Package Integration

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

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

         In February 2001, we made ADMS available  using an Application  Service
Provider  (ASP) model in which all principal  functions are performed by servers
located at our  facilities  that can be accessed  from the  dealership by modem,
broadband  or  other  connection.   An  ASP  implementation  has  the  following
advantages over the more traditional approach:
o It significantly reduces cost of entry because of the reduced need to purchase
computers and software.

o It significantly reduces on-going hardware maintenance costs.

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

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

Since we introduced our ASP model,  various  competitors  have introduced or are
proposing to introduce ASP products or Wide Area Network (WAN) products designed
to compete  with an ASP model.  Although we have limited  information  about our
competitors' new products, we believe that our ASP solution continues to give us
a competitive  advantage over the competition  because we can generally offer it
at a lower cost (both start up and monthly) to dealers,  and our design  permits
us to update or enhance functionality more readily than our competitors.

Security

         Our  software  includes   state-of-the-art   on-line  access  security.
Multiple  phases of security  allow an  operator  maintenance,  entry,  inquiry,
report or complete lockout. In addition, our security system allows a dealership


                                       3
<PAGE>

to have one  operator  enter data and  another to  process  it.  With the use of
Virtual Private Network (VPN), transactions pass securely over the Internet from
server to workstation and back again.

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

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

         With the release of our ASP  technology,  we are now looking to provide
our clients with data backup and mirroring services.  This service is offered to
assure 24/7 data  availability  and  recovery  from data  corruption  or natural
disasters. For clients that elect our ASP package, data availability, protection
and recovery is a built-in  feature.  For clients  operating  ADMS in house,  we
offer this  service for a monthly  fee. Our ASP systems are hosted in a physical
environment  that is  operational  24 hours a day, 7 days a week,  has  multiple
fiber  trunks  from  multiple  sources,  backup  generators  and  runs of  fully
redundant hardware, power and ISP connections.  The hosting facility also offers
raised floors and HVAC  temperature  control systems with separate cooling zones
and  seismically  braced  racks.  It  has a wide  range  of  security  features,
including  state-of-the-art smoke detection and fire suppression systems, motion
sensors,  and 24x7  secured  access,  as well as video camera  surveillance  and
security breach alarms.

Our Market and Strategy

Our Market
----------

         Based  upon  information   obtained  from  the  National  Auto  Dealers
Association  (NADA) and executives at major United States automobile  companies,
we believe that:

         o    There are  approximately  22,000  new-automobile  dealerships  and
              approximately   200,000   used-car   or   independent   automobile
              dealerships  in the  United  States;  o 97% of  auto  dealers  use
              computers;

         o    Approximately  18% of  new-automobile  dealerships will upgrade or
              replace their dealer management system in each calendar year.

         o    For   new-automobile   dealerships,   the  average  annual  dealer
              expenditure on information systems is approximately $100,000.

         o    The average new-automobile dealership uses 25 workstations.


Market Opportunity
------------------

         We currently  have our ADMS product  installed with  approximately  282
dealership  in a  market  that  consists  of  22,000  new-automobile  dealership
locations.  Annually,  18% (3900  dealerships)  of the  target  market  replaces
upgrade or add to their  systems,  which creates  tremendous  growth  potential.
There  are  several  defining  market   characteristics   that  present  both  a
significant challenge, and a significant opportunity, for ARKONA.

                                       4
<PAGE>

         Market  domination by older  technology.  Eighty percent of the new-car
automotive  dealerships in the United States use office software provided by one
of two companies-  Reynolds & Reynolds (R&R) and Automatic Data  Processing Inc.
(ADP).  Both of  these  companies  offer  products  based  on  old,  proprietary
technologies.  Our software,  in contrast,  is built on the state-of-the-art IBM
iSeries  (AS400)  platform,  making  it  extremely  flexible  to  implement  and
maintain.  It addition,  our use of IBM's iSeries  platform allows us to embrace
newer computing models such as the ASP or mobile computing models.

         The market  leaders'  solutions  are expensive to install and maintain.
Because the market leaders have captured such a large  percentage of the market,
there is little natural market  pressure to control  pricing.  As a result,  the
prices for office  software  typically paid by dealerships  are extremely  high.
These extremely high prices permit us to offer our ADMS product price at a price
that is consistent with long-term  profitability  but is well below those of R&R
and ADP.

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

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

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

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

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

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

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

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


                                       5
<PAGE>

         In addition  to our direct  marketing  efforts,  and  potentially  more
important  to  us  as  a  company,  is  our  efforts  in  developing   strategic
relationships  with third party suppliers,  automobile  manufacturers  and other
industry  partners.  Currently,  we have  requests  from 9 third  party  service
providers to integrate with ADMS and an additional 34 to draw information off of
our system. We have entered into an agreement with Mitsubishi USA under which we
have been  designated  its dealer  solution of choice,  and we have had periodic
discussions  with  other  automobile   manufacturers  with  respect  to  similar
designations.  Last but  certainly  not least,  we are working with  independent
automobile  dealer  associations on a national and state level to provide a cost
effective solution to their dealers.

         We believe  that the  independent  or used car market  represent a huge
opportunity for the dealer  management  system (DMS) provider that can provide a
fully-integrated DMS at a price that dealers can afford To date, our competition
has been unable to enter this market  because their pricing is too high for used
car  dealers.  We are not plagued  with the same  limitations.  Our ASP offering
allows  us  to  provide   independent,   used-car   automobile  dealers  with  a
full-featured  fully  integrated  DMS at a price that is affordable for them and
profitable for us.

         We have not commenced  actively  marketing our ADMS product to used car
dealers but, through word of mouth referrals, have installed our ADMS product in
approximately  20 used car  dealerships  to date and expect that number to grow.
Until we achieve  profitability,  we expect to  continue  to focus our sales and
marketing resources on the new-car market. We expect,  however, that in the near
future,  we will be able to  begin  diverting  sales  efforts  into the used car
market and believe that we could  reasonably  become a market leader in the used
car DMS marketing in the next few years.

         Another effective  marketing tool is our philosophy and business model.
We believe that we need to earn our customer's business every month. So we don't
lock our dealers into restrictive long-term contracts like our competition.  Our
goal is to ensure that,  when a new dealership  becomes an ARKONA client,  it is
the beginning of a close working  relationship.  It is far less costly to keep a
customer  than to find a new  one.  Following  implementation,  we  continue  to
monitor  our  clients'  experiences  to  assure  that  they  are  using  all the
productivity tools and features built-in the product.  Currently,  we offer free
unlimited  phone  support  between  the hours of 7:00 am and 6:00 pm MST  Monday
through Friday, and on Saturdays from 7:00 am until 2:00 pm.

         As part of our  commitment  to our  clients,  we provide  them  ongoing
training.   Clients  are  given  the  choice  of  detailed   self-help  manuals,
classroom-style  training  offered  at  our  offices,  on-site  training  at the
client's  location  or  training  via the  Internet.  In  addition,  we  provide
Internet-based training using Web-X.

Distribution

         Our ADMS  software  is  presently  distributed  through  our  three man
installation  teams drawn from our 23-person in-house  installation  staff. Each
installation  takes 5-6  man-weeks  of time,  which  generally  is  composed  of
approximately  three weeks of actual data conversion and installation  time, one
week of upfront  on-site  training  and  another  1-2 weeks of follow up on-site
training and trouble shooting. We are in the process of exploring and developing
ways to shorten the amount of time and effort involved in the  installation  and
training process in order to reduce costs and accelerate our rate of growth.

                                       6
<PAGE>

Our Intellectual Property

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

         During the fiscal  year ended  March 31,  2003,  we spent  $635,922  on
company-sponsored  research  and  development,  and during the fiscal year ended
March 31, 2002, we spent $412,994 on company-sponsored research and development.
None of our research efforts to date have been sponsored by customers.

 Competition

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

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

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

         ADP is a large,  international firm with over $7 billion in revenue and
over 500,000 clients in all divisions,  making it one of the largest independent
computing and consulting  firms in the U.S. The Dealership  Systems  Division of
ADP  generates an estimated  $706 million in revenues  from sales to  automotive
dealers.

Install Base:     16,000 Dealerships in U.S and Europe
Hardware:         Proprietary.
Software:         Proprietary - PICK Operating System.

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

                                       7
<PAGE>

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

Reynolds & Reynolds (R&R)

         Reynolds & Reynolds has revenues of  approximately  $992 million with a
major  presence  in several  automotive  market  segments  including  auto parts
wholesale distribution,  automotive jobbers, auto parts retail and services. R&R
also markets electronic parts catalog systems, dealer communications systems and
is the major supplier of custom computer forms for dealer systems.

Install Base:     10,000 Dealerships
Hardware:         Proprietary
Software:         Proprietary

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

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

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

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

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

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

                                       8
<PAGE>

Employees

         As of March 31,  2003,  in  addition  to our five  officers,  we had 38
employees, including 6 computer programmers, 5 marketing and sales employees, 25
installation and support employees, and 2 administrative and clerical employees.
None of our employees is  represented by a collective  bargaining  organization,
and we consider our relationship  with all our employees to be satisfactory.  We
currently have employment agreements with our President, Richard Holland and our
Vice President of Customer Support, Blake Nielson.


History

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

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

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

         At the time of the  asset  purchase,  Ensign  was  installing  its EDMS
product in nine  dealerships per year.  Today, we are installing our DMS product
in seven or more  automobile  dealerships  per month and are optimistic that the
number of installation will continue to grow during the coming year.

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

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

         In 2000,  with new management and an expanded sales force,  we marketed
Universal  Update(TM) to more than 2000 potential customers and repositioned the
technology  in  the  mobile  computing  market.  Nevertheless,  soon  after  the
acquisition  of the Ensign  assets in  November  2000,  in light of the  limited
resources  at our  disposal  and  concerns  over the amount of  additional  work
required to make  Universal  Update(TM) a profitable  endeavor,  our  management


                                       9
<PAGE>

determined to suspend further development and marketing of Universal  Update(TM)
and focus our resources and attention to the automobile  dealership  back office
products  developed by Ensign.  In January  2001, we merged Utah Arkona with and
into the Company,  with the Company  surviving,  in order make the name "Arkona"
available to the Company.

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

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

Certain Risk Factors

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

We have  incurred  substantial  losses since our  inception  and may continue to
incur losses in the future.
--------------------------------------------------------------------------------
         We  acquired  the assets that  generate  all of our revenue in November
2000, and,  accordingly,  our current business has a limited  operating  history
upon  which  an  evaluation  of our  prospects  and us can  be  based.  We  have
experienced  net losses in each  three-month  period  since  inception,  with an
accumulated  deficit  of  approximately  $(22,342,318)  as of  March  31,  2003.
Although  we have  projected  that we will  generate  positive  cash  flow  from
operations  and earn a net profit  during one or more  quarters  during 2003 and
thereafter,  such projections  assume 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.  Assuming
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  expense to increase at a faster
rate  than  expected.  Even if we do  become  profitable,  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 and
fund our operations.
--------------------------------------------------------------------------------
         Although we believe that we have working capital sufficient to meet our
immediate term obligations,  such projection assumes that we will not experience
an unexpected  need for cash and will not  significantly  expand our  operations
through acquisition or otherwise. We do not have a significant cash reserve, and
our cash flow  from  operations  is  presently  approximately  equal to our cash
expenditures. In the event 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 will be available on terms favorable
to us, or at all. If adequate funds are not  available,  or are not available on
acceptable  terms,  our ability to expand our operations,  or to continue normal
operations, may be limited.


                                       10
<PAGE>


Our  accountants  have  included  an  explanatory  paragraph  on  our  financial
statements regarding our status as a "going concern."
--------------------------------------------------------------------------------
         Our consolidated financial statements included in this report have been
prepared  on the  assumption  that we will  continue  as a  going  concern.  Our
independent public accountants have issued their report dated June 30, 2003 that
includes  an  explanatory  paragraph  stating  that  our  recurring  losses  and
accumulated  deficit,  among other  things,  raise  substantial  doubt about our
ability to continue as a going  concern.  Our product line is limited and it has
been necessary to rely upon financing from the sale of our equity  securities to
sustain operations.  Additional  financing may be required if we are to continue
as a going concern.

We may be unable to increase the number of  customers  using our ADMS product or
other future offerings.
--------------------------------------------------------------------------------
         Our Arkona Dealer  Management  Suite product is relatively  new, and we
are  operating in a market where two  competitors  control 80% of the market and
have a significant  advantage relative to market acceptance.  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  achieve  and  maintain
profitability.

Our competitors have greater resources than we do.
--------------------------------------------------------------------------------
         The market for automobile dealership data management software is highly
competitive,  and we must compete with companies that possess greater financial,
technical and marketing  resources than we do. These  advantages may enable them
to respond more quickly to new or emerging  technologies and changes in customer
preferences.  These  advantages  may also allow them to engage in more extensive
research and development,  undertake extensive far-reaching marketing campaigns,
adopt  more  aggressive  pricing  policies  and make more  attractive  offers to
potential  employees and strategic  partners.  As a result,  we may be unable to
obtain a significant  market share in the automobile dealer  management  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.

Our services are subject to system failure and security risks.
--------------------------------------------------------------------------------
         Our operations,  particularly  our ASP product,  are dependent upon our
ability to protect  our  network  infrastructure  against  damage  from  natural
disasters,  such as  fire,  earthquakes  and  floods,  as well  as  power  loss,
telecommunications  failures and similar events. All of our network and computer
equipment,  including  components  critical  to our  operations,  are  currently
concentrated  in  a  co-location  facility  provided  by  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.

                                       11
<PAGE>

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

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

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

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

o    There may be a systemic  failure  of  Internet  communications,  leading to
     claims associated with the general unavailability of 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, and future
performance  will  depend in part upon our  ability to  increase  sales,  manage
growth effectively,  and to retain the services of our management, our technical
staff and sales staff. Competition for management, technical and sales personnel
is intense, and we do not have long-term  employment  agreements with any of our
employees.  As a result, we may be unable to retain our key employees or attract
other highly qualified  employees in the future. The loss of the services of any
of our management,  technical or sales team 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 Arkona Dealer
Management Suite, as critical to our success, and we rely on copyright and trade
secret  protection to protect our proprietary  rights in intellectual  property.
Any of our  intellectual  property  rights  may be  challenged,  invalidated  or
circumvented,  or the rights granted  thereunder may not provide any competitive
advantage.  We could also incur  substantial costs in asserting our intellectual
property  or  proprietary  rights  against  others,  including  any such  rights
obtained from third parties,  and/or  defending any  infringement  suits brought
against us.  Although each of our employees  and  consultants  is asked to enter


                                       12
<PAGE>

into a confidentiality and invention  agreement,  there can be no assurance that
such agreements  will be honored or that we will be able to protect  effectively
our rights to trade secrets and know-how.

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

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

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

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

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

                                       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 be subject to manipulation by one or more shareholders.  In
addition,  the  limited  volume of trading  limits  significantly  the number of
shares that one can purchase or sell in a short period of time. Consequently, an
investor may find it more  difficult to dispose of shares of our common stock or
obtain a fair price for our common stock in the market.

Our founders and officers hold a significant  number of our outstanding  shares,
which  will  allow  them to  influence  the  outcome  of  matters  submitted  to
stockholders for approval.
--------------------------------------------------------------------------------
         Our management owns and has the power to vote  approximately 24% of our
issued and outstanding  common stock.  Three  additional  shareholders  have the
power to vote approximately 15% of our issued and outstanding common stock. As a
result,  these  stockholders  have  substantial  control over matters  requiring
approval by our stockholders,  such as the election of directors and approval of
significant corporate transactions. In addition, this concentration of ownership
may also have the effect of delaying or preventing a change in control.

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

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

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

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

         o    Manipulation   of  our   stock   price  by   existing   or  future
              shareholders;

                                       14
<PAGE>

         o    The  purchase  or sale of a larger  number  of  shares by a single
              shareholder  in a short period of time;

         o    Announcements  by  us  or  competitors  concerning   technological
              innovations,  new  products or  procedures  developed by us or our
              competitors;

         o    The adoption or amendment of governmental  regulations and similar
              developments  in the United  States  and  foreign  countries  that
              affect  our  products  or  markets  specifically  or  our  markets
              generally;

         o    Disputes relating to patents or proprietary rights;

         o    Publicity  regarding  actual  or  potential  results  relating  to
              product candidates under development by us or a competitor;

         o    Slow acceptance of our products in new or existing markets;

         o    A general  lack of trust in the  financial  markets as a result of
              accounting scandals or for other reasons; and

         o    Economic and other external factors,  as well as  period-to-period
              fluctuations in financial results.

Our ability to issue  preferred  stock may  significantly  dilute  ownership and
voting power and negatively affect the price of our common stock.
--------------------------------------------------------------------------------
         Under our Certificate of Incorporation,  as amended,  we are authorized
to issue up to 10,000,000  shares of preferred stock. Our Board of Directors has
the authority to create various  series of preferred  stock with such voting and
other  rights  superior  to those of our  common  stock and to issue  such stock
without shareholder approval. This issuance of such preferred stock would dilute
the ownership and voting power of the holders of our common stock and may have a
negative effect on the price of our common stock.

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

Our  common  stock is a  "low-priced  stock" and  subject to certain  regulatory
action that limits or restricts the market for such stock.
--------------------------------------------------------------------------------
         Shares of our common stock may be deemed to be "penny stock," resulting
in increased  risks to our investors and certain  requirements  being imposed on
some brokers who execute  transactions in our common stock. In general,  a penny
stock is a an equity security that:

         o    Is priced under five dollars;

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

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

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

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

         We believe that our common  stock is presently a "penny  stock." At any
time the common stock  qualifies as a penny stock,  the following  requirements,
among others, will generally apply:

                                       15
<PAGE>

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

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

         o    In connection  with the execution of any  transaction  involving a
              penny  stock,  certain  broker  dealers  must  deliver  to certain
              purchasers the following:

              o    bid and offer price quotes and volume information;

              o    the broker-dealer's compensation for the trade;

              o    the  compensation  received by certain  salespersons  for the
                   trade; o monthly accounts statements; and

              o    a written statement of the customer's financial situation and
                   investment goals.

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

Item 2.  Description of Property

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

Item 3.  Legal Proceedings

         None.

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

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


                                       16
<PAGE>

                                     PART II

Item 5.   Market for Common Equity and Related Stockholder Matters

Market Price

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

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

         Fiscal Year Ended March 31, 2003
         --------------------------------
         Quarter ended June 30, 2002                   $0.60               $0.34
         Quarter ended Sept. 30, 2002                  $0.60               $0.20
         Quarter ended Dec. 31, 2002                   $0.44               $0.16
         Quarter ended March 31, 2003                  $0.26               $0.17

         Fiscal Year Ended March 31, 2004          Low                High
         --------------------------------          ---                ----
         Quarter  ended June 30, 2002
           (through  June 26, 2003)                    $0.21               $0.16

         The quotations  set forth above reflect  inter-dealer  prices,  without
retail  mark-up,  mark  down  or  commission,   and  may  not  represent  actual
transactions.  The last sale price of our common  stock,  as reported on the OTC
Bulletin Board on June 26, 2003 was $0.17 per share.

Outstanding Shares and Number of Shareholders
---------------------------------------------

         As of June 26, 2003, there were approximately  28,435,828 shares of our
common  stock  issued  and  outstanding,  which were held by  approximately  500
holders of record.  We have never issued preferred stock. We have never declared
or paid dividends on any class of our equity securities, and we currently intend
to retain any future  earnings  for use in our  business  and do not  anticipate
paying any dividends on our outstanding common stock in the foreseeable future.

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

         Set forth below is certain information, as of March 31, 2003, about the
number of shares of Common Stock  subject to options,  warrants and other rights
granted,  or that  may be  granted,  under  compensation  plans  adopted  by the
Company.

                                       17
<PAGE>
<TABLE>
<CAPTION>

                                                                                      Number of securities
                                                                                    remaining available for
                              Number of securities to       Weighted-average         future issuance under
                              be issued upon exercise       exercise price of      equity compensation plans
                              of outstanding options,     outstanding options,       (excluding securities
       Plan category            warrants and rights        warrants and rights      reflected in column (a))
---------------------------  -------------------------  -------------------------  --------------------------
<S>                                  <C>                          <C>                      <C>
                                        (a)                        (b)                        (c)
Equity compensation plans
  approved by security
  holders(1)(2)                      2,760,000                    $0.32                    3,335,000

Equity compensation plans
  not approved by security
  holders                               Nil                        Nil                        Nil

Total                                2,760,000                    $0.32                    3,335,000
</TABLE>

         (1) All such options,  warrants and rights represent options,  warrants
and rights granted, or available for grant under our 2001 Stock Incentive Plan.

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

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

         During the  quarter  ended  March 31,  2003,  we  offered  and sold (a)
500,000  shares  of  our  common  stock  to a  single  accredited  investor  and
significant  shareholder at the purchase price of $0.20 per share on January 21,
2003, (b) 250,000 shares of our common stock to a single accredited investor and
significant  shareholder at the purchase price of $0.20 per share on February 7,
2003, and (c) 750,000 shares of our common stock to two accredited investors and
significant  shareholders  at the purchase  price of $0.20 per share on March 3,
2003.  January 21,  2003.  The offer and sale of such shares of our common stock
were effected in reliance  upon the exemption set forth in Rule 506  promulgated
under the  Securities  Act of 1933,  as amended,  and the exemption for sales of
securities not involving a public offering,  as set forth in Section 4(2) of the
Securities Act of 1933, as amended, based upon the following:  (a) the investors
confirmed to us that they were "accredited investors," as defined in Rule 501 of
Regulation  D  promulgated  under the  Securities  Act and had such  background,
education  and  experience  in financial  and business  matters as to be able to
evaluate the merits and risks of an investment in the securities;  (b) there was
no public offering or general  solicitation  with respect to each offering;  (c)
the  investors  were provided  with certain  disclosure  materials and all other
information   requested   with  respect  to  the  Company,   (d)  the  investors
acknowledged  that all securities being purchased were  "restricted  securities"
for purposes of the Securities  Act, and agreed to transfer such securities only


                                       18
<PAGE>

in a transaction registered under the Securities Act or exempt from registration
under the  Securities  Act;  and (e) a legend  was  placed  on the  certificates
representing each such security stating that it was restricted and could only be
transferred if subsequently  registered  under the Securities Act or transferred
in a transaction exempt from registration under the Securities Act.

Item 6.   Management's Discussion and Analysis

Overview

         ARKONA,  Inc.  (formerly  The Thorsden  Group and Sundog  Technologies,
Inc.) was  organized in 1992 as a data base  technology  company with  Universal
Update as its primary product.  Universal Update(TM) allows rapid integration of
business  information  systems  throughout  the  enterprise  and easy sharing of
critical  information with remote,  occasionally  connected workers and partners
around the world.  Prior to 2001,  we  primarily  worked to develop and sell the
Universal Update technology. We have since determined to suspend development and
marketing of Universal Update(TM).

         Following our acquisition of the assets of Ensign Information System in
late 2000,  our focus and direction  has changed from our  Universal  Update(TM)
product and the mobile  computing  industry to our newly acquired  Arkona Dealer
Management Solution (ADMS) and the automobile  dealership  management  industry.
When we acquired  the assets of Ensign,  their  predecessor  to our ADMS product
already  had a  customer  base  and was a  proven  product.  At the  time of the
acquisition,  Ensign had  installed  9 systems  in the prior 12  months.  We are
currently installing on average of 5-6 systems per month.

Results of Operations

         Revenues  for the fiscal  year ended  March 31,  2003 ("FY  2003") were
$3,072,282, compared to $2,338,176 for the fiscal year ended March 31, 2002 ("FY
2002").  This  represents  a 31 percent  increase in revenue over FY 2002 and is
primarily due to increases in our monthly  customer base and recurring  revenue.
In FY 2003,  we  increased  our  recurring  revenue  from  $77,000  per month to
$125,000 per month.  With respect to the first  quarter of the fiscal year ended
March 31,  2004 ("FY  2004"),  we expect to report  that our  recurring  monthly
revenue has  increased  to $160,000 per month.  We expect our monthly  recurring
revenue to exceed $250,000 per month by the end of this fiscal year. In addition
to the growth in our customer base and recurring revenue,  we expect to increase
the  number of  installations  from an  average of 6 per month to 8-10 per month
during  FY  2004.  We  believe  that we can  reach  profitability  this  year by
sustaining our experienced revenue growth. However, we expect our year-over-year
revenue change to increase from the 31 percent  experienced  between FY 2002 and
FY 2003 to approximately 50 % in FY 2004.

         Cost of sales totaled $1,531,706 in FY 2003,  compared to $1,411,893 in
FY 2002.  As a  percentage  of sales cost of sales was 50  percent  for FY 2003,
compared  to 60 percent  of FY 2002.  The  decrease  in cost of sales was due to
efficiencies  obtained in the installation process. For example, in FY 2002, the
average number of man-weeks  required to install an average sized dealership was
seven. In FY 2003, we were able to decrease that to an average of 5-6 man-weeks.
We are  increasing  our efforts in this area to continue this downward  trend to
decrease  the  average  man-weeks  required  to 5 in FY 2004.  One of the  major
factors  in  achieving  the  decrease  in  man-  weeks  in  a  more  experienced
installation  staff.  Another factor is the implementation of process to control
and guide the installation and training efforts. In total, we expect the cost of
sales to increase in FY 2004 as a result of planned growth;  however,  we expect
the cost of sales to decrease as a percentage of sales.

                                       19
<PAGE>

         Operating  expenses  for FY 2003  totaled  $4,596,488  as  compared  to
$7,852,885  for FY 2002.  This  represents  a 41 percent  decrease,  of which 36
percent  resulted from the absence of unearned  compensation  amortization in FY
2003.  The  remaining 5 percent  decrease in operating  expenses  resulted  from
decreases in marketing, general and administrative expenses.

         Research and development  expenses increased  $222,928,  or 53 percent,
from  $412,994  in FY 2002 to  $635,922  in FY  2003.  The  increase  was due to
additions in engineering efforts.  Toward the end of FY 2003 and now in FY 2004,
as  profitability  is nearing,  we are focusing on our  engineering  efforts and
additions to our existing products and the development of new products.  Whether
we purchase, license or joint develop these capabilities,  engineering resources
are used. Because of this focus, we expect  engineering  expenses to increase in
future periods. As a percentage of sales,  engineering  expenses were 17 percent
in FY 2002,  and 13 percent in FY 2003. At the current stage of our company,  we
would like to keep engineering expenses between 15 and 20 percent.

         Marketing, general and administrative expenses totaled $2,428,860 in FY
2003, compared to $3,124,748 in FY 2002,  representing a decrease of $695,888 or
22  percent.  Several  areas  contributed  to  the  decrease.  Depreciation  and
amortization,  a component of  marketing,  general and  administrative  expenses
decreased  approximately  $97,000 in FY 2002.  The decrease was partially due to
certain  assets  becoming  fully  depreciated  in  FY  2003.  In  addition,  the
amortization of Goodwill and Technology  acquired in the Ensign purchase did not
demonstrate  sufficient  impairment to require the same level of amortization as
in prior years. The decrease in marketing,  general and administrative  expenses
also results from a decrease in salaries due to head count decreases, a decrease
travel expenses due to decreased travel, a decrease in professional fees such as
marketing  and  investor   relations  expenses  and  several  other  areas  that
individually are not significant but together are  significant.  As a percentage
of sales, marketing sales and administrative expenses decreased from 133 % in FY
2002 to 79% in FY 2003.

         We also recognized  $2,903,250 of deferred  compensation during FY 2002
as compared with $0 for the year ended March 31, 2003. The deferred compensation
is a result of options  that  vested  during the period  that were  granted at a
price lower than the then market value.

         The net loss for the year  ended FY 2003 was  $1,559,085  (or $0.06 per
share)  compared to a loss of  $5,548,416  (or $0.30 per share) in FY 2002.  The
primary reason for the decrease in the loss is the  amortization of compensation
expenses in FY 2002. Of the $0.30 per share loss in FY 2002, the amortization of
compensation  expense  represented  half or $0.15 of such  loss.  The  remaining
difference  between  last  year and this  year is $0.09 per share is due to a 31
percent,  or $734,106,  increase in revenues and combined  decrease in operating
expenses of 41 percent or $1,087,253.

         We do see dramatic positive changes taking place in almost every aspect
of our business.  Our sales trend is upward.  Our expense trend, as a percentage
of revenues, is downward.

Liquidity and Capital Resources

         At March 31,  2003,  we had cash and cash  equivalents  of $18,307,  as
compared to cash and cash equivalents of $120,290 as of March 31, 2002.

         In  order to meet  operating  costs  during  FY 2003,  we  relied  upon
increased   revenues   in  all   revenue   categories   and  the   issuance   of
4,493,031,shares  of common  stock at an average  price of $0.21 per share to an
executive officer and three accredited outside investors.

                                       20
<PAGE>

         In  an  effort  to  reduce  debt  and  to  meet   operating  cash  flow
requirements,  we raised  $425,000  in the first  quarter  of FY 2004 by selling
425,000  shares of Series B  Convertible  Preferred  Stock  ("Series B Preferred
Shares") at $1.00 per share.  Each Series B Preferred  Share is  convertible  to
five (5)  common  shares  at the  option of the  holder  and  receives  the same
dividends  as common  stock on an as  converted  basis.  The Series B  Preferred
Shares  carry a  liquidation  preference  equal to $1.00  per  share of Series B
Preferred,  plus accrued and unpaid dividends on each share, with the balance of
the proceeds being paid to the 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 Series B Preferred
Shares are  redeemable  with 30 days advance notice at the option of the Company
after June 30,  2008.  Each Series B Preferred  Share has one (1) vote and votes
together as a class with common stock, except that the Series B Preferred Shares
vote alone as a class for (i) any adverse change to the rights,  preferences and
privileges  of the Series B  Preferred,  (ii) any  increase  or  decrease in the
number of authorized Series B Preferred shares.

         Unless and until we become profitable, we will need to raise additional
capital to fund our  operations,  our expansion,  and to develop new and enhance
existing services or products or to respond to competitive  pressures.  In order
to raise such funds, we expect to continue to rely upon the proceeds of sales of
equity securities and convertible notes in the immediate future. During the past
year,  we have sought to obtain  funding from various  sources,  including  many
banks and other  non-affiliated  entities.  Nevertheless,  to date, we have been
unable to secure financing on terms we deem reasonable from unaffiliated funding
sources and have continued to rely upon capital  provided by our Chief Executive
Officer  and a few  other key  investors.  We  intend  to  continue  to seek for
large-block   financing  from  institutional  sources  for  our  short-term  and
long-term  financing.  We have not received any  favorable  proposals  from such
institutional  sources,  however,  and expect,  in the short run, to continue to
rely on  insiders  and key  shareholders  as  long  as  such  financing  remains
available.

         We cannot provide assurance that additional financing will be available
on terms  favorable to us, or at all. If adequate funds are not available or are
not available on acceptable terms, our ability to fund our marketing and planned
product development programs or otherwise respond to competitive  pressures will
be limited. If additional  financing continue to be unavailable over an extended
period of time, we may be unable to continue as a going concern.

         The  following  table  discloses   aggregate   information   about  our
contractual  obligations  including long-term debt,  operating and capital lease
payments and office lease payments, and the periods in which payments are due as
of March 31, 2003:

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------
                                             Less Than                              After 5
Contractual Obligations            Total     1 Year       1-3 years    4-5 Years    Years
-----------------------------   ----------   ----------   ----------   ----------   ----------
<S>                             <C>          <C>          <C>          <C>          <C>
Long-term debt                  $  438,996   $  244,822   $  194,174   $        0   $        0
-----------------------------   ----------   ----------   ----------   ----------   ----------
Operating Leases                   110,187       52,392       53,429            0            0
-----------------------------   ----------   ----------   ----------   ----------   ----------
Capital Leases                      20,784       17,627            0            0
                                                                                        38,411
-----------------------------   ----------   ----------   ----------   ----------   ----------
Office Lease                       573,281      241,793      331,488            0            0
-----------------------------   ==========   ==========   ==========   ==========   ==========
Total Contractual Obligations   $1,160,875   $  559,791   $  601,084   $        0   $        0
----------------------------------------------------------------------------------------------
</TABLE>

Critical Accounting Policies and Estimates

         Management  is basing this  discussion  and  analysis of our  financial
condition and results of operations on our  consolidated  financial  statements.
The preparation of these financial  statements requires us to make estimates and
judgments that affect the reported amounts of assets,  liabilities,  revenue and
expenses,  and related  disclosure of contingent  assets and liabilities.  On an
on-going  basis,  we evaluate our critical  accounting  policies and  estimates,
including   those  related  to  revenue   recognition,   valuation  of  accounts
receivable, property, plant and equipment, long-lived assets, intangible assets,


                                       21
<PAGE>

and contingencies. We base our estimates on historical experience and on various
other assumptions that we believe to be 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 consolidated
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 the Company's future results of operations and cash flows.

         o    Revenue  Recognition.  Revenues  from  continuing  operations  are
              generated from the following  activities:  Software  Maintenance &
              Support,  Consulting  Services  and the Product  Installation  and
              Training. Software maintenance and support are billed on a monthly
              basis and revenues are  recognized  in the month that services are
              rendered.  Consulting  services  revenue is recognized  and billed
              upon  completion of customer  specified  tasks.  Installation  and
              training  services are stipulated and performed in accordance with
              a signed  contract  between the company  and the  customer.  These
              contracts  require  customers  to  pay an  upfront  non-refundable
              deposit which are carried as a liability called Deferred  Contract
              Services  on our  books.  Revenue  is  recognized  throughout  the
              performance  of the contract on a percentage of completion  basis.
              We  currently  sell  limited  amounts of  hardware  to  customers;
              however,  when we do we recognize  the revenue for hardware  sales
              upon delivery.

         o    Valuation  of  Accounts  Receivable.   A  considerable  amount  of
              judgment is required  when we assess the ultimate  realization  of
              receivables, including assessing the probability of collection and
              the current  credit-worthiness of our customers. As an application
              service  provider,  the majority of our  customers  rely on us for
              access to their  accounting  systems  for  day-to-day  operations.
              Because  of  this  dependence,   the  collectibility  of  accounts
              receivable for monthly  maintenance  and software  support is very
              high, as is the collectibility of billings for installation of our
              software and training services associated with the installation of
              our  software.  However,  eventhough  we  have  a high  degree  of
              confidence  in  the  collection  of  our  accounts   receiveables,
              management review thes  collectibility and aging of receivables on
              a monthly basis and make appropriate  adjustments to our allowance
              for doubtful accounts. As a result of our experience and analyses,
              we believe that the current allowance is adequate to cover any bad
              debts and credits that may be issued as of the date of the balance
              sheet.

         o    Equipment.  We utilize  significant amounts equipment in providing
              service to our customers.  We utilize  straight-line  depreciation
              for equipment over our estimate of their useful lives.  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.   We  perform   an  annual   analysis   to   confirm   the
              appropriateness  of  estimated  economic  useful  lives  for  each
              category of equipment.  Estimates and assumptions  used in setting
              depreciable lives require both judgment and estimates.

         o    Goodwill.  We annually evaluate goodwill for potential  impairment
              indicators.   If  impairment   indicators  exist  we  measure  the
              impairment  in accordance  with FASB 142. Our judgments  regarding
              the existence of impairment indicators are based on legal factors,
              market conditions, and operational conditions. Future events could
              cause us to conclude that impairment indicators exist and that the
              goodwill  associated  with  our  acquired  business  is  impaired.
              Goodwill  is no  longer  amortized,  but  instead  is  subject  to
              impairment tests at least annually.

                                       22
<PAGE>

         o    Contingencies.  We are subject to legal  proceedings that arise in
              the  ordinary  course of  business.  We are required to assess the
              likelihood  of any adverse  judgments or outcomes to these matters
              as well as potential ranges of probable losses. A determination of
              the  amount  of  loss   accrual   required,   if  any,  for  these
              contingencies  are made after careful  analysis of each individual
              issue.  We consult  with legal  counsel  and other  experts  where
              necessary  to assess any  contingencies.  A required  accrual  may
              change at some point in the future  due to new  developments  in a
              matter or  changes  in  approach  such as a change  in  settlement
              strategy in dealing with these matters.

Item 7.  Financial Statements

         The Company's  consolidated  financial  statements and associated notes
are set forth following the signature and  certification  pages on pages  number
F-1 - F-15.

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

         None.

                                    PART III

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

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

Item 10. Executive Compensation

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

Item 11. Security Ownership of Certain Beneficial Owners and Management

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

Item 12. Certain Relationships and Related Transactions

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

                                       23
<PAGE>

Item 13. Exhibits and Reports on Form 8-K

         (a) Exhibits.

<TABLE>
<CAPTION>

   Exhibit
    Number                       Title of Document                                  Location
---------------    ----------------------------------------------    ---------------------------------------
<S>                <C>                                               <C>
2.1                Asset  Purchase  and Sale  Agreement  between     Incorporated by reference to the
                   the Company and Ensign Information Systems        Company's Quarterly Report on Form
                                                                     10-QSB filed with the SEC on November
                                                                     14, 2000, File No. 0-24372

2.2                Agreement  and  Plan of  Merger  between  the     Incorporated by reference to the
                   Company and Arkona, Inc. (a Utah corporation)     Company's Quarterly Report on Form
                                                                     10-QSB filed with the SEC on February
                                                                     13, 2001, File No. 0-24372

3.1                Certificate of  Incorporation,  as amended to     Filed herewith
                   date

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

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

10.1               Form  of   Employee   Confidentiality, Work       Incorporated  by  reference  to  the
                   Product and Non-competition Agreement             Company's  Quarterly  Report on Form
                                                                     10-QSB   for   the   quarter   ended
                                                                     December 31, 1997, as amended, filed
                                                                     with  the SEC on May 7,  1998,  File
                                                                     No. 0-24372

10.2               2001 Stock Incentive Plan                         Incorporated  by  reference  to  the
                                                                     Annual  Report on Form 10-K SB filed
                                                                     with the SEC on July 9,  2002,  File
                                                                     No. 0-24372.

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

10.4               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

10.5               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

10.6               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

99.1               Certification of Chief Executive Officer          Filed herewith

99.1               Certification of Chief Financial Officer          Filed herewith
</TABLE>

         (b) Reports on Form 8-K

         The  Company  did not file any  reports on Form 8-K during the  quarter
ended March 31, 2003.

                                       24
<PAGE>

Item 14.  Controls and Procedures

     (a) 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-14(c) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), within 90 days of the filing date of this
report. Based on this evaluation,  our principal executive officer and principal
financial  officer  concluded  that our  disclosure  controls and procedures are
effective in alerting them on a timely basis to material information relating to
our Company (including its consolidated subsidiaries) required to be included in
our reports filed or submitted under the Exchange Act


     (b) There have been no significant  changes  (including  corrective actions
with regard to significant  deficiencies or material weaknesses) in our internal
controls or in other  factors that could  significantly  affect  these  controls
subsequent to the date of the evaluation referenced in paragraph (a) above.

Item 15.  Principal Accountant Fees and Services


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





                                       25
<PAGE>





                                   SIGNATURES
                                   ----------

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

                                            ARKONA, INC.


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

                                            Date:   June 27, 2003
                                                 -----------------------------


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

                    Signature                                      Title                             Date
                    ---------                                      -----                             ----
<S>                                                  <C>                                        <C>
                                                     Chief Executive Officer and                June 27, 2003
           /s/ Alan S. Rudd                          Director (Principal Executive
-----------------------------------                  Officer)
           Alan S. Rudd


           /s/ Richard Holland                       President,   Vice   President   of         June 27, 2003
-----------------------------------                  Engineering and Director
          Richard Holland


          /s/ Stephen Russo                         Chief Financial Officer                    June 27, 2003
------------------------------------                (Principal Financial and
          Stephen Russo                                  Accounting Officer)



          /s/ Bryan Allen                           Director                                   June 27, 2003
-----------------------------------
          Bryan Allen

</TABLE>



                                       26
<PAGE>



                                 CERTIFICATIONS

I, Alan S. Rudd, certify that:

         1. I have reviewed this annual report on Form 10-KSB of Arkona, Inc.;

         2. Based on my  knowledge,  this  annual  report  does not  contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
annual report;

         3. Based on my knowledge, the financial statements, and other financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

                  a) designed such disclosure  controls and procedures to ensure
                  that  material   information   relating  to  the   registrant,
                  including its consolidated  subsidiaries,  is made known to us
                  by others  within  those  entities,  particularly  during  the
                  period in which this annual report is being prepared;

                  b) evaluated the effectiveness of the registrant's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

                  c) presented in this annual report our  conclusions  about the
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the Evaluation Date;

         5. The  registrant's  other  certifying  officers and I have disclosed,
based on our most recent evaluation,  to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

                  a) all significant  deficiencies in the design or operation of
                  internal   controls   which   could   adversely   affect   the
                  registrant's ability to record, process,  summarize and report
                  financial  data  and  have  identified  for  the  registrant's
                  auditors any material weaknesses in internal controls; and

                  b)  any  fraud,   whether  or  not  material,   that  involves
                  management or other  employees who have a significant  role in
                  the registrant's internal controls; and

         6. The registrant's  other certifying  officers and I have indicated in
this annual  report  whether or not there were  significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: June 27, 2003                     /s/ Alan S. Rudd
                                       --------------------------------------
                                       Alan S. Rudd, Chief Executive Officer


                                       27
<PAGE>

I, Stephen L. Russo, certify that:

         1. I have reviewed this annual report on Form 10-KSB of Arkona, Inc.;

         2. Based on my  knowledge,  this  annual  report  does not  contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
annual report;

         3. Based on my knowledge, the financial statements, and other financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

                  a) designed such disclosure  controls and procedures to ensure
                  that  material   information   relating  to  the   registrant,
                  including its consolidated  subsidiaries,  is made known to us
                  by others  within  those  entities,  particularly  during  the
                  period in which this annual report is being prepared;

                  b) evaluated the effectiveness of the registrant's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

                  c) presented in this annual report our  conclusions  about the
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the Evaluation Date;

         5. The  registrant's  other  certifying  officers and I have disclosed,
based on our most recent evaluation,  to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

                  a) all significant  deficiencies in the design or operation of
                  internal   controls   which   could   adversely   affect   the
                  registrant's ability to record, process,  summarize and report
                  financial  data  and  have  identified  for  the  registrant's
                  auditors any material weaknesses in internal controls; and

                  b)  any  fraud,   whether  or  not  material,   that  involves
                  management or other  employees who have a significant  role in
                  the registrant's internal controls; and

         6. The registrant's  other certifying  officers and I have indicated in
this annual  report  whether or not there were  significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: June 27, 2003                     /s/ Stephen L. Russo
                                       -----------------------------------------
                                       Stephen L. Russo, Chief Financial Officer



                                       28
<PAGE>
















                                                   ARKONA, INC.

                                                  March 31, 2003

                                           Independent Auditors' Report
                                                        and
                                               Financial Statements































<PAGE>


<TABLE>
<CAPTION>


                                                   ARKONA, INC.

                                                 TABLE OF CONTENTS

                                                                                                               Page

<S>                                                                                                             <C>
Independent Auditors' Report...................................................................................F-1

Balance Sheet March 31, 2003...................................................................................F-2

Statements of Operations For the Years Ended March 31, 2003 and 2002...........................................F-3

Statements of Stockholders' Equity/(Deficit) For the Years Ended March 31, 2003 and 2002.......................F-4

Statements of Cash Flows For the Years Ended March 31, 2003 and 2002...........................................F-5

Notes to Financial Statements.............................................................................F6 - F15
</TABLE>




<PAGE>

                          Independent Auditors' Report

The Board of Directors and Shareholders
ARKONA, Inc.

We have audited the accompanying  balance sheet of ARKONA, Inc., as of March 31,
2003, and the related statements of operations,  stockholders'  equity, and cash
flows for the years ended March 31, 2003 and 2002.  These  financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of ARKONA,  Inc., as of March 31,
2003,  and the results of operations  and cash flows for the periods ended March
31, 2003 and 2002, in conformity with accounting  principles  generally accepted
in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in Note 10 to the
financial  statements,  the Company has experienced losses from operations since
its  inception and has  significant  negative  cash flow from  operations  which
raises  substantial  doubt about the  ability to  continue  as a going  concern.
Management's plans in regard to these matters are also described in Note 10. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


/s/ MANTYLA McREYNOLDS
------------------------------
MANTYLA McREYNOLDS
Salt Lake City, Utah
June 30, 2003



                                      F-1

<PAGE>

<TABLE>
<CAPTION>

                                                   ARKONA, INC.
                                                   Balance Sheet
                                                  March 31, 2003

 ASSETS
 Current Assets:
<S>                                                                           <C>
   Cash & cash equivalents - Notes 1 & 2                                      $     18,307
   Accounts receivable, net of allowance of $23,946                                 81,749
   Employee advances                                                                21,186
                                                                              ------------
      Total Current Assets                                                         121,242
Property & Equipment, net - Note 6                                                 123,337
Other Assets:
   Deposits - Note 9                                                                13,205
   Goodwill from Ensign purchase (net) - Note 7                                    156,622
    Intangible assets - Note 4                                                     103,505
                                                                              ------------
      Total Other Assets                                                      $    273,332
TOTAL ASSETS                                                                       517,911
                                                                              ============
LIABILITIES & STOCKHOLDERS' EQUITY/(DEFICIT)
Current Liabilities:
   Accounts payable                                                           $    347,289
   Accrued liabilities                                                             244,040
   Deferred revenue                                                                172,433
   Current portion long-term debt - Note 5                                          69,322
                                                                              ------------
      Total Current Liabilities                                                    833,084
Long-Term Liabilities:
    Long-term notes payable - Note 16                                              152,174
    Note payable -related parties - Note 13                                        286,822
    Less current portion long-term debt                                            (69,322)
                                                                              ------------
      Total Long-Term Liabilities                                                  369,674
                                                                              ------------
         Total Liabilities                                                       1,202,758
Stockholders' Deficit - Notes 8, 11, 13-14
    Preferred stock, $.001 par value; authorized 10,000,000 shares; issued
    and outstanding -0- shares                                                           0
    Common stock, $.001 par value; authorized 50,000,000 shares; issued and
    outstanding 28,435,828                                                          28,436
    Additional paid-in capital                                                  21,645,977
    Accumulated unrealized losses on investments                                   (16,942)
    Deficit accumulated during the development stage                           (22,342,318)
                                                                              ------------
      Total Stockholders' Deficit                                                 (684,847)
                                                                              ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                   $    517,911
                                                                              ============
</TABLE>

                 See accompanying notes to financial statements





                                      F-2
<PAGE>




                                  ARKONA, INC.
                            Statements of Operations
                   For the Years Ended March 31, 2003 and 2002

                                                2003            2002
                                            ------------    ------------

Revenues                                    $  3,072,282    $  2,338,176
Cost of Sales                                  1,531,706       1,411,893
Research and development                         635,922         412,994
Marketing, general and administrative          2,428,860       3,124,748
Amortization of unearned compensation                  0       2,903,250
        Total operating expenses               4,596,488       7,852,885
        Net Income/(Loss) from Operations     (1,524,206)     (5,514,709)
Other Income/(Expense):
     Other income                                      1               3
     Interest expense                            (34,880)        (33,710)
                                            ------------    ------------
        Total Other Income/(Expense)             (34,879)        (33,707)
                                            ------------    ------------
Net Income/(Loss) Before Taxes                (1,559,085)     (5,548,416)
        Income taxes                                   0               0
Net Income/(Loss)                           $ (1,559,085)   $ (5,548,416)
                                            ============    ============
Basic and diluted net loss per share        $      (0.06)   $      (0.30)
                                            ------------    ------------
Weighted average number shares                26,122,740      18,575,326
                                            ============    ============

                 See accompanying notes to financial statements


                                      F-3

<PAGE>


                                  ARKONA, INC.
                  Statements of Stockholders' Equity/(Deficit)
                   For the Years Ended March 31, 2003 and 2002
<TABLE>
<CAPTION>


                                                               Addit'l        Accum       Unearned       Accum          Total
                                   Shares         Common       Paid-in     unrealized     Compen-       Loss Devel   Stockholders'
                                   Issued         Stock        Capital        Loss        sation          Stage         Deficit
                                -------------- ------------- ------------- ------------ ------------- ------------- --------------
<S>                                <C>               <C>       <C>            <C>        <C>          <C>                   <C>
Balance, March 31, 2001            14,408,912        14,409    18,322,868     (15,532)   (2,903,250)  (15,234,817)          183,678
Issued shares for cash at
$0.19 per share                     3,845,130         3,845       726,729        --            --            --             730,574
Issued shares for cash at
$0.25 per share                     2,701,110         2,701       672,299        --            --            --             675,000
Issued shares for cash at
$0.22 per share                        90,909            91        19,909        --            --            --              20,000
Issued shares for cash at
$0.26 per share                       384,615           385        99,615        --            --            --             100,000
Issued shares for cash at
$0.30 per share                       316,667           317        94,683        --            --            --              95,000
Issued shares for cash at
$0.33 per share                     1,862,122         1,862       612,638        --            --            --             614,500
Issued shares for cash at
$0.44 per share                       100,000           100        43,900        --            --            --              44,000
Issued shares for cash at
$0.60 per share                       133,333           133        79,867        --            --            --              80,000
Adjustment to realized loss
on investments                           --            --            --        (1,410)         --            --              (1,410)
Compensation expense for
stock options granted                    --            --            --          --       2,903,250          --           2,903,250
Net Loss for the twelve
months ended March 31, 2002              --            --            --          --            --      (5,548,416)       (5,548,416)
                                -------------- ------------- ------------- ------------ ------------- -------------  -------------
Balance, March 31, 2002            23,842,798        23,843    20,672,508     (16,942)             0  (20,783,233)         (103,824)
Issued shares for cash at
$0.30 per share                       200,000           200        59,800        --            --            --              60,000
Issued shares from warrants
for cash at $0.33 per share           303,030           303        99,697        --            --            --             100,000
Issued shares for cash at
$0.20 per share                     3,890,000         3,890       774,110        --            --            --             778,000
Issued shares for debt at
$0.20 per share                       200,000           200        39,862        --            --            --              40,062
Net loss for the twelve
months ended March 31, 2003              --            --            --          --            --      (1,559,085)       (1,559,085)
                                -------------- ------------- ------------- ------------ ------------- ------------- --------------
Balance, March 31, 2003            28,435,828  $   28,436    $21,645,977   $  (16,942)  $          0  $(22,342,318)  $     (684,847)
                                ============== ============= ============= ============ ============= ============= ==============
</TABLE>


                 See accompanying notes to financial statements




                                      F-4
<PAGE>

<TABLE>
<CAPTION>
                                                   ARKONA, INC.
                                             Statements of Cash Flows
                                    For the Years Ended March 31, 2003 and 2002

                                                                    2003            2002
                                                                -----------    -----------
<S>                                                             <C>            <C>
Cash Flows Provided by/(Used for) Operating Activities
Net Income/(Loss)                                               $(1,559,085)   $(5,548,416)
Adjustments to reconcile net income to net cash
provided  by  operating activities:
   Depreciation and amortization                                    124,166        384,214
   Bad debt expense                                                  17,939          6,008
   Amortization of stock options                                          0      2,903,250
   Decrease (increase) in prepaid expenses                            4,574         10,787
   Decrease (increase) in accounts receivable                        73,376       (110,033)
   Increase (decrease)in accounts payable                            85,977         59,991
   Increase in deferred revenue                                      63,683        (65,903)
   Increase in accrued liabilities                                   33,656        168,180
                                                                -----------    -----------
         Net Cash Provided by/(used for) Operating Activities    (1,155,714)    (2,191,922)
Cash Flows Provided by/(Used for) Investing Activities
   Acquisition of property and equipment                            (25,332)       (56,985)
                                                                -----------    -----------
                Net Cash Used for Investing Activities              (25,332)       (56,985)
Cash Flows Provided by/(Used for) Financing Activities
Principal increase (decrease) on notes payable                      141,002        (25,098)
Proceeds from issuance of stock                                     938,062      2,359,074
                                                                -----------    -----------
          Net Cash Provided by (Used for)Financing Activities     1,079,063      2,333,976
                                                                -----------    -----------
                    Net Increase/(Decrease) in Cash                (101,983)        85,069
Beginning Cash Balance                                              120,290         35,221
                                                                -----------    -----------
Ending Cash (bank overdraft) Balance                            $    18,307    $   120,290
                                                                ===========    ===========
Supplemental Disclosure Information:
   Cash paid for interest                                       $    34,880    $    33,710
   Cash paid for income/franchise taxes                         $     1,831    $     2,419
   Issued stock for debt                                        $    40,062    $         0
</TABLE>

                 See accompanying notes to financial statements



                                      F-5
<PAGE>


                                  ARKONA, INC.
                          Notes to Financial Statements
                                 March 31, 2003

Note 1      Organization and Summary of Significant Accounting Policies

            (a)  Organization

            ARKONA,  Inc. [the Company] was  originally  incorporated  under the
            laws of the State of Delaware in 1992 as The Thorsden  Group,  Ltd.,
            for the purpose of seeking and acquiring business opportunities.  In
            October  1997,  the  Company  merged  with  Arkona,   Inc.,  a  Utah
            corporation  (formerly Arkona, LLC), in a reverse triangular merger,
            accounted for as a purchase.  After the merger and until November 1,
            2000,   the  Company   continued  the  business  of  Arkona,   Inc.;
            developing,   marketing,   and  selling   software   products  which
            incrementally and automatically  update database content,  reference
            documents,  and enterprise  applications  required by  organizations
            with   distributed    business   centers,    field    professionals,
            telecommuters,  partners,  and  customers.  On  March  25,  1999 the
            Company  changed its name to Sundog  Technologies,  Inc.,  effective
            June 10, 1999.

            On February 22, 2001 the Company changed its name to ARKONA, Inc. On
            November 1, 2000 the Company purchased  substantially all the assets
            of Ensign  Information  System including its intellectual  property.
            Shortly  after the Ensign  purchase the Company  turned its business
            focus to the revenue  generating  products acquired from Ensign. The
            ultimate  success of the Company will be dependent on its ability to
            adequately fund, develop and market its products.

            (b)  Income Taxes

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

            (c)  Net Loss Per Common Share

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

                                      F-6
<PAGE>
                                  ARKONA, INC.
                          Notes to Financial Statements
                                 March 31, 2003


Note 1      Organization   and  Summary  of  Significant   Accounting   Policies
            [continued]

            (d)  Cash & Cash Equivalents

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

            (e) Use of Estimates in Preparation of Financial Statements

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

             (f)  Revenue Recognition

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

            (g)  Patents

            The Company has obtained  various patents for certain aspects of its
            products. The costs of obtaining patents are capitalized as incurred
            and are  amortized  over  estimated  useful lives.  Amortization  is
            computed on the straight-line  method. One patent has been issued as
            of March 31, 2003, and is being amortized over seven years (see Note
            4).

                                      F-7
<PAGE>
                                  ARKONA, INC.
                          Notes to Financial Statements
                                 March 31, 2003


            (h)  Investment in Marketable Securities

Note 1      Organization   and  Summary  of  Significant   Accounting   Policies
            [continued]

            Investments in marketable  securities are  "available-for-sale"  and
            are  recorded at fair market  value with the  associated  adjustment
            recorded as an unrealized gain or loss. The unrealized loss is based
            on the original cost of the securities  verses current market value.
            As of March 31, 2003 there are no marketable securities of the books
            of the Company.

            (i)  Software Costs

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

            (j)  Advertising Costs

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

Note 2      Concentration

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

            The Company  maintains  cash  balances  in a  financial  institution
            located in Salt Lake City,  Utah.  Accounts at this  institution are
            insured by the Federal Deposit Insurance Corporation up to $100,000.
            As of March  31,  2003,  the  Company  had no cash in  excess of the
            insured amount at this institution.

Note 3      Income Taxes

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

                                      F-8
<PAGE>
                                  ARKONA, INC.
                          Notes to Financial Statements
                                 March 31, 2003

Note 3     Income Taxes [continued]
<TABLE>
<CAPTION>

         Deferred tax items                              Balance           Tax           Rate
         -----------------------------------------------------------------------------------------
<S>                                                   <C>             <C>                 <C>
           Loss carryforward (expires through 2023)   $ 18,760,975    $  7,316,780        39%
           Stock Compensation                         $  7,546,250    $  2,943,038        39%
                                                                      ------------
           Valuation allowance                                        ($10,259,818)
                                                                      ------------
            Deferred tax asset                                        $          0
                                                                      ============
</TABLE>

            The allowance has increased $608,043 from $9,651,775 as of March 31,
            2002.  For the years  ending March 31, 2003 and 2002 the Company had
            no  significant  income tax expense or  liability as a result of net
            operating  losses  incurred.   Currently,  there  is  no  reasonable
            assurance  that  the  Company  will be able  to  take  advantage  of
            deferred  tax  assets,   thus,  an  offsetting  allowance  has  been
            established for the deferred asset.

Note 4      Intangible Assets

            The Company has applied and been granted  patent  protection for its
            proprietary  technology relating to Universal Update. The patent was
            granted on December 7, 1999. Since that time the Company has applied
            and received additional  protection for its patent.  Amortization of
            cost began on December 7, 1999. Amortization expense for each of the
            years ended March 31, 2003 and 2002 was $7,760.  Unamortized  patent
            costs,  related to continuing  operations,  as of March 31, 2003, is
            $27,085.

            As part of the Ensign  asset  acquisition,  see note 7, the  Company
            acquired  rights to technology.  The original cost of the technology
            was  being  amortized  on a  straight  line  basis  over two  years.
            However,  because of the  adoption and  application  of FAS 142, the
            Company  determined  that the asset does not have a determined  life
            and the  asset  will no  longer  be  amortized  but  will be  tested
            annually to  determine if  impairment  has  occurred.  Based on this
            analysis,  the Company has  recorded no  impairment  charges for the
            year ending March 31,  2002.  The current book value of the asset is
            $76,420.

Note 5      Leases

            The Company has various capital lease agreements collateralized with
            property  and  equipment  as of March 31,  2003.  These  leases bear
            interest at various  interest rates and have remaining terms of less
            than one year.  The  amount  due and  maturing  throughout  the next
            fiscal year is $38,411.

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

                                      F-9
<PAGE>
                                  ARKONA, INC.
                          Notes to Financial Statements
                                 March 31, 2003

Note 5      Leases [continued]

                                               Minimum
                  Year Ending                  Lease Payments
                  3/31/2004                            241,793
                  3/31/2005                            247,632
                  3/31/2006                             83,853
                                               ---------------
                  Total                               $809,052

            Rent expense  during the year was $244,170 for 2003 and $211,592 for
2002.

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

Note 6      Property and Equipment

            Property and equipment are  summarized by major  classifications  as
follows:
<TABLE>
<CAPTION>

                   Asset Class                                 Accumulated          Net
                                                 Cost           Depr/Amort         Book       Method/Life
        ------------------------------------------------------------------------------------------------------
<S>                                                 <C>             <C>              <C>         <C>
        Office Furniture                            $72,520         ($47,772)        $24,748  SL/5
        Computer Software                            63,001          (59,541)          3,460  SL/3
        Computer Equipment                          442,197         (371,520)         70,677  SL/3
        Leasehold Improvements                       54,763          (30,311)         24,452  SL/5
                                            ---------------- ----------------- --------------
             Total                                 $632,481        ($509,144)       $123,337
                                            ================ ================= ==============
</TABLE>

            The Company acquired  approximately  $119,674 in computer  equipment
            financed through capital leases. Depreciation expense, including the
            amortization  of assets  acquired  by  capital  lease,  amounted  to
            $116,406  and  $119,198  during the years  ended  March 31, 2003 and
            2002, respectively.

Note 7      Ensign Goodwill

            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. The Company structured
            the acquisition to be non-dilutive to shareholders. In order to make
            the transaction non-dilutive, the Company purchased from certain key
            shareholders 1,740,250 shares of outstanding common stock at a price
            of $0.02 per share.

Note 7      Ensign Goodwill [continued]

            With the  acquisition of Ensign,  the Company  recorded  Goodwill of
            $313,244.  Through fiscal year March 2002, the Company had amortized
            $156,622,  or approximately  half of the original book balance.  The
            Company has adopted FASB 142,  Goodwill and Other Intangible  Assets
            for FY2003.  This statement  eliminates the amortization of goodwill
            and  requires  the  Company  to  test  the  asset,   annually,   for
            impairment.   Based  on   management's   analysis  and  testing  for
            impairment,  no  adjustment  is needed for the year ending March 31,
            2003.

                                      F-10
<PAGE>
                                  ARKONA, INC.
                          Notes to Financial Statements
                                 March 31, 2003


Note 8      Private Placement Memorandum/Stock Issuances

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

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

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

            During the fiscal year ended  March 31,  2003,  the  Company  issued
            4,393,030 shares of common stock for cash proceeds of $938,000 at an
            average price of approximately  $0.21 per share in transactions that
            were exempt from registration under the Securities Act.

            During fiscal 2003, the Company sold shares of common stock for cash
            to six (6)  qualified  investors;  one  investor  purchased  200,000
            shares of common  stock  for $0.30 per share or  $60,000,  the other
            investors  purchased  3,890,000 shares of common stock for $0.20 per
            share, or $778,000.

                                      F-11
<PAGE>

                                  ARKONA, INC.
                          Notes to Financial Statements
                                 March 31, 2003


Note 8      Private Placement Memorandum/Stock Issuances [continued]

            On June 20, 2002,  303,031  warrants to purchase  303,031  shares of
            common stock were  exercised  at $0.33 per share for $100,000  cash.
            The proceeds were used to pay operating expenses.

            The Company  has issued  200,000  shares of common  stock as partial
            settlement of debt related to consulting  services.  The shares were
            recorded at $0.20 per share,  which approximates the market value on
            the date of issuance.  The  issuance of these shares was  registered
            under the Securities Act of 1933, as amended.

Note 9      Deposits

            In conjunction with its facility lease obligations,  the Company has
            placed a security  deposit  with its  landlord.  The deposit  totals
            $13,205 for office space as of March 31, 2003.

Note 10     Going Concern

            The Company has  incurred  losses from  inception  to March 31, 2003
            amounting to $22,342,318. Financing the Company's activities to date
            has primarily been the result of private  placement  offerings.  The
            Company's ability to achieve a level of profitable operations and/or
            additional  financing  may impact its  ability to  continue as it is
            presently   organized.   Management  is  expanding   operations  and
            anticipates reaching a level of profitable operations. To the extent
            that cash flow  requirements  are not met by operations,  management
            intends  to  raise  additional  capital  through  private  placement
            offerings.

Note 11     Stock Option Plans

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

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

            All options  granted under the 1992 and 1999 stock option plans have
            expired, been cancelled or been converted into options granted under
            the 2001 plan except for 115,000 options granted under the 1999 plan


                                      F-12
<PAGE>
                                  ARKONA, INC.
                    Notes to Financial Statements [continued]
                                 March 31, 2003

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

            Through March 31, 2003,  there were outstanding a total of 2,445,000
            stock  options to purchase  Company  common stock  granted under the
            2001 Plan,  all of which have an exercise  price of $0.30 per share.
            Options  granted  under the 2001 plan vest over a one to three  year
            period.  Of the options  granted  under the 2001 plan,  583,965 have
            vested as of March 31, 2003.

Note 11     Stock Option Plans [continued]

            Compensation  cost for stock  options is measured as the excess,  if
            any, of the estimated  fair market value of the  Company's  stock at
            the date of grant over the amount the recipient  must pay to acquire
            the stock.  Unearned  compensation,  which is recorded as a separate
            component of stockholders' equity, as a result of compensatory stock
            options is generally  amortized to expense over the vesting  periods
            of the  underlying  stock options.  The amount  amortized to expense
            through  March  31,  2003  was  $5,309,137.   Unearned  compensation
            represents the intrinsic  value of stock options granted but not yet
            vested.  The Company has no  unearned  compensation  as of March 31,
            2003.

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

            Information  on  stock  options  outstanding  at March  31,  2003 is
summarized as follows:
<TABLE>
<CAPTION>
                                   Number of
           Range of exercise        Options         Average      Weighted Average        Number          Weighted
                prices              Granted      Remaining Life   Exercise Price      Exercisable     Average Price
           -----------------     --------------- --------------- ------------------ ----------------- ---------------
<S>        <C>                        <C>           <C>          <C>                       <C>        <C>
           $          0.30            2,445,000     105 mos      $            0.30         2,275,965  $         0.30
           $          1.00              115,000      5 mos       $            1.00           115,000  $         1.00
                                 --------------- --------------- ------------------ ----------------- ---------------
                                      2,560,000                  $            0.33         2,390,965  $         0.33
</TABLE>

Note 12     401K Profit Sharing Plan

            The Company has an employee  benefit  program  consisting  of a 401K
            Profit  Sharing  Plan.  The 401K  Plan  provides  for  employees  to
            contribute  on a  pretax  basis,  employer  matching,  and  a  broad
            portfolio of  investment  options  within the plan to be selected by
            the employee.  Employer matching  contributions are made at the sole


                                      F-13
<PAGE>
                                  ARKONA, INC.
                    Notes to Financial Statements [continued]
                                 March 31, 2003

            discretion of management.  Profit sharing expense  recognized  under
            this plan was  $28,789 and $3,568 for the years ended March 31, 2003
            and 2002, respectively.

Note 13     Related Party Transactions/Stock Options

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

            The  Company  has  accrued  unpaid   compensation  to  officers  and
            employees  in the  amount of  $117,937.  The  balance  is payable on
            demand, is unsecured and non-interest bearing.

            Two shareholders  have advanced funds to the Company to provide cash
            flow in the amount of $276,822.  These  advances are  unsecured  and
            bear interest at 12%. The notes  provide for  conversion to stock at
            the option of the holder.  Another  shareholder has advanced $10,000
            to the Company to provide cash flow.  This advance is also unsecured
            and bears interest at 12%, but is not convertible to stock.

Note 14     Preferred Stock Rights

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

                                      F-14
<PAGE>

                                  ARKONA, INC.
                    Notes to Financial Statements [continued]
                                 March 31, 2003

Note 14     Preferred Stock Rights [continued]

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

Note 15  Subsequent Events

            In an  effort  to  reduce  debt  and to  meet  operating  cash  flow
            requirements,  the Company raised $425,000 by selling 425,000 shares
            of Series B  Preferred  shares at $1.00 per  share.  Each  preferred
            share is  convertible to five (5) common shares at the option of the
            preferred shareholder.

            Each share of Series B Preferred  shares receives the same dividends
            as common stock on an as converted basis.

            Series B Preferred  shares carry a liquidation  preference  equal to
            the price per share of Series B  Preferred,  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, Series B Preferred shares are redeemable with 30 days advance
            notice at the option of the Company after June 30, 2008.

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

Note 16   Notes Payable

            The Company has  restructured  three accounts  payable to be paid as
            long-term notes payable.  Approximately $58,000 is being paid at the
            rate of $3,000 per month over 20 months.  The remaining  amount will
            likely be paid through the issuance of common stock. As discussed in
            Note 8, the Company has issued  100,000  shares thus far,  valued at
            $20,000.

                                      F-15