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

                               Amendment No. 1 on
                                  FORM 10-KSB/A

[x]  Annual report under section 13 or 15(d) of the  Securities  Exchange Act of
     1934 for the fiscal year ended March 31, 2005

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


                         Commission File Number 0-24372

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

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



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


                         10575 South River Front Parkway
                                    Suite 400
                            South Jordan, Utah 84095
               (Address of principal executive offices) (Zip Code)

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

Name of exchange on which registered:                     None

Securities registered under Section 12(b) of the Act:     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 $7,254,661.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of June 1, 2005 was $12,438,790.  The number of shares outstanding
of the issuer's common stock,  par value $.001 per share, as of June 1, 2005 was
32,169,670 shares, of which 22,615,983 were held by  non-affiliates.  The market
price of the common stock as of June 1, 2005 was $0.55 per share.

                       DOCUMENTS INCORPORATED BY REFERENCE

None.


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





                                Table of Contents


EXPLANATORY NOTE.............................................................1

PART I.......................................................................2


Item 1.  Description of Business.............................................2


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.....................................................................17


Item 5.   Market for Common Equity and Related Stockholder Matters..........17


Item 6.   Management's Discussion and Analysis..............................17


Item 7.  Financial Statements...............................................24


Item 8.  Changes In and Disagreements With Accountants
         on Accounting and Financial Disclosure.............................24


Item 8A.  Controls and Procedures...........................................24


Item 8B.  Other Information.................................................25

PART III....................................................................26


Item 9.    Directors, Executive Officers, Promoters
           and Control Persons; Compliance with Section 16(a)
           of the Exchange Act..............................................26


Item 10.  Executive Compensation............................................31


Item 11. Security Ownership of Certain Beneficial Owners
         and Management and Related Stockholder Matters.....................34


Item 12.  Certain Relationships and Related Transactions....................37


Item 13.  Exhibits..........................................................39


Item 14.   Principal Accountant Fees and Services...........................40


Restated Financial Statements..............................................F-1


<PAGE>



                                EXPLANATORY NOTE

         This   Amendment  No.  1  to  Annual  Report  on  Form  10-KSB/A  (this
"Amendment")  is being filed by Arkona,  Inc. (the  "Company") in order to amend
and restate its Annual Report on Form 10-KSB for the fiscal year ended March 31,
2005 filed with the SEC on July 14, 2005 (the "Form 10-KSB").
         This  Amendment  is being  filed  primarily  in order to amend "Item 7.
Financial  Statements" in order to correct the error in the financial statements
of the Company for the years ended March 31, 2005 and March 31, 2004 reported in
the Form 8-K filed by Arkona,  Inc.  on October 24,  2005.  The Company has also
amended  "Item 6.  Management's  Discussion  and  Analysis"  which contain cross
references  to the  financials  statements,  in order  to  correct  those  cross
references and related  explanations  of accounting  policies and other matters.
The Company has also  amended  "Item 8A.  Controls and  Procedures"  in order to
modify the determinations set forth therein.
         The  remainder  of the Form 10-KSB is being  restated  in its  original
form, with immaterial corrections of "nits" in order to facilitate delivery of a
single,  integrated document to the Company's shareholders in connection with an
upcoming shareholders meeting.

                           Forward Looking Statements

         This  Annual   Report  on  Form   10-KSB   (this   "Report")   contains
forward-looking  statements  within the meaning of Section 27A of the Securities
Act  of  1933,  as  amended  (the  "Securities  Act"),  and  Section  21E of the
Securities  Exchange  Act  of  1934,  as  amended  (the  "Exchange  Act").  Such
statements  can be  identified  by the  use of  forward-looking  words  such  as
"anticipate,"  "estimate," "project," "likely," "believe," "intend," "expect" or
similar words.  These statements relate to our, and, in some cases, our clients'
or business partners',  future plans, objectives,  expectations,  intentions and
financial  performance and the assumptions that underlie these  statements.  All
forward-looking  statements  included  in this  Report  are  made as of the date
hereof,  based on information  available to us as of such date, and we assume no
obligation to update any forward-looking statement. It is important to note that
such  statements  may not prove to be accurate  and that our actual  results and
future events will differ, and could differ  materially,  from those anticipated
in such statements.  Among the factors that could cause actual results to differ
materially  from the Company's  expectations  are those described under "Item 1.
Description of Business - Certain Risk Factors."  Readers are also encouraged to
review our other filings with the Securities and Exchange Commission (the "SEC")
describing  other  factors that may affect our future  results.  All  subsequent
written and oral forward-looking statements attributable to us or persons acting
on our behalf are  expressly  qualified  in their  entirety by this  section and
other factors included elsewhere in this Report.

                                      -1-
<PAGE>

                                     PART I

Item 1.  Description of Business

Overview

         Arkona,  Inc. ("we,"  "Arkona" or the "Company")  develops and licenses
management   software   for   automobile   dealerships.   Because  of  operating
similarities  with  automobile  dealerships,  we  also  license  our  management
software  to a few marine and RV  dealerships,  and we are seeking to expand our
presence among dealers of power sports  equipment  (such as  motorcycles,  ATVs,
snowmobiles and watercraft).

         The Company's  most important  product is its Arkona Dealer  Management
Suite  (the  "ADMS").  The  ADMS  software  is  a  fully  integrated  dealership
management  software system that allows dealerships to manage  substantially all
aspects of their business  operations.  It is a modular  system,  which makes it
scalable for different  types and sizes of  dealerships.  A key advantage of the
ADMS software is its ability to run on an Application  Service  Provider ("ASP")
model.  Under an ASP model,  the software  provider  runs software and maintains
data at central locations, and customers use the software over the Internet. The
ASP model may  significantly  reduce upfront and ongoing  hardware costs for the
dealership because the significant processing is done on computers maintained at
offsite  locations by the Company.  The dealership needs only standard  personal
computers with reliable Internet access.  The ASP model may also reduce the need
for technical  computer  personnel because the software and related hardware are
managed by the Company at an offsite location. The ADMS software integrates with
many of the major automobile  manufacturers,  and the Company  continues to seek
cooperation from the other manufacturers to integrate with their systems.

         The Company  provides  training to  employees  of the  dealerships  who
purchase the ADMS software license,  and for a monthly fee, provides  additional
technical support and regular software updates.

         The Company is expanding its target  market beyond new and  independent
car dealerships to power sports  equipment  dealerships.  We market our products
primarily through regional sales  representatives,  in-house sales and marketing
personnel and  independent  sales agents.  The Company also markets its products
via  trade  shows,  seminars,   press  releases,   customer  referral  programs,
relationships with suppliers, automobile manufacturers and industry partners, as
well as, advertisements in trade publications.

Products and Services

         The Arkona Dealer Management Suite
         ----------------------------------

         The Company's  main product is the ADMS.  The ADMS is a software  suite
that allows automobile,  marine, RV and power sports dealerships to automate and
effectively  manage all aspects of their business  operations,  including sales,
accounting, parts, service, and financing functions.

                                      -2-
<PAGE>

         The ADMS  software uses a highly  integrated,  modular  structure  that
allows  management  decisions to be made based on information  from a variety of
areas  within the  dealership's  business.  For  example,  the ADMS sales module
provides  management and the sales  department  with real-time  vehicle-specific
cost information in order to facilitate price negotiations and, if the potential
customer has previously done business with the dealership,  provides information
regarding that customer's previous purchases,  use of the service department and
other  associated  activity.  The ADMS service  module  includes an  appointment
system that facilitates order writing and technician  analysis and automatically
integrates with accounting in order to produce and track invoices.  If parts are
drawn from  inventory in  connection  with a repair,  the ADMS service and parts
modules  can  be  set  to  automatically  order  a  replacement  part  from  the
manufacturer or merely to make  recommendations  when the inventory of a certain
part or product is low.  These and other  functions  work  together  in order to
integrate,  automate,  and  streamline  the various  functions of an  automobile
dealership.

         The ADMS  software's  modular  structure  allows a dealership to choose
only the  modules  it  needs at the time  while  retaining  the  ability  to add
additional  modules in the future.  The modular  structure  also permits  custom
programming,  or updating,  of a particular  function  without the need to alter
other  functions  or modules.  This  permits the Company to customize a software
system to meet the needs of particular dealerships.

         Another key  advantage  of the ADMS  software is its ability to operate
using an ASP model.  Under an ASP model,  we can run software and maintain  data
offsite, while customers use the software and access or manipulate data over the
Internet. Application of the ASP model can significantly reduce most upfront and
ongoing  hardware  and  operating  system costs for the  dealership  because the
significant  processing is done on computers  maintained at an offsite location.
The dealership uses only basic personal computers with reliable Internet access,
while the Company handles (and pays for) day-to-day  maintenance and upgrades at
the offsite location. The ASP model may also allow an ADMS licensee to avoid the
expense of having its own technical personnel.

         We believe the ADMS software and the ASP system are highly reliable and
secure. The ADMS software uses password  administration  features that allow the
dealership to establish  access levels for different  users.  The dealership can
restrict or give access to each of the key  elements of the  software  including
system  maintenance,  data  entry,  inquiry,  and  report  generation.  The ADMS
software  has built-in  recovery  systems so that if a system  fails,  it can be
restarted,  and the system will remember where it left off and continue  running
from that point. The Company uses Virtual Private Network ("VPN")  technology to
protect data  transmission  over the Internet.  A VPN is a private network built
atop a public  network.  Hosts within the private network use encryption to talk
to other hosts;  the  encryption  is intended to exclude  hosts from outside the
private  network  even if they are on the public  network.  We maintain  the ASP
system at a hosting  facility with multiple fiber trunks from multiple  sources,
backup generators,  fully redundant  hardware,  power and Internet  connections,
climate control systems,  seismically braced rack systems, and security and fire
detection and suppression systems.

                                      -3-
<PAGE>

         Dealer-Manufacturer Communications
         ----------------------------------

         The Company's ADMS software  integrates with the systems of many of the
major  automobile  manufacturers.  An important  element of a dealer  management
system is its ability to integrate a dealership's  system with a  manufacturer's
system - for example, the ability of a Ford dealership's system to integrate and
communicate with Ford Motor Company's  system.  The ability of the dealership to
integrate and share  information about warranty service claims,  parts,  vehicle
orders,  and  other  similar  information  with  the  manufacturer  can save the
dealership and the  manufacturer  thousands of dollars a month.  The Company has
dedicated  substantial  resources to making its ADMS software integrate with the
systems  of  many of the  major  automobile  manufacturers.  The  ADMS  software
currently  integrates  with the systems of Ford,  Lincoln-Mercury,  GMC,  Buick,
Chevrolet,  Pontiac,  Cadillac, Hummer, Dodge, Chrysler, Jeep, BMW, MINI, Honda,
Acura,  Suzuki,  Mitsubishi,  Mazda,  Isuzu,  Subaru and BMW Motorcycles.  Major
automobile  manufacturers  with which the  Company's  system does not  integrate
include  Toyota,   Nissan,   Volvo,  Lexus,   Infinity,   Jaguar,  Range  Rover,
Mercedes-Benz, Saab, Hyundai, Porsche, and VW-Audi.

         Stand Alone Products
         --------------------

         In connection with the ADMS software,  we develop stand-alone products,
including  bar  coding.  Bar  coding  is an  important  supplement  to a  dealer
management  system  because it assists the  dealership in managing their vehicle
inventories.  The  Company  has  developed  a bar coding  system for the vehicle
inventory  module and the parts and service module that  significantly  improves
the time and cost involved with maintaining vehicle and parts inventories.

         Training and Support Services; Consulting
         -----------------------------------------

         The Company provides  training and customer support  services.  This is
important to dealerships  because employee  turnover and growth creates the need
for ongoing  training on ADMS.  The Company  also  provides  detailed  self-help
manuals, classroom training, onsite training, and training over the Internet.

         For a  monthly  fee,  the  Company  provides  unlimited  technical  and
customer   support  for  the  ADMS   product.   The  Company  is  developing  an
Internet-based   support  system  that  will  have  pre-recorded,   step-by-step
instructions for frequently requested tasks. The Company expects that the system
will be available during the second quarter of fiscal year 2006.

         The Company also provides  limited  custom  programming  and consulting
services. Our programming and consulting fees are based on the scope of services
provided.

         Installation
         ------------

         Installation  of the ADMS software at a dealership is typically done by
a three person  installation  team. A typical  installation  is completed over a
three to four week  period.  The  Company  also sells  installation  hardware in
connection with the installation of the ADMS software.

                                      -4-
<PAGE>

Markets

         Potential  customers  include new and independent car  dealerships,  as
well as,  dealers  of RV,  marine  and  power  sports  equipment.  The  National
Automobile  Dealers  Association (the "NADA") estimates there are 22,200 new car
dealerships in the United States and over 60,000 independent car dealerships. It
also  estimates   there  are   approximately   6,000  dealers  of  power  sports
(motorcycle, ATV, watercraft/sport boats and snowmobiles) equipment.

         Automobile Dealership Market
         ----------------------------

         The Company believes the automobile  dealership  market is evolving and
moving  toward using more  technology  in the  management  of their  businesses.
Automobile  dealers  are  consistently   trying  to  reduce  costs  and  improve
efficiency through the use of information  technology.  The Company's perception
is that,  for the most part,  automobile  dealers  have lagged  behind in taking
advantage of technology for their information systems. The Company believes that
an increasing number of automobile dealers,  wanting to improve customer service
and support, are looking to improve their information technology.

         The NADA has identified  several  significant  trends in the retail car
and truck  environment  that the Company  believes will pressure dealers to look
for ways to better manage their business. Those trends include the following:

     o   Pressure on profit margins in all  departments is expected to encourage
         dealers  to  improve  management   procedures,   marketing  skills  and
         performance in every department.  Reliable,  timely information will be
         important in that process.

     o   The increasing geographical  concentration of automobile dealerships is
         reducing profit margins and pressuring dealers to increase volume.

     o   Improvements   in  product   quality  and  extended   warranties   have
         significantly reduced the required service for vehicles,  which reduces
         an important source of revenue for automobile dealers.

     o   The growth of competing  service  providers (such as Jiffy-Lube,  Midas
         Mufflers,  Brake-O, etc.) is putting pressure on automobile dealerships
         to operate their service  departments  as  efficiently  as possible and
         with an increased emphasis on customer satisfaction.

     o   Automobile   manufacturers   are  demanding  more  control  over  their
         marketing  channels in an effort to manage  customer  satisfaction  and
         volume.  This effort includes  increasing  reporting  requirements  for
         dealerships, increasing involvement in maintaining physical facilities,
         more  communication  between  manufacturers  and  dealerships  and  the
         integrating of computer systems of dealerships and manufacturers.

                                      -5-
<PAGE>

     o   The  increase  in  dealership  groups  and  corresponding  decrease  in
         independent dealerships.

         We believe these trends have favorable  implications for the Company as
a provider of a low-cost  dealership  management  system that enables  extensive
manufacturer-dealer communication.

         Power Sports Market
         -------------------

         The power sports  market is estimated to be an $18 billion  industry in
the U.S. It consists of new and used motorcycles,  ATV's,  personal  watercraft,
and  snowmobiles,  as well as, parts,  accessories  and mechanical and financial
services related to these products.

         Over the past five years,  the industry has grown an average of 15% per
annum. The industry is highly fragmented.  For example, of the approximate 6,000
franchised motorcycle dealerships, most are individually owned.

         Many of the power  sports  dealership  owners  are  motorcycle,  ATV or
snowmobile  enthusiasts with minimal business  training.  The largest dealership
group  generated  revenues of  approximately  $100 million in 2005, or less than
1.0% of total industry sales.

         The  Company is  encouraged  by its  initial  research,  marketing  and
selling to the power sports  market.  Many of the power sports dealers that have
already  purchased  the ADMS  software  indicate  that  they  like  the  product
features,  attractive pricing, and technical  expertise.  The Company intends to
enhance its product offering during the coming year to incorporate  power sports
specific capabilities.

         Marine and RV Markets
         ---------------------

         We have licensed the ADMS software to a few marine and RV  dealerships.
Such   dealerships  are  able  to  use  the  software   because  of  operational
similarities with automobile dealerships. The Company has not commenced, and has
not plans to commence,  any active  marketing  initiatives or extensive  product
customization for the marine and RV markets.

ompetition

         Automobile Market
         -----------------

         According   to  a  2003  market   study  by  the  NADA,   conducted  by
Friedman-Swift  Associates,  the market for automobile dealer management systems
is dominated by two major players - ADP Dealer  Services  ("ADP") and Reynolds &
Reynolds  ("Reynolds").  According to NADA,  ADP and Reynolds  together  control
about 71% of the market for automobile dealer management systems.  Approximately
10 providers, including Arkona, compete for the remaining 30% of the market.

         ADP and Reynolds are large, well-financed organizations; they have good
brand name  recognition.  Their systems  integrate with all the major automobile
manufacturers.  Their market dominance also creates  significant hurdles because


                                      -6-
<PAGE>

many  dealerships are hesitant to abandon their existing systems and switch to a
new system provided by a smaller company with limited  resources.  Their ability
to integrate their systems with all the major automobile manufacturers is highly
appealing to large  automobile  dealerships  selling cars from most of the major
automobile  manufacturers and especially  automobile  manufacturers with systems
with which the ADMS software cannot yet integrate.  However,  the price of ADP's
and  Reynolds'  dealer  systems is generally  much higher than our price for the
ADMS, and the Company believes that ADP and Reynolds  products  generally do not
reflect recent  technological  developments,  including the ability to run on an
ASP model.  The  Company's  success in  competing  with ADP and  Reynolds in the
market for independent car dealerships supports this belief.

         Power Sports Market
         -------------------

         The following  companies sell dealer management  systems into the power
sports market: Comptron, ProQuest Powersports,  MIC, ARI Networks, C Systems and
Shoptech.  Of these competitors,  ProQuest  Powersports (a subsidiary of ADP) is
the most widely used. ProQuest Powersport's  Lightspeed product has an estimated
over 80% market penetration. Based upon conversations with power sports dealers,
the Company  believes  that  ProQuest is  experiencing  a lot of  push-back  and
dissatisfaction   from  dealerships   because  of  their  pricing  and  business
practices. This opens the door for the Company to win market share by delivering
more value for less money.

Intellectual Property

         The  Company  believes  its  intellectual  property  is critical to its
success. The Company relies on common law copyright,  trademark and trade secret
protection to protect its intellectual  property. We have not formally patented,
copyrighted  or  registered  any  of our  intellectual  property.  However,  all
employees involved in software development are asked to sign confidentiality and
invention  rights  agreements.  There is a risk that the Company's  intellectual
property could be  challenged,  invalidated  or  circumvented,  that it could be
deemed to infringe on third-party intellectual property or that it could fail to
provide a competitive advantage in the future.

         The Company spent $1,099,469 and $858,735 during the fiscal years ended
March  31,  2005 and  2004,  respectively,  on  company-sponsored  research  and
development activities.

Employees

         As of March 31, 2005, the Company had 78 full-time employees consisting
of 5 corporate  officers,  12 sales and marketing  representatives,  11 computer
engineers  and  programmers,   47  installation  and  support   technicians  and
employees,  and 3 administrative and clerical  employees.  None of the Company's
employees are represented by a collective bargaining organization.

                                      -7-
<PAGE>

Corporate History

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

Certain Risk Factors

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

         The Company has incurred substantial losses since its inception and may
         incur losses in the future.
         -----------------------------------------------------------------------
         The Company has  recognized net income during the years ended March 31,
2005 and 2004.  Prior to that, the Company  experienced  losses as it progressed
through its development  stage.  The Company will continue to be profitable only
if it can add new  customers  at a constant or  increased  rate,  while  keeping
increases in costs and  operating  expenses  below  increases  in revenues.  The
Company  may not be able to  continue  to add new  customers  and may even  lose
customers.  Assuming the Company continues to grow,  revenues,  related costs of
operations such as labor and benefits,  server and other capital equipment costs
and  other  expenses  could  increase  disproportionately,  or the  Company  may
experience  unexpected  costs related to  litigation,  insurance,  acquisitions,
product  development,  financing or other items that may cause costs to increase
at a faster  than  expected  rate.  The  Company  may not be able to increase or
maintain profitability in the future.

         The Company may require additional  capital to continue  development of
         products and fund operations.
         -----------------------------------------------------------------------
         The Company does not have a significant  cash  reserve,  and cash flows
from operations are  approximately  equal to cash  expenditures.  If the Company
experiences  an  unexpected  need  for  cash,  expands  its  operations  in  any
significant  way or otherwise  needs  additional  cash,  it would expect to rely
primarily  on the offer  and sale of  convertible  notes,  warrants  and  equity
securities to obtain cash. If financing is needed,  additional financing may not
be available on favorable terms, or at all. If adequate funds are not available,
or are not available on acceptable  terms, the Company's  ability to continue or
expand its operations may be limited.

                                      -8-
<PAGE>

         The Company may be unable to increase the number of customers using its
         Arkona Dealer Management Suite product or other future products.
         -----------------------------------------------------------------------
         The ADMS  product is  relatively  new to the market and the  Company is
operating  in  a  market  where  two  competitors  (ADP  and  Reynolds)  control
approximately  71% 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 the ADMS product is subject to the
risk that  end-users  may decide not to  purchase  the ADMS  product at the rate
projected  because  of the  Company's  insignificant  position  in  the  market,
concerns over the  Company's  ability to continue as a going  concern,  concerns
about the  Company's  products,  cost cutting by  competitors  or various  other
reasons.  If the Company is unable to increase its installation base of the ADMS
product  in  the  future,   it  is  unlikely  that  the  Company  will  maintain
profitability.

         The Company's competitors have greater resources than the Company does.
         -----------------------------------------------------------------------
         The market for  automobile  dealership  management  software  is highly
competitive,  and the Company must compete with companies  that possess  greater
financial,  technical and marketing resources.  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,  the Company may be
unable to obtain a significant  market share in the automobile dealer management
systems business.  In addition,  competition may result in the Company suffering
price  reductions,  reduced  gross  margins and even loss of market  share.  The
Company may not be able to compete  successfully,  and competitive pressures may
adversely affect results of operations and overall financial condition.

         Software products tend to evolve rapidly and the Company's  competitors
         may develop products that are technically superior.
         -----------------------------------------------------------------------
         The Company's  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 the
Company  continually  improves the performance,  features and reliability of its
software,  particularly in response to competitive offerings by other companies.
The  Company  may  not  be  able  to  respond  quickly,   cost  effectively  and
sufficiently to meet these developments.

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

         Developments by others may render some or all of the Company's products
or potential product offerings  uncompetitive or obsolete.  The Company competes
with a number of entities that are currently  developing and producing  software
products that compete with the Company's current and proposed products.  Many of
these competitors have  substantially  greater capital  resources,  research and


                                      -9-
<PAGE>

development capabilities,  and production and marketing resources,  capabilities
and experience than the Company has available.  These competitors may succeed in
developing  products  that are more  effective  or less costly than any products
that the Company may develop, or that gain market acceptance prior to any of the
Company's products, making market penetration more difficult.

         The  Company's  services  are subject to system  failure  and  security
         risks.
         -----------------------------------------------------------------------
         The Company's  operations,  particularly its ASP network, are dependent
upon the Company's ability to protect its network  infrastructure against damage
from natural disasters,  such as fire, earthquakes and floods, as well as, power
loss,  telecommunications  failures, Internet system hackers and similar events.
All of the  Company's  network  and  computer  equipment,  including  components
critical to operations,  are currently  concentrated  in a co-location  facility
provided by MCI. The  occurrence  of a natural  disaster or other  unanticipated
system or power failure could cause  interruptions in the services provided.  In
addition,   failure  of   telecommunications   providers  to  provide  the  data
communications  capacity required as a result of natural disasters,  bankruptcy,
operational disruptions or for any other reason could cause interruptions in the
services provided. Any damage or failure that causes interruptions in operations
could  have a  material  adverse  effect on the  Company's  business,  financial
condition and results of operations.

         The  Company's  ASP network is subject to factors that could also cause
interruptions  in service or reduced capacity for the Company's  customers.  The
core of the Company's  network  infrastructure  is  vulnerable  to  unauthorized
access,  computer  viruses,  equipment  failure and other  disruptive  problems,
including the following:

     o   End 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 the Company's and customers'  computer  systems,
         which may result in liability to customers and also may deter potential
         customers.

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

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

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

          The occurrence of any unauthorized access,  computer virus,  equipment
failure  or other  disruptive  problem  could lead to a  substantial  decline in
customer  confidence  and  liability  to  customers.  This would have a material
adverse affect on the Company's business,  financial condition and/or results of
operations.

                                      -10-
<PAGE>

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

         The  Company  relies on its  intellectual  property  rights  and if the
         Company  is unable  to  protect  these  rights,  it may face  increased
         competition and the business may be materially adversely affected.
         -----------------------------------------------------------------------
         The Company regards its intellectual property,  particularly its Arkona
Dealer  Management Suite, as critical to its success and it relies on common law
to  protect  its  proprietary  rights  in  intellectual  property.  Any  of  its
intellectual property rights may be challenged,  invalidated or circumvented, or
the rights granted  thereunder may not provide any  competitive  advantage.  The
Company  could  also  incur  substantial  costs in  asserting  its  intellectual
property  or  proprietary  rights  against  others,  including  any such  rights
obtained from third parties,  and/or defending any infringement suits.  Although
each of the  Company's  employees  and  consultants  is asked  to  enter  into a
confidentiality and invention agreement,  such agreements may not be honored and
the Company may not be able to  effectively  protect its rights to trade secrets
and  know-how.  In  addition,  others may  independently  develop  substantially
equivalent  proprietary  information  and techniques or otherwise gain access to
the Company's trade secrets and know-how.

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

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

                                      -11-
<PAGE>

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

     o   redesign  products or services that incorporate  disputed  intellectual
         property; or

     o   pay monetary damages to the holder of the intellectual property right.


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

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

         The Company may be subject to claims  based upon  allegations  that its
         products are defective.
         -----------------------------------------------------------------------
         The Company's  products include programs  designed for mission critical
applications,  creating the risk that the failure or malfunction of its products
may  result in  serious  damage or loss and  expose  the  Company to a claim for
damages.  Although  contract terms purport to limit  exposure,  a court may rule
those  terms to be invalid or  unenforceable,  and changes in the law may render
those  terms void or  unenforceable.  A  successful  claim could have a material
adverse effect on the Company's operations.  Furthermore,  the cost of defending
against a claim, even successfully,  could be material and could have an adverse
effect on the  Company's  results of  operations  and an  adverse  effect on the
marketing of the Company's products.

         Trading in the  Company's  common stock is thin and there is a limit to
         its liquidity.
         -----------------------------------------------------------------------
         The  Company's  common stock is quoted on the OTC Bulletin  Board.  The
volume of trading in the Company's  common stock is limited and likely dominated
by a few  individuals.  Because of the thinness of the market for the stock, its
price may be subject to manipulation. In addition, the limited volume of trading
limits  significantly  the number of shares that can be  purchased  or sold in a
short period of time.  Consequently,  an investor may find it more  difficult to
dispose of shares of the  Company's  common stock or obtain a fair price for the
stock in the market.

         The  Company's   executive   officers  hold  a  significant  number  of
         outstanding  shares,  which may allow them to influence  the outcome of
         matters submitted to stockholders for approval.
         -----------------------------------------------------------------------


                                      -12-
<PAGE>

         As of March 31, 2005, the Company's executive officers own and have the
power to vote approximately 23% of the issued and outstanding common stock. Five
additional  shareholders have the power to vote  approximately 15% of the issued
and outstanding  common stock. As a result,  these stockholders have substantial
control over matters requiring  approval,  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.

         The  Company's  shareholder  rights plan and certain  provisions in the
         Delaware  corporate law may permit the Company's  Board of Directors to
         block a takeover attempt and adversely affect the common stock value.
         -----------------------------------------------------------------------
         The Company's Board of Directors adopted a shareholder  rights plan and
declared a dividend of an associate right, which are intended to have the effect
of deterring any takeover of the Company that is not preceded by board  approval
of the proposed  transaction.  The existence of a shareholders'  rights plan may
deter  potential   tender  offers  for  the  Company's  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 that  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.
         -----------------------------------------------------------------------
         The  Company  may  raise  additional  funds in the  future  by  issuing
additional  shares of common stock,  or  securities  that are  convertible  into
common stock, such as convertible notes,  options,  warrants or preferred stock.
Any such sale of common stock or other  securities will lead to further dilution
of the equity ownership of existing holders of the Company's common stock.

         The Company's stock price is volatile and subject to manipulation.
         -----------------------------------------------------------------------
         The  market  price of the  Company's  common  stock,  like  that of the
securities of other small public  companies,  may be highly volatile.  The stock
price may change  dramatically as the result of various  factors,  including the
following:

     o   Manipulation of the stock price by existing or future shareholders.

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

                                      -13-
<PAGE>

     o   Short selling of the common stock in the United States or overseas.

     o   Announcements  by the Company or competitors  concerning  technological
         innovations, new products or new procedures.

     o   The adoption or amendment of  governmental  regulations  and/or similar
         developments in the United States and/or foreign  countries that affect
         the Company's products or markets specifically or markets generally.

     o   Disputes relating to proprietary rights.

     o   Publicity  regarding  actual or potential  results  relating to product
         candidates under development by the Company or a competitor.

     o   Slow acceptance of the Company's 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.

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

         The Company's ability to issue preferred stock may significantly dilute
         ownership  and  voting  power and  negatively  affect  the price of the
         common stock.
         -----------------------------------------------------------------------
         Under the  certificate  of  incorporation,  as amended,  the Company is
authorized to issue up to 10,000,000  shares of preferred  stock.  The Company's
Board of Directors has the authority to create various series of preferred stock
with such voting and other  rights  superior to those of the common stock and to
issue such stock without shareholder  approval.  This issuance of such preferred
stock may dilute the  ownership  and voting  power of the  holders of the common
stock and may have a negative effect on the price of the common stock.

         The Company  has not  declared  any  dividends  with  respect to common
         stock.
         -----------------------------------------------------------------------
         The  Company has never paid cash  dividends  on its common  stock.  The
Company  intends to retain  earnings,  if any,  to  finance  the  operation  and
expansion of the  business  and,  therefore,  the Company does not expect to pay
cash dividends on shares of common stock in the foreseeable future.

         The  Company's  common  stock is a  "low-priced  stock" and  subject to
         regulations that limit or restrict the market for the stock.
         -----------------------------------------------------------------------
         Shares of the Company's common stock may be deemed to be "penny stock,"
resulting in increased risks to investors and certain requirements being imposed
on some brokers who execute  transactions  in the common  stock.  In general,  a
penny stock is an equity security that:

                                      -14-
<PAGE>

     o   Is priced below 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.

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

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

         The  Company  believes  that its  common  stock is  presently  a "penny
stock."  At any time that the  common  stock  qualifies  as a penny  stock,  the
following requirements, among others, will generally apply:

     o   Certain broker-dealers who recommend penny stocks 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, a purchaser  should provide a written  statement  presenting the
         purchaser's  financial  situation  and  investment  goals,  and 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 related to the trade.

         o    The compensation received by certain salespersons for the trade.

         o    Monthly statements related to the account.

                                      -15-
<PAGE>

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

Item 2.  Description of Property

         The Company  does not own any real  property.  It  currently  leases an
11,800 square foot facility  located at 10542 South Jordan  Gateway,  Suite 200,
South  Jordan,   Utah,  84005.  The  Company  conducts  all  of  its  corporate,
administrative,  and research and development  activities at this facility.  The
lease of the facility will expire July 31, 2005,  and monthly lease payments are
$21,616 per month.

         The Company entered into a certain Office Lease (the "New Lease") for a
facility  located at 10757 South River Front  Parkway,  Suite 400, South Jordan,
Utah,   84095.   The  Company   intends  to  conduct   all  of  its   corporate,
administrative,  and  research  and  development  activities  within  the leased
premises.

         The New Lease is for five (5) years commencing on August 1, 2005 unless
the landlord has not fulfilled its construction obligations. Rental payments for
each month are as follows:  $38,115.85 (first year),  $39,157.27  (second year),
$40,198.68 (third year),  $41,240.10  (fourth year) and $42,281.52 (fifth year).
In  addition,  the  Company is  required  to pay a pro rata  share of  operating
expenses for the property.

         The new facility is under  construction  by the landlord who is fitting
the building in accordance with our  specifications.  The landlord is paying for
the  construction.  The new  facility  will provide  sufficient  space for us to
continue all of our activities for the foreseeable future.

         In the opinion of  management,  the  property  leased by the Company is
adequately covered by insurance.

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 the high and low bid  quotations  for the
Company's  common stock as reported on the OTC  Bulletin  Board.  The  Company's
common stock is traded on the OTC Bulletin Board under the symbol ARKN.OB.

                                                    High           Low
                                                    ----           ---
         Fiscal Year Ended March 31, 2005
         --------------------------------
            Quarter ended June 30, 2004             $0.71         $0.58
            Quarter ended Sept. 30, 2004            $0.68         $0.39
            Quarter ended Dec. 31, 2004             $0.65         $0.40
            Quarter ended March 31, 2005            $0.72         $0.57

         Fiscal Year Ended March 31, 2004
         --------------------------------
            Quarter ended June 30, 2003             $0.21         $0.16
            Quarter ended Sept. 30, 2003            $0.85         $0.10
            Quarter ended Dec. 31, 2003             $0.83         $0.53
            Quarter ended March 31, 2004            $0.80         $0.53

         The quotations  set forth above reflect  inter-dealer  prices,  without
retail  mark-up,   mark-down  or  commission,   and  may  not  represent  actual
transactions.

Outstanding Shares and Number of Shareholders

         As of March 31,  2005,  there were  32,169,670  shares of common  stock
issued and outstanding,  which were held by approximately 400 holders of record.
In addition,  as of that date, there were issued and outstanding  575,000 shares
of Series B  Convertible  preferred  stock  (convertible  into an  aggregate  of
2,875,000  shares of common stock) which were held by 13 holders of record.  The
Company has never declared or paid dividends on any class of equity  securities,
and the Company  currently  intends to retain any future earnings for use in the
Company's business and do not anticipate paying any dividends on its outstanding
common stock in the foreseeable future.

Recent Sales of Unregistered Securities

         Not applicable.

Item 6.   Management's Discussion and Analysis

         The  following  discussion  should  be read  in  conjunction  with  our
Restated  Financial  Statements  and Notes  thereto  included  elsewhere in this
Report. This discussion contains  forward-looking  statements that involve risks
and  uncertainties.  Any  statements  in this  report  about  our  expectations,


                                      -17-
<PAGE>

beliefs, plans, objectives,  assumptions or future events or performance are not
historical  facts and are  forward-looking  statements.  You can identify  these
forward-looking  statements  by the use of words or phrases  such as  "believe,"
"could," "may,"  "anticipate,"  "intend,"  "expect," "will," "plan," "estimate,"
"continue,"  "should" or  "would".  Among the  factors  that could cause  actual
results  to  differ  materially  from  those  indicated  in the  forward-looking
statements  are risks and  uncertainties  inherent  in our  business  including,
without  limitation,  the discussions set forth under the caption  "Certain Risk
Factors."

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

Overview

         We develop and sell management software for automobile dealerships. The
operating   similarities   between  automobile,   marine,  RV  and  power  sport
dealerships  makes  our  software  attractive  to  marine,  RV and  power  sport
dealerships as well.

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

         The market for automobile dealer management systems is dominated by two
major players: Automatic Data Processing, Inc. ("ADP") and Reynolds and Reynolds
("Reynolds").  According  to a 2003 market  study by the NADA,  ADP and Reynolds
together  control  about 71% of the  market  for  automobile  dealer  management
systems. ADP and Reynolds are large, well-financed organizations. They have good
brand name recognition and their systems integrate with all the major automobile
manufacturers.  Their market dominance creates significant barriers to entry for
us because many  dealerships are hesitant to abandon their existing  systems and
switch to a new system  provided by a smaller  company with  limited  resources.


                                      -18-
<PAGE>

However, we presently offer a system that is technologically superior at a price
that is substantially lower than the standard pricing of both ADP and Reynolds.

         The  Company's  revenues  continue to grow at a rapid rate,  increasing
35.6%  between the fiscal year ended March 31, 2004 ("fiscal year 2004") and the
fiscal year ended March 31, 2005 ("fiscal year 2005"),  after  increasing  74.1%
between the fiscal year ended  March 31,  2003  ("fiscal  year 2003") and fiscal
year 2004. The Company earns more than half its revenues from recurring  support
and maintenance. These recurring revenues continue to grow at a rate of 3% to 4%
monthly and provide future stability for the Company's financial performance.

         During the last two quarters of fiscal year 2005, the Company  invested
in additional  sales,  engineering and  installation  support staff, in order to
adequately prepare for the expected growth in business in fiscal year 2006. As a
result of this  investment,  the Company  suffered a net loss before  income tax
benefit for the year ended March 31, 2005 of  ($303,865).  It was  necessary  to
make  this  investment  early,  in order to allow  for the  proper  training  of
personnel and for the adequate development and upgrading of software products.

Results of Operations for the Fiscal Years Ended March 31, 2005 and 2004

         Revenues - Revenues increased  $1,904,308 to $7,254,661 for fiscal year
2005 or 35.6% over fiscal year 2004.  For fiscal year 2004,  revenues  increased
$2,278,071 to $5,350,353,  or 74.1% over fiscal year 2003.  These  increases are
due to the Company's success in replacing existing competitors' systems with the
ADMS.

         For fiscal year 2005, revenues from recurring monthly technical support
& maintenance increased $1,613,489 to $3,993,073 or 67.8% over fiscal year 2004.
For fiscal  year 2004,  revenues  from  recurring  monthly  technical  support &
maintenance  increased  $1,012,742 to $2,379,584 or 74.1% over fiscal year 2003.
These  increases  in  revenues  from  recurring   monthly  technical  support  &
maintenance  are  due to the  continuing  monthly  increase  in the  size of the
Company's installed customer base, as well as, the Company allowing customers to
decrease  front-end  installation  charges in return for larger monthly  support
charges.   Customer   technical  support  &  maintenance   contracts  are  on  a
month-to-month  basis.  Customers have the right to cancel these services at any
time,  without  penalty.  For the month of March 2005,  revenue  from  recurring
monthly  technical  support &  maintenance  was  approximately  $387,500  and is
expected to grow  approximately 3% to 4% per month throughout  fiscal year 2006,
as the installed customer base continues to grow.

           For fiscal year 2005,  revenues from ADMS  installation  and training
services  increased  $206,105 to $2,880,146  or 7.7% over fiscal year 2004.  For
fiscal year 2004,  revenues from  installation and training  services  increased
$1,159,101  to  $2,674,041  or 76.5% over  fiscal year 2003.  The  smaller  than
expected   increase  in  installation  and  training  services  revenue  is  due
primarily,  as noted  above,  to the  Company  allowing  customers  to  decrease
front-end installation charges in return for larger monthly support charges. The
Company's  customer base grew from 195 installed  customers as of March 31, 2004
to 280  installed  customers as of March 31, 2005.  (A single  customer may have
multiple  dealerships).  The  Company  believes  it will  continue  to grow  its
customer base through the replacement of competitors'  systems and  installation
into new dealerships.  Additionally,  installations  are expected to increase as
the Company grows its business to power sports dealerships.

                                      -19-
<PAGE>

         The  Company  is  actively  pursuing  sales of  hardware  equipment  in
connection with its installation  service.  For fiscal year 2005,  revenues from
hardware sales  increased  $257,067 to $324,852 or 379.2% over fiscal year 2004.
For fiscal year 2004,  revenues from hardware sales increased $29,161 to $67,785
or 75.5% over fiscal year 2003. It is expected that revenues from hardware sales
will  continue  to  grow as the  Company's  customer  base  continues  to  grow.
Additionally,  the Company anticipates  dedicating sales resources to increasing
hardware sales.

         Cost  of  Sales  - For  fiscal  year  2005,  cost  of  sales  increased
$1,503,484 to  $4,059,955 or 58.8% over fiscal year 2004.  For fiscal year 2004,
cost of sales  increased  $968,339 to $2,556,471 or 61.0% over fiscal year 2003.
Cost of sales as a percentage  of revenues  increased  8.2% for fiscal year 2005
and decreased 3.9% for fiscal year 2004.

         The  increase  in cost of sales for fiscal year 2005 is a result of the
Company  hiring  additional  installation  and support  technicians  to properly
prepare  for  expected  growth  in its  customer  base.  This  should  result in
increased software  installations in 2006. Additional increases in cost of sales
for fiscal year 2005 are  attributable to increased sales of hardware  equipment
and its related costs, as well as to increases in amortization  costs related to
capitalized  software  costs.  It is expected that cost of sales as a percent of
sales will decrease in fiscal year 2006 as increased  hiring,  which occurred in
fiscal year 2005,  is not expected to occur in 2006.  Additionally,  the Company
should  receive the benefits  from the  installation  and training  efficiencies
learned in previous years.

         The 3.9%  decrease  in cost of sales in fiscal  year 2004 is  primarily
attributable to increased efficiencies in the Company's installation procedures.
For example, our  post-installation  service includes having one individual from
the support department  dedicated to a new dealership for two to six weeks after
an  installation.  By having a dedicated  individual  provide  post-installation
support,  potential  problems can be anticipated and solved by someone  familiar
with the customer's needs in a timely and cost-efficient  manner.  After the two
to six weeks of post-installation  monitoring, new customers are transitioned to
normal customer support.

         Operating  Expenses - Operating  expenses are comprised of research and
development expense and sales,  marketing and general  administrative  expenses.
For  fiscal  year  2005,  total  operating  expenses  increased   $1,083,401  to
$3,545,418  or 44.0% over  fiscal  year 2004.  For fiscal  year 2004,  operating
expenses  decreased  $262,269 to  $2,462,017 or 9.6% less than fiscal year 2003.
Operating  expenses as a percentage of revenue increased 2.9% during fiscal year
2005 over  fiscal  year 2004.  Operating  expenses  as a  percentage  of revenue
decreased 42.7% during fiscal year 2004 over fiscal year 2003.

         Research and  Development  Expense - Research and  development  expense
(net of capitalized  software  development costs) increased by $219,646 or 43.8%
for fiscal year 2005 due to the hiring of additional  software  developers and a
continued focus on research and development  activities,  as well as, developing
and maintaining software compatible with original equipment  manufacturers.  For


                                      -20-
<PAGE>

fiscal year 2004,  research  and  development  expense  increased by $205,998 or
69.7%.  The increase was primarily  the result of the focus of resources  toward
the completion of much of the base development of the ADMS software. The Company
believes  research and  development  will play an  important  roll in its future
success.   The   Company's   goal  is  to  keep  its  software   and   processes
technologically ahead of the competition and it expects research and development
expense to grow in the future.

         Sales,  Marketing and General Administrative Expense - Sales, marketing
and general  administrative expense increased in fiscal year 2005 by $863,755 or
44.1% over fiscal year 2004 due to the hiring of additional sales, marketing and
administrative  personnel  and  related  costs.  These costs were  necessary  to
support expected  continued growth in revenues.  For example,  the Company hired
four new regional  sales  representatives  in fiscal 2005. For fiscal year 2004,
sales,  marketing and general administrative expense decreased $468,267 or 19.3%
over  fiscal  year  2003 due  primarily  to  decreases  in travel  expenses  and
professional fees.

         Net Income - For fiscal years 2005 and 2004,  the Company  recorded net
income after tax benefit of $3,175,372 and $1,850,153, respectively. The Company
recorded  a tax  benefit  for  fiscal  years  2005  and 2004 of  $3,479,237  and
$1,560,000,  respectively. For fiscal year 2003, the Company recorded a net loss
after tax benefit of ($1,275,015).  The overall  recognition of profits has been
due to  increased  revenues  from  installations,  increased  recurring  support
charges,  as well as,  relative  decreases in overall  expenses and increases in
installation  and training  efficiencies.  A tax benefit has been  recognized to
account for future expected taxable income.

Liquidity and Capital Resources

         The Company's liquidity position has significantly  improved during the
last two years.  As of March 31, 2005 and 2004,  working capital totaled $31,346
and $415,267,  respectively. As of March 31, 2003, working capital was a deficit
of  ($680,932).  The decrease in working  capital as of March 31, 2005  compared
with March 31,  2004 is  principally  a result of  additional  cash  having been
raised  through the issuance of new common and preferred  equity stock in fiscal
year 2004,  while in fiscal year 2005, the only cash raised through the issuance
of equity stock was from the exercise of employee stock  options.  Historically,
we have funded  operations by issuing equity stock,  but we are now seeking,  to
the extent  feasible,  to fund  operations  solely from revenues  generated from
operations.

         Cash and cash  equivalents  were  $141,179 and $361,955 as of March 31,
2005  and  2004,  respectively.  Accounts  receivable  net of an  allowance  for
doubtful accounts were $464,426 and $489,602, respectively.  Current liabilities
were  $594,850  and  $489,579,  respectively.  The  Company  did not  incur  any
additional  long-term  liabilities  during the fiscal year ended March 31, 2005.
The  only  long-term  obligation  as of  March  31,  2005 and 2004 is a note for
$50,000,  payable to a related  party,  on which the Company only makes interest
payments at 12% monthly.

Critical Accounting Policies and Estimates

         Management is basing the discussion and analysis of financial condition
and results of operations on the Company's  restated financial  statements.  The
preparation of these restated financial statements requires the use of estimates


                                      -21-
<PAGE>

and judgments that affect the reported amounts of assets,  liabilities,  revenue
and  expenses,  as well as, the  related  disclosure  of  contingent  assets and
liabilities.  On an on-going basis, management evaluates its critical accounting
policies  and  estimates,   including  those  related  to  revenue  recognition,
valuation of accounts  receivable,  property,  plant and  equipment,  long-lived
assets,  intangible assets and contingencies.  Management bases its estimates on
historical  experience and on various other  assumptions that they 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.

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

     o   Revenue Recognition.  The Company recognizes revenue in accordance with
         the Staff  Accounting  Bulletin (SAB) No. 104,  "Revenue  Recognition."
         Following  SAB  No.  104,  the  Company  recognizes  revenue  when  (i)
         persuasive  evidence  of  an  arrangement  exists;  (ii)  delivery  has
         occurred or services have been rendered; (iii) the sales price is fixed
         or determinable; and (iv) collectibility is reasonably assured.

         During the course of business,  the Company recognizes revenue from the
         following activities: Technical Support & Maintenance,  Hardware Sales,
         Consulting Services,  Installation and Training Services,  and Software
         Sales. Technical Support & Maintenance includes monthly service charges
         for  ongoing  technical  support,  automatic  software  upgrades,  data
         transfer,   data  storage,   data  backup,   bar  coding,   and  server
         maintenance.  These  services  are  billed  monthly  as  stipulated  in
         contracts  with  customers  and earned as the services  are  performed.
         Hardware  Sales  include  the sales of  standard  computer  systems and
         peripherals  and revenue is recognized  when title passes upon shipment
         to the customer. Installation of the hardware and/or peripherals is not
         a required  component of the  purchase  contract.  Consulting  Services
         include fees charged for additional  system  training and  programming.
         The   Company   recognizes    consulting   service   fees   under   the
         percentage-of-completion  method over the period in which the  services
         are  provided.  Installation  and  Training  Services  include fees for
         software  licensing,  server  file  configuration,   on-site  training,
         software  and  hardware   installation,   forms  programming  and  data
         conversion.  Revenue is recognized in accordance with the terms of each
         contract,  on  a   percentage-of-completion   basis.  Installation  and
         training   service   contracts   generally   require   the  payment  of
         non-refundable  security  deposits.  These  deposits  are  deferred and
         recognized  over  the life of the  installation  and  training  service
         contract,  which is usually less than one month.  Software Sales (where
         the software is hosted on customers'  servers) include  licensing fees,
         server   configuration,   initial  training,   programming,   and  data
         conversion. Software sales revenue is recognized when title passes upon
         installation of the software onto the customers' servers.

                                      -22-
<PAGE>

         In certain  cases,  the Company has multiple  agreements  with the same
         customer  under the  Company's  ASP  agreements.  In those  cases,  the
         Company  determines  whether  or not  the  fees  qualify  for  separate
         accounting  treatment  as  required  by SAB No.  104  and the  American
         Institute for Certified Public Accountant's  Emerging Issues Task Force
         (EITF)  Issue  No.   00-21,   "Revenue   Arrangements   with   Multiple
         Deliverables."  For these  arrangements,  which include ASP agreements,
         the Company  allocates and defers revenue for the undelivered  elements
         based on their vendor-specific objective evidence (VSOE) of fair value.
         VSOE  is  generally  the  price  charged  when  that  element  is  sold
         separately. In situations where VSOE exists for all elements (delivered
         and undelivered),  the Company allocates the total revenue to be earned
         under  the  arrangement  among  the  various  elements,  based on their
         relative fair value.  For  transactions  where VSOE exists only for the
         undelivered  elements,  the  Company  defers the full fair value of the
         undelivered  elements and recognizes  the difference  between the total
         arrangement fee and the amount  deferred for the  undelivered  items as
         revenue.  If VSOE  does  not  exist  for  undelivered  items  that  are
         services,  then the  Company  recognizes  the  entire  arrangement  fee
         ratably over the remaining  service period.  If VSOE does not exist for
         undelivered  elements  that are  specified  product  or  features,  the
         Company  defers  revenues  until the  earlier  of the  delivery  of all
         elements or the point at which we determine VSOE for these  undelivered
         elements.

         The Company  recognizes  revenue  related to the delivered  products or
         services  only if (i) the above revenue  recognition  criteria are met;
         (ii) any  undelivered  products or services  are not  essential  to the
         functionality of the delivered products and services; (iii) payment for
         the delivered  products or services is not contingent  upon delivery of
         the remaining  services;  and (iv) the Company has an enforceable claim
         to  receive  the amount  due in the event  that we do not  deliver  the
         undelivered  products or services.  For arrangements  where undelivered
         services are essential to the functionality of the delivered items, the
         Company recognizes service revenues under the  percentage-of-completion
         contract  method in  accordance  with the  provisions  of  Statement of
         Position (SOP) 81-1,  "Accounting for Performance of Construction  Type
         and Certain Production Type Contracts."

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

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

                                      -23-
<PAGE>

     o   Capitalization  of Software  Expense.  Costs  incurred to establish the
         technological  feasibility of software  products to be sold,  leased or
         otherwise  marketed  by  the  Company  are  expensed  as  research  and
         development.  Once technological feasibility is established,  costs are
         capitalized in accordance  with SFAS No. 86,  "Accounting for the Costs
         of Computer Software to Be Sold,  Leased, or Otherwise  Marketed" until
         the product is available for general release to customers.  Judgment is
         required in determining when technological  feasibility of a product is
         established.  Capitalized costs, which consist primarily of payroll and
         benefits of both employees and outside contractors, have been amortized
         on a  product-by-product  basis using the straight-line method over the
         established  economic  life of the products.  In addition,  capitalized
         software costs are tested for impairment  each year in accordance  with
         SFAS No. 142.

Item 7.  Financial Statements

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

Item 8.  Changes  In  and  Disagreements  With  Accountants  on  Accounting  and
         Financial Disclosure.

         None.

Item 8A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

         Under  the  supervision  and with the  participation  of the  Company's
management,  including the Company's  principal  executive officer and principal
financial  officer,  the  Company  conducted  an  evaluation  of its  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"), as of March 31, 2005. Based on this evaluation,  the Company's  principal
executive  officer and  principal  financial  officer  concluded  that,  for the
reasons and in the manner set forth in the  following  paragraph,  the Company's
disclosure   controls  and  procedures  were  not  effective  in  ensuring  that
information required to be disclosed by the Company in its reports that it files
or submits under the  Securities  Exchange Act of 1934 (as amended) is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
rules and forms of the SEC.

         The Company's financial statements included in the Form 10-KSB included
a  description,  in Note 15 to the  financial  statements,  of a  "Prior  Period
Adjustment"  relating to its accounting for software  development  costs. In the
course of  preparing  a response  to a routine  SEC  comment  letter on the Form
10-KSB,  the  principal   executive  officer  and  principal  financial  officer
determined  that the  adjustment  reflected  in the Form  10-KSB  was  partially
inaccurate  and is filing  this  Amendment,  in part,  in order to correct  that
inaccuracy.  Information regarding the correction is disclosed in Note 15 to the
restated financial statements included herewith. Based upon this occurrence, the


                                      -24-
<PAGE>

Company  determined  that it  needs  to take  steps,  and is  taking  steps,  to
facilitate timely and comprehensive  discussions with the Company,  and with the
Company's  independent  public  accountants,  regarding issues that arise in the
course of developing financial statements for public disclosure.

Changes in Internal Controls over Financial Reporting

         With the participation of its principal executive officer and principal
financial officer,  management of the Company has, as required by Rule 13a-15(d)
under the Exchange Act,  determined that there were no changes during the fiscal
year ended March 31, 2005 in its internal control over financial  reporting that
would materially  affect, or would reasonably likely to materially  affect,  its
internal control over financial reporting.

Item 8B.  Other Information.

         The Company and RiverPark Three,  LLC, a Utah limited liability company
entered into a certain Office Lease (the "Lease") as of January 21, 2005 located
at 10757 South River Front  Parkway,  Suite 400, South Jordan,  Utah 84095.  The
Company  intends to conduct all of its corporate,  administrative,  and research
and development activities on the leased premises.

         The Lease is for five (5) years commencing on August 1, 2005 unless the
landlord has not fulfilled its construction obligations. Rental payments are for
each month as  follows:  $38,115.85  (first  year),  $39,157.27  (second  year),
$40,198.68 (third year),  $41,240.10  (fourth year) and $42,281.52 (fifth year).
In  addition,  the  Company is  required  to pay a pro rata  share of  operating
expenses for the property.



                                      -25-
<PAGE>


                                    PART III

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

Directors

         Each director serves until the next annual meeting of shareholders  and
until his  successor is duly elected and  qualified.  Certain  information  with
respect to each of the directors of the Company is set forth below.
<TABLE>
<CAPTION>

              Name                        Age                       Position                       Director Since
----------------------------------     -----------    --------------------------------------    ---------------------
<S>                                        <C>        <C>                                       <C>
Alan Rudd                                  53         Chief Executive Officer, Chairman of      January 2000
                                                      the Board
Richard Holland                            44         President, Director                       November 2000

Bryan T. Allen                             38         Director                                  August 2000

Paul Henriod                               52         Director                                  December 2004
Kent A. Misener                            53         Director                                  December 2004
</TABLE>

         The following  paragraphs  set forth certain  biographical  information
about each of the directors:

         ALAN RUDD joined the Company as Chairman and Chief Executive Officer on
January 1, 2000.  Rudd  brings  more than 20 years  experience  in the  computer
industry to the Company.  From March 1996 to November  1999,  Rudd was the Chief
Executive  Officer of Vinca  Corporation,  a Utah-based  company  that  provided
continuous  availability  software  for  Microsoft,  Novell and IBM  distributed
network  platforms.  In recognition of his achievements at Vinca, Rudd was named
Utah's 1999  Entrepreneur  of the Year.  Vinca was acquired by Legato Systems of
Palo Alto, California on July 31, 1999.

         Prior to  joining  Vinca  Corporation,  Rudd  spent 10 years in  senior
management  positions at Novell. His positions at Novell included Legal Counsel,
Regional  Sales  Manager,   Area  Sales  Director  and  Vice  President  of  OEM
Operations.

         Rudd has a Bachelor's degree in Business Administration and Finance, as
well as a Juris Doctorate from Brigham Young  University.  Following law school,
he spent 7 years as in-house legal counsel for several  corporations,  including
State Farm Insurance and Prime  Computer,  before joining Novell and moving into
corporate management.

                                      -26-
<PAGE>

         RICHARD  HOLLAND joined the Company as a director and Vice President in
November 2000 and has been  President of the Company  since April 2001.  Holland
was formerly the President and co-founder of Ensign Information  Systems and has
been  designing and  developing  technology  systems for more than 23 years.  As
co-founder of Ensign,  Holland was the chief architect of the Company's software
product - a fully integrated  business  management system that provides improved
communications, customer relationships and profitability for its customers.

         Before starting Ensign in 1994,  Holland was the national sales manager
for Cars/Dyatron,  a specialist in General Motors dealership software, from 1980
to 1994.  Prior to working at  Cars/Dyatron,  he was general manager of Advanced
Computer  Systems (ACS), the first company to introduce IBM PC-based systems for
the automotive dealer industry.

         Holland has a Bachelor of Science  degree in Tax Accounting and Finance
from the University of Utah. He is also a Certified IBM Professional.

         BRYAN T. ALLEN is outside  counsel to the  Company  and has served as a
director of the Company  since August 2000.  Allen is a  shareholder  at the law
firm of Parr  Waddoups  Brown Gee & Loveless in Salt Lake City,  Utah,  where he
advises  clients  on  corporate,  securities,  acquisition  and  other  business
matters. Prior to joining Parr Waddoups,  Allen was a partner at the law firm of
Stoel  Rives,  LLP in Salt Lake City,  Utah.  Allen is a former  Chairman of the
Securities Section of the Utah State Bar. Allen received bachelor degrees, summa
cum  laude,  from the  University  of Utah in  Economics  and  Chinese  Studies,
received a Masters degree in religion, cum laude, from the Yale Divinity School,
and received his Juris Doctorate from Yale Law School.

         PAUL  HENRIOD has served as a director of the  Company  since  December
2004. Henriod is the President of eReinsure,  the leading provider of web-hosted
technologies for the reinsurance  industry.  Prior to joining eReinsure in 2000,
Henriod held several management positions with AON Insurance, including Managing
Director of AON  Technology  Group,  President of AON Risk  Services of Utah and
President of AON Risk  Services of  Colorado.  Prior to AON,  Henriod  owned and
managed ITA Insurance,  one of the nation's leading insurance firms dedicated to
the technology industry.

         KENT A. MISENER has served as a director of the Company since  December
2004. Since 1983, Misener has been the Treasurer and Chief Investment Officer of
Deseret Mutual Benefit  Administrators,  with approximately $4 billion in assets
under management. He is also a member of the board of directors of Deseret First
Federal Credit Union CUSO and a member of the  investment  committees of various
nonprofit  corporations,  including Intermountain  Healthcare.  Misener is a CFA
Charter holder and a member of the Salt Lake City Society of Financial Analysts.

         No family  relationship  exists among any of the directors or executive
officers of the Company.

                                      -27-
<PAGE>

Meetings and Committees

         During the fiscal year ended March 31,  2005,  the  Company's  Board of
Directors (the "Board") held formal meetings and also met informally on numerous
occasions  to  approve  relevant  matters  by  written  consent.  All  incumbent
directors  attended at least 75% of all Board meetings and applicable  committee
meetings.

         The  entire  Board  currently  serves  as the  audit  committee  of the
Company. Only Messrs. Henriod and Misener satisfy the independence  requirements
applicable to audit committees of listed companies.  In addition,  the Board has
determined  that the audit  committee  does not have a member  qualifying  as an
audit committee  financial  expert, as defined in Item 401(h) of Regulation S-B.
In order to save limited  capital over the last several  years,  the Company has
chosen not to offer significant cash compensation to its directors.  The absence
of significant cash compensation makes recruiting persons that are not otherwise
interested in the Company more  difficult.  For these reasons,  the Company does
not  have on its  Board a  person  that  would  qualify  as an  audit  committee
financial expert. Now that the Company has reported net income for a full fiscal
year and is preparing for the  possibility of applying for listing on the Nasdaq
SmallCap  Market or the  American  Stock  Exchange,  the Company  expects to add
additional  independent  directors  and, as part of that process,  may recruit a
person that qualifies as an audit committee financial expert.

         The Company does not presently have a standing nominating  committee or
compensation committee. The Company does not have a nominating committee charter
or a compensation  committee  charter.  During fiscal 2006, the Board expects to
organize and adopt charters for such committees.

Directors' Compensation

         Directors,  who are not  officers  of the  Company,  do not receive any
regular compensation for their service on the board of directors. Directors, who
are  officers  of the  Company,  receive no  additional  compensation  for their
service  as a  director  of the  Company.  Directors  are  entitled  to  receive
compensation for services unrelated to their service as a director to the extent
that they provide such unrelated services to the Company.  See "Item 12. Certain
Relationships and Related Transactions."

Directors  of the Company are entitled to  participate  in the  Company's  stock
incentive plan. During the fiscal year ended March 31, 2005, the Company did not
grant  any  options  to  purchase  shares  of  its  common  stock  to any of its
directors.

                                      -28-
<PAGE>

Executive Officers and Key Employees

         In addition to Messrs.  Rudd and  Holland,  whose  biographies  are set
forth above, certain biographical information is furnished below with respect to
the following executive officers and key employees of the Company:
<TABLE>
<CAPTION>

              Name                        Age                       Position                       Officer Since
----------------------------------     -----------    -------------------------------------     ---------------------

<S>                                        <C>        <C>                                       <C>
Leland H. Boardman                         49         Vice President of Operations and          April 2005
                                                      Chief Financial Officer

Blake Nielson                              45         Vice President of Client Services         November 2000


David D. Jenkins                           49         Vice President of Marketing               November 2003
</TABLE>

         LELAND H. BOARDMAN has been the Vice  President of Operations and Chief
Financial  Officer of the  Company  since  April  2005.  Boardman is a certified
public  accountant  with  more  than 24 years of  experience  working  with both
private and public companies, as well as working in public accounting.  Boardman
most recently was the Vice President of Operations for Sorenson Medical, Inc., a
privately-held  manufacturer of disposable medical products, where he served for
3 years.  Prior to working with  Sorenson,  Boardman  served over 8 years as the
Chief Accounting Officer for Ballard Medical Products, a wholly-owned subsidiary
of Kimberly Clark  Corporation.  Before joining  Ballard,  Boardman was a Senior
Manager with Deloitte and Touche, LLC, an international  public accounting firm,
where he  worked  for over 12  years.  Boardman  holds a  bachelor's  degree  in
accounting from the University of Utah.

         BLAKE  NIELSON has been the Vice  President  of Client  Services of the
Company since November 2000. Nielson was a founder of Ensign Information Systems
and brings over 14 years of experience in client services with other  automotive
industry related companies.  He is responsible for customer satisfaction through
successful  product  installations,  client training and ongoing product support
and maintenance. Before joining the Company, Nielson worked as Vice President of
Operations  for Ensign  Information  Systems from 1994 to 2000.  Before  Ensign,
Nielson was the  Regional  Director of Client  Services  for  Sunguard  Business
System, beginning in 1992. Prior to joining Sunguard, Nielson was Head of Client
Services  for  Advanced  Computer  Systems,  from  1990 to 1992.  Nielson  has a
Bachelors degree from Brigham Young  University in Financial  Planning and is an
AS/400  Certified  Specialist.  He also served one term on the Internal  Revenue
Service Technology Committee.

         DAVID D. JENKINS has been Vice  President of Marketing  for the Company
since  November  2003.  Prior to joining the Company,  Jenkins  worked for Vinca
Corporation (and then its purchaser,  Legato Systems, Inc.) for 7 years managing
the multi-OEM sales  relationship  with Novell.  Jenkins has also had experience
selling  software  to  many  large  worldwide  corporations  including  US  Air,
Northwest Airlines,  Martin Marietta, Jet Propulsion  Laboratories,  Luxor Hotel
and Casinos,  and 3 Com  Corporation.  Jenkins has a Bachelors  degree from Utah
State University and an MBA from Brigham Young University.

                                      -29-
<PAGE>

Section 16(A) Beneficial Ownership Reporting Compliance

         Section  16(a) of the  Securities  Exchange  Act of 1934  requires  the
Company's executive officers and directors, as well as, persons who beneficially
own more than ten  percent  of the  common  stock,  to file  initial  reports of
ownership and reports of changes in ownership  with the  Securities and Exchange
Commission ("SEC"). Reporting persons are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.  Based solely on a
review  of the  copies of such  forms  furnished  to the  Company,  the  Company
believes that the following  forms were  delinquent or were not filed during the
most recent fiscal year or prior years (to the extent not previously disclosed):
Richard  Holland,  the  President  of the Company and a director,  entered  into
transactions on March 26, 2004,  April 19, 2004, May 19, 2004 and June 15, 2004,
all of which were  required to be reported  within two business days and none of
which was reported until October 1, 2004.

Code of Ethics

         The Company has adopted the "Arkona Code of Ethics and Conduct,"  which
constitutes  a code of ethics that applies to the principal  executive  officer,
principal financial officer, principal accounting officer or controller,  and/or
persons performing  similar functions,  as defined in Item 406 of Regulation S-B
under the Securities  Exchange Act of 1934. The Company posts the Code of Ethics
and Conduct and any amendments to or waivers from the Code Ethics on our website
at www.arkona.com under "Investor Relations."



                                      -30-
<PAGE>


Item 10.  Executive Compensation

Summary Compensation Table

         The following table summarizes the compensation  paid or accrued by the
Company to or on behalf of the Company's Chief Executive Officer, as well as the
four most highly  compensated  executive officers of the Company whose aggregate
compensation  for the  fiscal  year  ended  March  31,  2005  exceeded  $100,000
(collectively, the "Named Executive Officers").

<TABLE>
<CAPTION>

                                                                              Long Term Compensation
                                                                        -----------------------------------
                                              Annual Compensation                Awards           Payouts
                                         ------------------------------          ------           -------

                                                               Other                 Securities
                                                              Annual    Restricted   Underlying              All Other
                                                              Compen-      Stock      Options/      LTIP      Compen-
          Name and                        Salary     Bonus    sation     Award(s)       SARs      Payouts     sation
     Principal Position         Year        ($)       ($)       ($)         ($)          (#)        ($)         ($)
----------------------------- ---------- ---------- -------- ---------- ------------ ------------ --------- ------------

<S>                           <C>         <C>       <C>      <C>         <C>         <C>          <C>       <C>
Alan Rudd,                    03/31/05    255,000     --        --          --           --          --     22,917 (1)
Chief Executive Officer and   03/31/04    215,625     --        --          --         250,000       --         --
Chairman of the Board         03/31/03    195,750     --        --          --           --          --         --

Richard Holland,              03/31/05    200,000     --        --          --           --          --         --
President and Director        03/31/04    172,500     --        --          --        1,200,000      --         --
                              03/31/03    171,250     --        --          --           --          --         --

Stephen L. Russo,             03/31/05    159,567     --        --          --         105,000       --         --
Vice President of             03/31/04    137,750     --        --          --         100,000       --         --
Operations and Chief          03/31/03    136,083     --        --          --           --          --         --
Financial Officer

Blake Nielson,                03/31/05    142,083     --        --          --           --          --         --
Vice President of Client      03/31/04    123,333     --        --          --         250,000       --         --
Services                      03/31/03    115,000     --        --          --           --          --         --

David D. Jenkins,             03/31/05    132,500     --        --          --         100,000       --         --
Vice President of Marketing   03/31/04    117,545     --        --          --         85,000        --         --
                              03/31/03    110,000     --        --          --           --          --         --
</TABLE>


     (1) Represents $22,917 of deferred  compensation from fiscal years 2001 and
         2002, paid in fiscal year 2005.

     (2) Mr. Russo resigned as Vice President of Operations and Chief  Financial
         Officer in April 2005.

         Option Grants in Last Fiscal Year

         The following table sets forth individual  grants of options to acquire
shares of common  stock  made by the  Company  to the Named  Executive  Officers
during the fiscal year ended March 31,  2005.  No SARs were granted to any Named
Executive Officer during the fiscal year ended March 31, 2005.

<TABLE>
<CAPTION>

                                      Number of         Percent of Total
                                     Securities        Options Granted to
                                 Underlying Options    Employees in Fiscal
             Name                      Granted                Year              Exercise Price       Expiration Date
------------------------------   ------------------    -------------------      --------------       ---------------
<S>                                <C>                        <C>                    <C>              <C>
Stephen L. Russo,
Vice President of Operations       105,000 (1) (2)            8.2%                   $0.60            7/01/2014 (2)
and Chief Financial Officer
(2)

David D. Jenkins,
Vice President of Marketing          100,000 (1)              7.8%                   $0.60              7/01/2014

</TABLE>

     (1) Such options become exercisable 40% on 7/01/2005,  30% on 7/01/2006 and
         30% on 7/01/2007.

     (2) Mr. Russo resigned as Vice President of Operations and Chief  Financial
         Officer in April 2005.  The options  granted to him during  fiscal 2004
         expired by their terms 30 days following his resignation.

Aggregated Option Exercises and Fiscal Year-End Option Values

         The following table provides information  regarding options held by the
Named  Executive  Officers as of March 31, 2005 and  options  exercised  by them
during the year ended March 31, 2005:
<TABLE>
<CAPTION>

                                                         Number of Securities
                                                    Underlying Unexercised Options        Value of Unexercised
                        Securities                                at                     In-the-Money Options at
                       Acquired on     Aggregate            March 31, 2005                 March 31, 2005 (1)
  Name and Position      Exercise        Value       Exercisable    Unexercisable     Exercisable    Unexercisable
                           (#)         Realized          (#)             (#)              ($)             ($)
                                          ($)
---------------------- ------------- -------------- -------------- ----------------- -------------- -----------------
<S>                    <C>           <C>            <C>             <C>              <C>             <C>
Alan Rudd,
Chief Executive                                        100,000         150,000          $46,000         $69,000
Officer and Chairman                                 (2) 70,000                       (2) $25,200
of the Board

Richard Holland,
President and          166,500          $96,280        880,000         720,000         $354,800         $331,200
Director                                             (2) 600,000                     (2) $216,000
</TABLE>

                                      -32-
<PAGE>
<TABLE>
<CAPTION>
<S>                    <C>           <C>             <C>             <C>              <C>             <C>
Stephen L. Russo,
Vice President of                                      90,000          165,000          $36,400         $33,900
Operations and Chief                                 (2) 520,000                     (2) $187,200
Financial Officer (3)

Blake Nielson,
Vice President of                                      350,000         150,000         $136,000         $69,000
Client Services

David D. Jenkins,
Vice President of                                      246,500         151,000          $92,140         $29,460
Marketing
</TABLE>


     (1) On March 31, 2005,  the closing sale price for a share of the Company's
         common stock on the OTC Bulletin Board was $0.66.

     (2) Represents  options to purchase  outstanding common stock for which the
         Company  will not be  required to issue any  additional  shares if such
         options are exercised.  See "Item 12. Certain Relationships and Related
         Transactions."

     (3) Mr. Russo resigned as Vice President of Operations and Chief  Financial
         Officer in April 2005.

Employment  Contracts  and  Termination  of  Employment,  and  Change-in-Control
Arrangements

         In  connection  with the  purchase of the assets of Ensign  Information
Systems in November 2000, the Company entered into an Employment  Agreement (the
"Holland  Agreement")  with  Richard  Holland,  currently  the  President of the
Company. The fixed term of the Holland Agreement has expired;  however, parts of
the  Holland  Agreement,  including  the  confidentiality,  non-competition  and
invention ownership  provisions,  continue to govern Mr. Holland's  relationship
with the Company.

         In  connection  with the  purchase of the assets of Ensign  Information
Systems in November 2000, the Company entered into an Employment  Agreement (the
"Nielson Agreement") with Blake Nielson,  currently the Vice President of Client
Services of the Company.  The fixed term of the Nielson  Agreement  has expired;
however,  parts  of  the  Nielson  Agreement,   including  the  confidentiality,
non-competition  and  invention  ownership  provisions,  continue  to govern Mr.
Nielson's relationship with the Company.

                                      -32-
<PAGE>


Item 11. Security  Ownership of Certain  Beneficial  Owners and  Management  and
         Related Stockholder Matters.

Securities Authorized for Issuance under Equity Compensation Plans

         Set forth below is certain information, as of March 31, 2005, 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.
<TABLE>
<CAPTION>

                                                                                          Number of securities
                                                                                         remaining available for
                             Number of securities to be    Weighted-average exercise      future issuance under
                               issued upon exercise of       price of outstanding       equity compensation plans
                                outstanding options,         options, warrants and        (excluding securities
       Plan category             warrants and rights                rights              reflected in column (a))
---------------------------  ---------------------------  ---------------------------  ---------------------------
                                         (a)                          (b)                          (c)
<S>                                   <C>                           <C>                         <C>
Equity compensation plans
approved by security
holders (1)                           8,254,092                     $0.303                      3,095,000

Equity compensation plans
not approved by security
holders                                  N/A                          N/A                          N/A

Total                                 8,254,092                     $0.303                      3,095,000
</TABLE>

     (1) Does not  include  secondary  options  with  respect  to  shares of the
         Company's  common  stock  granted to certain  officers,  directors  and
         employees  by  shareholders  of the  Company.  See  "Item  12.  Certain
         Relationships and Related Transactions."

Security Ownership of Certain Beneficial Owners and Management

         The table below sets forth information, as of June 1, 2005, each person
who beneficially owns more than 5% of the Company's  outstanding common stock or
Series B preferred stock, and information as to the ownership of common stock or
Series B preferred stock by each person serving as a director or Named Executive
Officer of the Company as of March 31, 2005.  Except as  otherwise  indicated in
the footnotes to this table, all shares are owned directly and the persons named
in the table have sole voting and investment  power with respect to shares shown
as beneficially being owned by them.
<TABLE>
<CAPTION>

                                                                                         Beneficial Ownership of
                                           Beneficial Ownership of Common Stock          Series B Preferred Stock
                                           -------------------------------------  --------------------------------------
                                            Ownership Amount                        Ownership Amount
                                             and Nature of                           and Nature of
                                               Beneficial          Percentage          Beneficial         Percentage
  Name and Address of Beneficial Owner        Ownership(1)        Ownership(2)        Ownership(1)       Ownership(3)
-----------------------------------------  ------------------     -------------     -----------------    ---------------
<S>                 <C>                       <C>                     <C>            <C>                 <C>
Alan Rudd, CEO and Chairman of the Board
10542 South Jordan Gateway
South Jordan, Utah  84095                     8,245,189(4)            21.8%               N/A                N/A

</TABLE>

                                      -34-
<PAGE>

<TABLE>
<CAPTION>

                                                                                         Beneficial Ownership of
                                           Beneficial Ownership of Common Stock          Series B Preferred Stock
                                           -------------------------------------  --------------------------------------
                                            Ownership Amount                        Ownership Amount
                                             and Nature of                           and Nature of
                                               Beneficial          Percentage          Beneficial         Percentage
  Name and Address of Beneficial Owner        Ownership(1)        Ownership(2)        Ownership(1)       Ownership(3)
-----------------------------------------  ------------------     -------------     -----------------    ---------------
<S>                 <C>                       <C>                     <C>            <C>                 <C>
Richard Holland, President and Director
10542 South Jordan Gateway
South Jordan, Utah   84095                    1,860,000(5)            4.9%                N/A                N/A


Stephen L. Russo, Vice President of
Operations and CFO (until April 2005)
10542 South Jordan Gateway
South Jordan, Utah   84095                     640,000(6)             1.7%                N/A                N/A


Blake Nielson, Vice
President of Client Services
10542 South Jordan Gateway
South Jordan, Utah   84095                     678,000(7)             1.8%                N/A                N/A

David D. Jenkins, Vice President of
Marketing
10542 South Jordan Gateway
South Jordan, Utah   84095                     272,000(8)             0.7%                N/A                N/A


Bryan T. Allen, Director
201 South Main Street
Suite 1100
Salt Lake City, UT  84111                      138,000(9)             0.4%                N/A                N/A


Paul Henriod, Director
1835 Laird Avenue
Salt Lake City, Utah  84108                  3,424,243(10)            9.0%                N/A                N/A

All officers and directors                     15,257,432             40.3%               N/A                N/A

   5% Series B Preferred Shareholders
   (Who are not Executive Officers or
               Directors)

Larry Battison
P.O. Box 1465
Duncan, OK  73534                                 N/A                  N/A               50,000              8.6%

B. Joe Clayton 4600 Clinton Hwy.
Knoxville, TN  37912                              N/A                  N/A               50,000              8.6%

Chapman Automotive Group
6601 East McDowell Road
Scottsdale, AZ  85257                             N/A                  N/A               50,000              8.6%
</TABLE>


                                      -35-
<PAGE>

<TABLE>
<CAPTION>

                                                                                         Beneficial Ownership of
                                           Beneficial Ownership of Common Stock          Series B Preferred Stock
                                           -------------------------------------  --------------------------------------
                                            Ownership Amount                        Ownership Amount
                                             and Nature of                           and Nature of
                                               Beneficial          Percentage          Beneficial         Percentage
  Name and Address of Beneficial Owner        Ownership(1)        Ownership(2)        Ownership(1)       Ownership(3)
-----------------------------------------  ------------------     -------------     -----------------    ---------------
<S>                 <C>                       <C>                     <C>            <C>                 <C>
Donald Ray Herring
4225 W. Plano Parkway
Plano, TX  75093                                  N/A                  N/A               50,000              8.6%

Anne K. Swope
1100 North Dixie
Elizabethtown, KY  42701                          N/A                  N/A               75,000             13.0%

Robert Woodhouse
2171 S. Hwy. 30
Blair, NE  68008                                  N/A                  N/A               50,000              8.6%

Lance Pittack
P.O. Box 546
Blair, NE  68008                                  N/A                  N/A               50,000              8.6%

Paul Cech
P.O. Box 546
Blair, NE  68008                                  N/A                  N/A               50,000              8.6%

H2 Land Trust
P.O. Box 467
Pontiac, IL  61764                                N/A                  N/A              100,000             17.3%
</TABLE>


     (1) Beneficial ownership for each person holding options, warrants or other
         rights  exercisable within 60 days of June 1, 2005 has been included as
         though  shares  of  common  stock  or  Series  B  preferred  stock,  as
         applicable, were outstanding.

     (2) The  percentage  indicated  represents  the  number of shares of common
         stock,  together  with the number of shares of common stock  subject to
         warrants  and options to purchase  common stock  exercisable  within 60
         days held by the indicated  person divided by the sum of (a) the number
         of shares  subject to options and  warrants to  purchase  common  stock
         exercisable by such shareholder  within 60 days of June 1, 2005 and (b)
         32,169,670,  which is the number of shares of common  stock  issued and
         outstanding as of June 1, 2005.

     (3) The  percentage  indicated  represents the number of shares of Series B
         preferred stock held by the indicated person divided by 575,000,  which
         is the  number  of  shares  of  Series B  preferred  stock  issued  and
         outstanding as of June 1, 2005.

     (4) Includes  175,000  options  granted under the Company's  incentive plan
         that are  exercisable  within 60 days of the date of the table,  70,000
         secondary options granted by shareholders of the Company (See "Item 12.
         Certain  Relationships and Related  Transactions") and 940,000 warrants
         in  connection  with the  issuance of  convertible  debt (See "Item 12.
         Certain Relationships and Related Transactions").

                                      -36-
<PAGE>

     (5) Includes  1,240,000 options granted under the Company's  incentive plan
         that  are  exercisable  within  60 days of the  date of the  table  and
         620,000  secondary  options granted by shareholders of the Company (See
         "Item 12. Certain Relationships and Related Transactions").

     (6) Includes  120,000  options  granted under the Company's  incentive plan
         that  are  exercisable  within  60 days of the  date of the  table  and
         520,000  secondary  options granted by shareholders of the Company (See
         "Item 12. Certain Relationships and Related Transactions").

     (7) Includes  425,000  options  granted under the Company's  incentive plan
         that are exercisable within 60 days of the date of the table.

     (8) Includes  272,000  options  granted under the Company's  incentive plan
         that are exercisable within 60 days of the date of the table.

     (9) Includes  138,000  options  granted under the Company's  incentive plan
         that are exercisable within 60 days of the date of the table.

     (10) Includes 1,409,092 warrants granted for services.

Item 12.  Certain Relationships and Related Transactions

         During the year ended March 31, 2004,  the Company  raised  $575,000 by
selling 575,000 shares of Series B preferred stock at $1.00 per share to a group
of  thirteen  (13)  investors,  nine  (9)  of  which,  following  the  purchase,
beneficially  owned 5% or more of the Company's  575,000  outstanding  shares of
Series B preferred stock.

         Each  share of  Series B  preferred  stock is  convertible  to five (5)
common shares at the option of the preferred shareholder. Each share of Series B
preferred stock receives the same dividends as common stock on an "as converted"
basis.  Shares of Series B preferred stock carry a liquidation  preference equal
to the price per share of Series B  preferred  stock,  plus  accrued  and unpaid
dividends on each share. In the event of a merger or liquidation, the balance of
proceeds is paid to the holders of the common  stock.  If not earlier  converted
into common stock, shares of Series B preferred stock are redeemable with thirty
(30) days advance notice at the option of the Company after June 30, 2008.  Each
share of Series B preferred stock has one (1) vote and votes together as a class
with  common  stock,  except  that the shares of Series B  preferred  stock vote
separately as a class for (i) any adverse change to the rights,  preferences and
privileges of the Series B preferred stock, (ii) any increase or decrease in the
number of authorized shares of Series B preferred stock.

         Certain  founding  shareholders of the Company obtained common stock in
return for contributions and development of the Company's  predecessor,  Arkona,
L.L.C.,  which  was  subsequently  merged  into  the  Company.   These  founding
shareholders  received a total of 7,523,000  shares of common  stock and,  then,


                                      -37-
<PAGE>

collectively,  entered into an agreement (the "Caldera  Agreement") with Caldera
Holdings,  LLC  ("Caldera"),  wherein  Caldera  was  given  the  right  to grant
secondary  options to third  parties  with  respect to  3,761,500  (subsequently
reduced to 1,550,000) of such shares in order to encourage the  development  and
increased  productivity  of the Company.  Holders of the shares  underlying  the
secondary  options are entitled to dividends and  distributions  with respect to
such shares until the options are exercised.  However,  Caldera has been granted
dispositive  voting  power with  respect to all  shares  subject to the  Caldera
Agreement  with  the  founding  shareholders  so long as the  Caldera  Agreement
remains in place.  The right of Caldera to grant  secondary  options  expired in
January  2003;  however,  Caldera  retains  voting  power  with  respect  to the
underlying  shares.  The  secondary  options have an exercise  price of $.30 per
share and expire prior to December 31, 2006.  As an inducement to certain of the
officers of Arkona to join the Company,  Caldera  granted  secondary  options to
Alan Rudd (70,000  options),  Richard Holland  (600,000  options) and Stephen L.
Russo (520,000 options).

         During the years ended March 31, 2005 and 2004, Bryan Allen,  Director,
was a partner with Stoel Rives LLP and then Parr Waddoups  Brown Gee & Loveless.
Mr. Allen,  and his law firms,  provides legal  services to the Company.  During
each of the years  ended  March 31,  2005 and 2004,  such laws firms  billed the
Company approximately $51,000 and $34,600, respectively, in legal services.

         Prior to fiscal  year 2004,  Alan Rudd,  Chief  Executive  Officer  and
Director, loaned the Company an aggregate of $150,000 at an interest rate of 12%
per annum.  Outstanding  principal  and interest on such loans were  convertible
into units,  comprised  of one share of common stock and one warrant to purchase
common stock at an exercise price of $.20 per share during the five-year  period
following issuance, at a rate of $0.20 per unit. During the year ended March 31,
2004, Mr. Rudd converted all outstanding principal and interest under such loans
into an  aggregate  of 940,000  shares of common  stock and 940,000  warrants to
purchase common stock.

         During the years  ended March 31,  2005 and 2004,  the Company  granted
205,000  and  1,975,000,  respectively,  options  to  purchase  common  stock to
executive officers and directors.  The options vest 40% on the first anniversary
of  the  grant  date,  30% on  the  second  anniversary  and  30%  on the  third
anniversary.  The options have exercise  prices ranging  between $0.20 and $0.60
per share and are  exercisable  at any time  within  ten (10) years of the grant
date.


                                      -38-
<PAGE>

Item 13.  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       Incorporated by reference to the
                                                                     Company's Quarterly Report on Form 10-QSB
                                                                     filed  with the SEC on August  14,  2003,
                                                                     File No. 0-24372

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

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

     4.2           Rights Agreement dated December 22, 2000          Incorporated by reference to the Current
                                                                     Report on form 8-K filed  with the SEC on
                                                                     January 18, 2001, File No. 0-24372

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

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

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

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

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

     23.1          Consent of Independent Registered Public          Filed herewith
                   Accounting Firm
</TABLE>

                                                     -39-
<PAGE>
<TABLE>
<CAPTION>

   Exhibit
    Number                       Title of Document                                  Location
---------------    ----------------------------------------------    ---------------------------------------
<S>                <C>                                               <C>
     31.1          Certification of Chief Executive Officer          Filed herewith
                   pursuant to Section 302 of the
                   Sarbanes-Oxley Act of 2002

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

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

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

</TABLE>


Item 14.   Principal Accountant Fees and Services

         Audit Fees

         The  Company's  independent  auditor for the years ended March 31, 2005
and 2004 was Mantyla McReynolds, P.C. ("Mantyla McReynolds"). The aggregate fees
for professional  services rendered by Mantyla McReynolds in connection with its
audit of the Company's consolidated financial statements $14,666 and $11,437 for
the years ended March 31, 2005 and 2004, respectively.

         Audit Related Fees

         The  aggregate  fees for  professional  services  rendered  by  Mantyla
McReynolds for audit related services were $4,024 and $1,528 for the years ended
March 31, 2005 and 2004, respectively.

         Tax Fees

         The aggregate fees for tax related  professional  services  rendered by
Mantyla McReynolds were $1,875 and $2,191 for the years ended March 31, 2005 and
2004, respectively.

         All Other Fees

         Mantyla  McReynolds  did not provide to the Company any other  material
services during the years ended March 31, 2005 and 2004.

         Audit Committee Pre-Approval Policies

         The Board, acting as the audit committee,  has established pre-approval
policies and  procedures  that would not permit  engagement  of  accountants  to
render audit or non-audit  services  without prior  approval of the Board.  As a
result, all engagements of the independent auditors to render audit or non-audit
services were approved by the Board.

                                      -40-
<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 Rudd
                                             -----------------------------------

                                              Alan  Rudd
                                              Chief Executive Officer

                                     Date:   November 10, 2005
                                             -----------------------------------

                   POWER OF ATTORNEY AND ADDITIONAL SIGNATURES

<TABLE>
<CAPTION>

                    Signature                                      Title                             Date
                    ---------                                      -----                             ----
<S>                                                  <C>                                      <C>

                                                     Chief Executive Officer and               November 10, 2005
           /s/ Alan Rudd                             Director (Principal Executive
--------------------------------------------         Officer)
     Alan Rudd


           /s/ Richard Holland                       President, Chief Technology               November 10, 2005
--------------------------------------------         Officer and Director
     Richard Holland


           /s/ Leland H. Boardman                    Chief Financial Officer                   November 10, 2005
--------------------------------------------         (Principal Financial and
     Leland H. Boardman                              Accounting Officer)



                                                     Director                                  November 10, 2005
--------------------------------------------
     Marc A. Fuller

          /s/ Paul Henriod*                          Director                                  November 10, 2005
--------------------------------------------
     Paul Henriod

          /s/ Kent A. Misener*                       Director                                  November 10, 2005
--------------------------------------------
     Kent A. Misener
</TABLE>


         * By:  Alan Rudd, Attorney-In-Fact.


                                      -41-
<PAGE>












                                  ARKONA, INC.

                             March 31, 2005 and 2004

             Report of Independent Registered Public Accounting Firm

                                       and

                          Restated Financial Statements



                                      F-1
<PAGE>

<TABLE>
<CAPTION>

                                  ARKONA, INC.

                                TABLE OF CONTENTS

                                                                                                               Page
                                                                                                               ----

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

Restated Balance Sheets as of March 31, 2005 and 2004...........................................................F-4

Restated Statements of Operations for the Years Ended March 31, 2005, 2004 and 2003.............................F-6

Restated Statements of Stockholders' Equity (Deficit) For the Years Ended
       March 31, 2005, 2004 and 2003............................................................................F-7

Restated Statements of Cash Flows for the Years Ended March 31, 2005, 2004 and 2003.............................F-8

Notes to Restated Financial Statements.........................................................................F-10

</TABLE>

                                      F-2
<PAGE>


                                  ARKONA, INC.



             Report of Independent Registered Public Accounting Firm



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

We have audited the accompanying balance sheets of Arkona, Inc., as of March 31,
2005 and 2004, and the related statements of operations,  stockholders'  equity,
and cash  flows  for the  years  ended  March 31,  2005,  2004 and  2003.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Arkona,  Inc., as of March 31,
2005 and 2004,  and the results of operations and cash flows for the years ended
March 31,  2005,  2004,  and 2003,  in  conformity  with  accounting  principles
generally accepted in the United States of America.


/s/ MANTYLA McREYNOLDS, LLC
---------------------------
MANTYLA McREYNOLDS, LLC
Salt Lake City, Utah
June 23, 2005, except for Note 15 to which the date is November 3, 2005

                                      F-3
<PAGE>


                                  ARKONA, INC.
                             Restated Balance Sheets
                                 As of March 31,


                                               Notes       2005         2004
                                             ---------  ----------   ----------
ASSETS
Current Assets:
     Cash and Cash Equivalents                   1      $  141,179   $  361,955
     Accounts Receivable (less allowance for
         doubtful accounts of $75,000 and
         $30,134, respectively)                  1         464,426      489,602
     Employee Advances                                      17,092       41,668
     Prepaid Expenses                                        3,499       11,621
                                                        ----------   ----------
     Total Current Assets                                  626,196      904,846
                                                        ----------   ----------
Property and Equipment - net                     5         359,810      220,777
                                                        ----------   ----------
Other Assets:
     Deferred Tax Asset                         1,2      5,039,237    1,560,000
     Capitalized Software Costs - net           1,3      1,148,935    1,018,716
     Goodwill - net                              6         156,622      156,622
     Intellectual Property - net                 6          76,420       76,420
     Deposits                                    8         122,080       79,580
     Other - net .                                          27,086
                                                        ----------   ----------
     Total Other Assets                                  6,543,294    2,918,424
                                                        ----------   ----------

Total Assets                                            $7,529,300   $4,044,047
                                                        ==========   ==========





See accompanying notes to restated financial statements


                                      F-4
<PAGE>

<TABLE>
<CAPTION>

                                  ARKONA, INC.
                             Restated Balance Sheets
                                 As of March 31,


                                                        Notes         2005            2004
                                                    ------------  ------------    ------------
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
<S>                                                 <C>           <C>             <C>
     Accounts Payable                                             $    156,074    $    157,779
     Accrued Liabilities                                               238,450         192,781
     Deferred Revenue                                     1            200,326         139,019
                                                                  ------------    ------------
     Total Current Liabilities                                         594,850         489,579
                                                                  ------------    ------------

Long-Term Note Payable                                   14             50,000          50,000
                                                                  ------------    ------------

Total Liabilities                                                      644,850         539,579
                                                                  ------------    ------------
Stockholders' Equity:                                 10, 12, 13
     Preferred Stock ($.001 par value; authorized
         10,000,000 shares; issued and outstanding
         575,000 shares)                                 7                 575             575
     Common Stock ($.001 par value; authorized
         50,000,000 shares; issued and outstanding
         32,169,670 and 31,565,670, respectively)                       32,170          31,566
     Additional Paid-In Capital                                     23,394,632      23,188,211
     Unearned compensation - stock options              1, 10          (19,357)
     Accumulated Unrealized Losses on
         Investments                                     1                --           (16,942)
     Accumulated Deficit                                9, 15      (16,523,570)    (19,698,942)
                                                                  ------------    ------------
     Total Stockholders' Equity                                      6,884,450       3,504,468
                                                                  ------------    ------------

Total Liabilities & Stockholders' Equity                          $  7,529,300    $  4,044,047
                                                                  ============    ============
</TABLE>


See accompanying notes to restated financial statements

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

                                  ARKONA, INC.
                        Restated Statements of Operations
                          For the Years Ended March 31,

                                             Notes           2005             2004            2003
                                         ------------    ------------    ------------    ------------
<S>                                      <C>             <C>             <C>             <C>
Revenues:                                        1
     Installation and Training Services                  $  2,880,146    $  2,674,041    $  1,514,940
     Technical Support & Maintenance                        3,993,073       2,379,584       1,366,842
     Hardware Sales                                           324,852          67,785          38,624
     Other                                                     56,590         228,943         151,876
                                                         ------------    ------------    ------------
     Total Revenues                                         7,254,661       5,350,353       3,072,282

Cost of Sales                                  1, 3         4,059,955       2,556,471       1,588,132
                                                         ------------    ------------    ------------
Gross Profit                                                3,194,706       2,793,882       1,484,150

Operating Expenses:                            1, 4
     Sales, Marketing & General
         Administrative                                     2,824,349       1,960,594       2,428,861
     Research & Development                                   721,069         501,423         295,425
                                                         ------------    ------------    ------------
     Total Operating Expenses                               3,545,418       2,462,017       2,724,286
                                                         ------------    ------------    ------------
Net income (loss) from operations                            (350,712)        331,865      (1,240,136)

Other Income (Expense) - net                      1            46,847         (41,712)        (34,879)
                                                         ------------    ------------    ------------
Income (Loss) Before Income Taxes                            (303,865)        290,153      (1,275,015)

Income Tax Benefit                                2         3,479,237       1,560,000
                                                         ------------    ------------    ------------
Net Income (Loss)                                        $  3,175,372    $  1,850,153    $ (1,275,015)
                                                         ============    ============    ============
Basic Earnings per Common Share:
     Net Income                                          $      0.099    $      0.062    $     (0.049)
     Average Number of Shares
           Outstanding                            1        31,956,688      29,755,709      26,122,740
Diluted Earnings per Common Share:
     Net Income                                          $      0.082    $      0.053    $     (0.049)
     Average Number of Shares
           Outstanding                            1        38,926,858      35,194,012      26,122,740


</TABLE>





See accompanying notes to restated financial statements


                                      F-6
<PAGE>

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


                                                                                       Additional
                          Preferred       Preferred        Common         Common        Paid-In
                            Shares          Stock          Shares          Stock        Capital
                          ------------   ------------   ------------   ------------   ------------
<S>                       <C>            <C>              <C>          <C>            <C>
Balance, March 31, 2002           --             --       23,842,798   $     23,843  $  20,672,508

Prior period
adjustment - error in
recording amortization
of software costs                 --             --             --             --             --

Issued shares for cash
at $0.30 per share                --             --          200,000            200         59,800

Issued shares from
warrants for cash at
$0.33 per share                   --             --          303,030            303         99,697

Issued shares for cash
at $0.20 per share                --             --        3,890,000          3,890        774,110

Issued shares for debt
at $0.20 per share                --             --          200,000            200         39,862


Net loss                          --             --             --             --             --
                          ------------   ------------   ------------   ------------   ------------

Balance, March 31, 2003           --             --       28,435,828   $     28,436   $ 21,645,977

Issued stock for cash
at $1.00 per share             575,000            575           --             --          574,425

Issued shares to
settle debt at $0.20
and $0.30 per share               --             --        1,374,415          1,374        316,564

Issued shares for
cash  at $0.15 to
$0.60 per share                   --             --        1,665,927          1,666        616,235

Issued shares for
options exercised at
$0.30 and $0.47 per
share                             --             --           89,500             90         35,010

Net income                        --             --             --             --             --
                          ------------   ------------   ------------   ------------   ------------
Balance, March 31, 2004        575,000   $        575     31,565,670   $     31,566   $ 23,188,211


Issued shares for
options exercised at
$.20 and $.30 per share           --             --          474,000            474        127,726

Issued shares for cash
and services at $.40
to $.51 per share                 --             --          130,000            130         52,420

Unearned compensation             --             --             --             --           26,275

Compensation earned               --             --             --             --             --

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

Net income                        --             --             --             --             --
                          ------------   ------------   ------------   ------------   ------------
Balance, March 31, 2005        575,000   $        575     32,169,670   $     32,170   $ 23,394,632
</TABLE>



See accompanying notes to financial statements

                                     F-7(A)
<PAGE>
<TABLE>
<CAPTION>

                                  ARKONA, INC.
                  Statements of Stockholders' Equity/(Deficit)
                          For the Years Ended March 31,
                             (split table concluded)


                              Unearned      Accumulated
                            Compensation     Unrealized                       Total
                                - Stock        Losses on     Accumulated    Stockholders'
                                Options       Investments      Deficit     Equity/(Deficit)
                            ------------    ------------    ------------   ---------------
<S>                         <C>             <C>             <C>             <C>
Balance, March 31, 2002             --      $    (16,942)   $(20,783,233)   $   (103,824)

Prior period
adjustment - error in
recording of software
costs and amortization              --              --           509,153         509,153

Issued shares for cash
at $0.30 per share                  --              --              --            60,000

Issued shares from
warrants for cash at
$0.33 per share                     --              --              --           100,000

Issued shares for cash
at $0.20 per share                  --              --              --           778,000

Issued shares for debt
at $0.20 per share                  --              --              --            40,062


Net loss                            --              --        (1,275,015)     (1,275,015)
                            ------------    ------------    ------------    ------------

Balance, March 31, 2003             --      $    (16,942)   $(21,549,095)      (108,376)

Issued stock for cash
at $1.00 per share                  --              --              --           575,000

Issued shares to
settle debt at $0.20
and $0.30 per share                 --              --              --           317,938

Issued shares for
cash  at $0.15 to
$0.60 per share                     --              --              --           617,901

Issued shares for
options exercised at
$0.30 and $0.47 per
share                               --              --              --            35,100

Net income                          --              --         1,850,153       1,850,153
                            ------------    ------------    ------------    ------------
Balance, March 31, 2004             --      $    (16,942)   $(19,698,942)   $  3,504,468


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

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

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

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

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

Net income                          --              --         3,175,372       3,175,372
                            ------------    ------------    ------------    ------------
Balance, March 31, 2005     $    (19,357)   $       --      $(16,523,570)   $  6,884,450
</TABLE>

See accompanying notes to financial statements.

                                     F-7(B)
<PAGE>
<TABLE>
<CAPTION>

                                  ARKONA, INC.
                        Restated Statements of Cash Flows
                          For the Years Ended March 31,

                                                          2005           2004           2003
                                                      -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>
Cash Flows from Operating Activities:
     Net Income (Loss)                                $ 3,175,372    $ 1,850,153    $(1,275,015)
     Adjustments to Reconcile Net Income
         (Loss) to Net Cash Used by
         Operating Activities:
         Depreciation Expense                             115,759        104,685        103,669
         Amortization Expense                             248,181        131,820        112,923
         Bad Debt Expense                                  44,866          6,188         17,938
         Stock Compensation Expense                         6,918           --             --
         Realized Gain on Investments                     (55,972)          --             --
         Deferred Income Tax Benefit                   (3,479,237)    (1,560,000)          --
         Decrease (Increase) in Accounts Receivable       (19,690)      (412,244)        80,716
         Decrease (Increase) in Employee Advances          24,576        (22,279)        (7,339)
         Decrease (Increase) in Prepaid Expenses            8,122        (11,621)          --
         Increase (Decrease) in Accounts Payable           (1,705)      (189,509)      (106,199)
         Increase (Decrease) in Accrued Liabilities        45,669        (51,261)        33,658
         Increase (Decrease) in Deposits & Other          (42,500)       (66,375)         4,574
         Increase (Decrease) in Deferred Revenue           61,307        (33,414)        63,683
                                                      -----------    -----------    -----------
     Net Cash Provided by (Used in)
         Operating Activities                             131,666       (253,857)      (971,392)
                                                      -----------    -----------    -----------
Cash Flows from Investing Activities:
     Acquisition of Property and Equipment               (254,792)      (202,125)       (25,332)
     Cash from Sale of Intangible Asset                   100,000           --             --
     Software Development Costs                          (378,400)      (357,312)      (376,498)
                                                      -----------    -----------    -----------
     Net Cash Used in Investing Activities               (533,192)      (559,437)      (401,830)
                                                      -----------    -----------    -----------
Cash Flows from Financing Activities:
     Principal Increase (Decrease) in Notes Payable          --          (71,058)       333,239
     Proceeds from Issuance of Common Stock               207,025        653,000        938,000
     Issuance of Stock Options                            (26,275)          --             --
     Proceeds from Issuance of Preferred Stock               --          575,000           --
                                                      -----------    -----------    -----------
     Net Cash Provided by Financing Activities            180,750      1,156,942      1,271,239
                                                      -----------    -----------    -----------
Net Increase (Decrease) in Cash                          (220,776)       343,648       (101,983)

Beginning Cash Balance                                    361,955         18,307        120,290
                                                      -----------    -----------    -----------
Ending Cash Balance                                   $   141,179    $   361,955    $    18,307
                                                      ===========    ===========    ===========
</TABLE>



See accompanying notes to restated financial statements


                                      F-8
<PAGE>



                                  ARKONA, INC.
                        Restated Statements of Cash Flows
                          For the Years Ended March 31,


                                     2005            2004             2003
                                     ----            ----             ----

Supplemental Disclosure Information:
Cash Paid for Interest           $   11,164       $   41,712       $   34,880
Cash Paid for Income Taxes             --         $    5,441       $    1,831
Issued Stock for Debt                  --         $  317,939       $   40,062






See accompanying notes to restated financial statements


                                      F-9
<PAGE>


                     Notes to Restated Financial Statements


1.      Organization and Summary of Significant Accounting Policies

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

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

         Net Income (Loss) Per Common Share - In  accordance  with SFAS No. 128,
         "Earnings per Share," basic earnings per common share is computed using
         the  weighted  average  number of common  shares  outstanding.  Diluted
         earnings per common share is computed using the weighted average number
         of common shares plus  dilutive  common share  equivalents  outstanding
         during  the  period  using the  treasury  stock  method.  Common  share
         equivalents were not included in the computation of net loss per common
         share for fiscal year 2003 because their inclusion was anti-dilutive.

         Cash & Cash  Equivalents  - For purposes of the restated  statements of
         cash flows,  the Company  considers  cash on deposit in banks and other
         unrestricted  investments  with original  maturities of three months or
         less to be cash  equivalents.  The Company maintains cash balances in a
         local financial  institution.  Accounts at this institution are insured
         by the Federal  Deposit  Insurance  Corporation  up to $100,000.  As of
         March 31, 2005, the Company had cash in excess of the insured amount at
         this institution.

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

                                      F-10
<PAGE>

         Revenue Recognition - The Company recognizes revenue in accordance with
         the  SEC's  Staff   Accounting   Bulletin   (SAB)  No.  104,   "Revenue
         Recognition."  Following  SAB No. 104, the Company  recognizes  revenue
         when (i) persuasive  evidence of an arrangement  exists;  (ii) delivery
         has occurred or services have been  rendered;  (iii) the sales price is
         fixed or determinable;  and (iv)  collectibility is reasonably assured.
         During the course of business,  the Company  recognizes revenue for the
         following activities: Technical Support & Maintenance,  Hardware Sales,
         Consulting Services,  Installation and Training Services,  and Software
         Sales. Technical support & maintenance includes monthly service charges
         for  ongoing  technical  support,  automatic  software  upgrades,  data
         transfer,   data  storage,   data  backup,   bar  coding,   and  server
         maintenance.  These  services  are  billed  monthly  as  stipulated  in
         contracts  with  customers  and earned as the services  are  performed.
         Hardware  Sales  include  the sales of  standard  computer  systems and
         peripherals,  and revenue is recognized when title passes upon shipment
         to the customer. Installation of the hardware and/or peripherals is not
         a required  component of the  purchase  contract.  Consulting  Services
         include fees charged for additional  system  training and  programming.
         The   Company   recognizes    consulting   service   fees   under   the
         percentage-of-completion  method over the period in which the  services
         are  provided.  Installation  and  Training  Services  include fees for
         software  licensing,  server  file  configuration,   on-site  training,
         software  and  hardware   installation,   forms  programming  and  data
         conversion.  Revenue is recognized in accordance with the terms of each
         contract,  on  a   percentage-of-completion   basis.  Installation  and
         Training  Service  contracts  require  the  payment  of  non-refundable
         security deposits.  These deposits are deferred and recognized over the
         life of the  Installation  and  Training  Service  contract,  which  is
         usually less than one month.  Software sales (where  software is hosted
         on customers'  servers) include licensing fees,  server  configuration,
         initial  training,  programming,  and data  conversion.  Software sales
         revenue  is  recognized  when title  passes  upon  installation  of the
         software onto the customers' servers.

         In certain  cases,  the Company has multiple  agreements  with the same
         customer  under  the  Company's   Application  Service  Provider  (ASP)
         agreements.  In those cases, the Company  determines whether or not the
         fees qualify for separate  accounting  treatment as required by SAB No.
         104  and the  American  Institute  for  Certified  Public  Accountant's
         Emerging   Issues  Task  Force   (EITF)  Issue  No.   00-21,   "Revenue
         Arrangements with Multiple Deliverables." For these arrangements, which
         include ASP  agreements,  the Company  allocates and defers revenue for
         the  undelivered  elements  based  on their  vendor-specific  objective
         evidence (VSOE) of fair value. VSOE is generally the price charged when
         that element is sold  separately.  In situations  where VSOE exists for
         all elements  (delivered and  undelivered),  the Company  allocates the
         total  revenue to be earned  under the  arrangement  among the  various
         elements,  based on their relative fair value. For  transactions  where
         VSOE exists only for the undelivered  elements,  the Company defers the
         full  fair  value  of  the  undelivered  elements  and  recognizes  the
         difference  between the total  arrangement  fee and the amount deferred
         for the  undelivered  items as  revenue.  If VSOE  does not  exist  for
         undelivered  items that are services,  then the Company  recognizes the
         entire  arrangement fee ratably over the remaining  service period.  If
         VSOE does not exist for undelivered elements that are specified product
         or  features,  the  Company  defers  revenues  until the earlier of the
         delivery of all  elements or the point at which we  determine  VSOE for
         these undelivered elements.

                                      F-11
<PAGE>

         The Company  recognizes  revenue  related to the delivered  products or
         services only if: (1) the above revenue  recognition  criteria are met;
         (2) any  undelivered  products or  services  are not  essential  to the
         functionality of the delivered  products and services;  (3) payment for
         the delivered  products or services is not contingent  upon delivery of
         the remaining services; and (4) the Company has an enforceable claim to
         receive  the  amount  due in the  event  that  we do  not  deliver  the
         undelivered products or services.

         For  arrangements  where  undelivered  services  are  essential  to the
         functionality of the delivered items,  the Company  recognizes  service
         revenues  under  the   percentage-of-completion   contract   method  in
         accordance with the provisions of SOP 81-1, "Accounting for Performance
         of Construction Type and Certain Production Type Contracts."

         Accounts  Receivable - Accounts  receivable consist of amounts due from
         customers. The Company records accounts receivable at the lower of cost
         or fair value. The Company  estimates  allowances for doubtful accounts
         based  on the aged  receivable  balances  and  historical  losses.  The
         Company charges off uncollectible accounts when management estimates no
         possibility of collecting the related receivable. The Company considers
         accounts  receivable to be past due or delinquent  based on contractual
         terms.

         Investment  in  Marketable   Securities  -  Investments  in  marketable
         securities  are  "available-for-sale"  and are  recorded at fair market
         value with the associated  adjustment recorded as an unrealized gain or
         loss.  As of  March  31,  2004,  the  unrealized  loss is  based on the
         original cost of the securities  verses  current  market value.  During
         fiscal year 2005, it was determined that the marketable securities held
         by the Company had no remaining  value and,  therefore,  the securities
         were written off and the unrealized loss recognized.

         Software   Development   Costs  -  Costs   incurred  to  establish  the
         technological  feasibility of software  products to be sold,  leased or
         otherwise  marketed  by  the  Company  are  expensed  as  research  and
         development.  Once technological feasibility is established,  costs are
         capitalized in accordance  with SFAS No. 86,  "Accounting for the Costs
         of Computer Software to Be Sold,  Leased, or Otherwise  Marketed" until
         the product is available for general release to customers.  Judgment is
         required in determining when technological  feasibility of a product is
         established.  Capitalized  software costs,  which consist  primarily of
         payroll and benefits of both  employees and outside  contractors,  have
         been amortized on a  product-by-product  basis using the  straight-line
         method over the established  economic life of the products  (determined
         to be five  years).  In  addition,  with the  issuance of SFAS No. 142,
         "Goodwill and Other Intangible Assets",  capitalized software costs are
         tested for impairment each quarter along with other intangible  assets.
         If impairment is  determined,  the amount of the  impairment is written
         off in that period.

         Note  Payable - The  Company  has a short term note  payable to an auto
         dealership for the purchase of a small passenger van. The original note
         terms are for the note to be paid within six months.  This liability is
         recorded as deferred revenue,  which should be earned in the subsequent
         period.

         Advertising  Costs -  Advertising  costs  are  charged  to  expense  as
         incurred.

                                      F-12
<PAGE>

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

         Recent Accounting  Pronouncements - On December 16, 2004, the Financial
         Accounting   Standards   Board   ("FASB")   issued  SFAS  No.   123(R),
         "Share-Based Payment", which is a revision of SFAS No. 123, "Accounting
         for Stock-Based  Compensation."  SFAS No. 123(R) supersedes APB Opinion
         No. 25,  "Accounting  for Stock Issued to  Employees."  SFAS No. 123(R)
         requires all  share-based  payments to employees,  including  grants of
         employee stock options,  to be recognized in the income statement based
         on their fair values. SFAS No. 123(R) must be adopted by the Company no
         later than July 1, 2005.  The Company  expects to adopt SFAS No. 123(R)
         on July 1, 2005. When the Company adopts SFAS No. 123(R),  it may elect
         the modified prospective method or the modified  retrospective  method.
         The  Company has not yet  determined  which  method it will elect.  The
         Company currently accounts for share-based  payments to employees using
         APB Opinion  No. 25 and the  intrinsic  value  method and, as a result,
         generally  recognizes no compensation  cost for employee stock options.
         The impact of adoption of SFAS No.  123(R) cannot be determined at this
         time because it will depend on levels of share-based  payments  granted
         in the future.

2.       Income Taxes

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

        Reconciliation between income taxes at statutory tax rates (39%) and the
        actual income tax provision  for  continuing  operations as of March 31,
        2005 follows:

        Expected provision (based on statutory rates)   $   (73,990)
        Effect of:
         Non-deductible permanent differences                 4,098
         Increase (decrease) in valuation allowance      (3,432,434)
         Increase in NOL carry forward                       23,089
                                                        -----------
        Total actual provision (benefit)                $(3,479,237)
                                                        ===========


                                      F-13
<PAGE>


        The tax effects of temporary  differences  that give rise to significant
        portions of the  deferred tax assets and  deferred  tax  liabilities  at
        March 31, 2005 and 2004, are presented below.
<TABLE>
<CAPTION>

                                                                            March 31, 2005        March 31, 2004
                                                                            ----------------      ---------------
<S>                                                                         <C>                   <C>
              Deferred tax assets:
                  Allowance for bad debts                                   $        29,250       $       11,752
                  Net operating loss carry forward                                5,532,375            5,519,534
                  Property and equipment, due to differences in
                  depreciation                                                       23,846               31,626
                  Intangibles, due to differences in amortization
                                                                                     74,312               50,068
                                                                            ----------------      ---------------
                  Gross deferred tax assets                                       5,659,783            5,612,980
                  Less valuation allowance                                          620,546            4,052,980
                                                                            ----------------      ---------------
                  Deferred tax assets                                             5,039,237            1,560,000

              Deferred tax liabilities                                                 --                   --
                                                                            ----------------      ---------------

              Net deferred tax assets                                       $     5,039,237       $    1,560,000
                                                                            ================      ===============


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

                                                                             March 31, 2005        March 31, 2004
                                                                            ----------------      ---------------
              Current expense (benefit):
                  Federal                                                   $          --         $         --
                  State

              Deferred expense (benefit):
                  Federal                                                        (3,033,181)          (1,360,000)
                  State                                                            (446,056)            (200,000)
                                                                            ----------------      ---------------

              Total provision (benefit) for income tax                      $    (3,479,237)      $   (1,560,000)
                                                                            ================      ===============
</TABLE>

         The  allowance  has  decreased  $3,432,434  as of March 31,  2005.  The
         decrease in the allowance is based on the weight of available evidence,
         that it is more  likely than not that the  deferred  tax assets will be
         realized.  The Company has been able to substantially increase revenues
         over the past two years.  The Company has an established  customer base
         that generates significant recurring revenue and expects to continue to
         expand  that base,  generating  additional  one-time  installation  and
         recurring  revenues.  The Company  believes it has incurred most of the
         significant  equipment and human resource expenses necessary to support
         its expected growth and appears to be capable of maintaining profitable
         operations going forward.

                                      F-14
<PAGE>

         Net  operating  loss carry  forwards  expire  thru  2025.  Subsequently
         recognized  tax  benefits  relating  to  the  valuation  allowance  for
         deferred  tax  assets  as of  March  31,  2005  will be  reported  as a
         reduction of income tax expense from continuing operations.

3.       Capitalized Software Costs

         The  Company  capitalizes  certain  costs of  developing  its  software
         products in accordance  with Statement of SFAS No. 86,  "Accounting for
         the  Costs of  Computer  Software  to be  Sold,  Leased,  or  Otherwise
         Marketed." Amortization expense, charged to cost of sales, was $248,181
         and $131,820 for the years ended March 31, 2005 and 2004, respectively.
         For the years ended March 31, 2005 and 2004, capitalized software costs
         and accumulated amortization were as follows:

                                             2005             2004

            Capitalized Software Costs     1,621,362      1,242,962
            Accumulated Amortization        (472,427)      (224,246)
                                         -----------    -----------
            Net                          $ 1,148,935    $ 1,018,716
                                         ===========    ===========

4.      Leases

        The  Company  has an  operating  lease for its office  facilities  which
        expires  July 31,  2005.  On  August 1, the  Company  will move to a new
        facility and has entered into a new five (5) year operating lease.

                     Year                          Minimum
                    Ending                     Lease Payments
                    ------                     --------------
                  3/31/2006                    $   397,473
                  3/31/2007                         474,842
                  3/31/2008                         487,339
                  3/31/2009                         499,836
                  3/31/2010                         512,333
                  3/31/2011                         172,166
                                              -------------
                  Total                          $2,543,989
                                              =============

         Rent expense under the facility lease was $274,606 and $243,892 for the
         years ended March 31, 2005 and 2004, respectively.

         The Company has  operating  leases  with IBM for  equipment.  The terms
         require  payments,  on a month-to-month  basis, in the amounts totaling
         $4,366.  Upon written notice, the Company is able to return or exchange
         the equipment at its option.

                                      F-15
<PAGE>

5.       Property and Equipment

         Property and  equipment  are  summarized  by major  classifications  as
         follows:

                              2005            2004          Method / Life
                           -----------    -----------       -------------
Office Furniture           $   113,572    $   102,979          SL / 5
Computer Software              171,487         70,605          SL / 3
Computer Equipment             733,172        606,258          SL / 3
Leasehold Improvements          54,763         54,763          SL / 5
Automobile                      16,403                         SL / 5
                           -----------    -----------
Total                        1,089,397        834,605
Accumulated Depreciation      (729,587)      (613,828)
                           -----------    -----------
Net                        $   359,810    $   220,777
                           ===========    ===========

         Depreciation  expense was  $115,759  and  $104,685  for the years ended
         March 31, 2005 and 2004, respectively.

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

6.       Goodwill and Intellectual Property

         On November 9, 2000 the Company entered into an Asset Purchase and Sale
         Agreement ("Agreement") with Ensign Information Systems ("Ensign").  In
         accordance with the Agreement,  the Company issued  1,500,000 shares of
         common stock for substantially  all of the assets of Ensign,  including
         intellectual property.

         With the  acquisition  of Ensign,  the  Company  recorded  goodwill  of
         $313,244.  Through  fiscal  year 2002 and into  fiscal  year 2003,  the
         Company had amortized  $156,622,  or half of the original book balance.
         In addition,  the Company  acquired from Ensign  intellectual  property
         related to the core  management  system  software of $305,682.  Through
         fiscal year 2002 and into fiscal year 2003,  the Company had  amortized
         $229,262 of the asset.  In fiscal year 2003,  the Company  adopted SFAS
         No.   142,"Goodwill  and  Other  Intangible  Assets".   This  statement
         eliminates the amortization of goodwill and other intangible assets and
         requires  the  Company  to test the assets  for  impairment,  which the
         Company performs on a quarterly basis.  Based on management's  analysis
         and testing  for  impairment,  no  adjustment  in the asset  values was
         recorded for the years ended March 31, 2005 and 2004.

7.       Preferred Stock

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

                                      F-16
<PAGE>

        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  share 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.

8.      Deposits

        In  conjunction  with its facility  lease  obligations,  the Company has
        placed security deposits with its landlords.  The deposits total $55,705
        and $13,205 as of March 31, 2005 and 2004, respectively.  In addition to
        the facilities  deposits,  the Company has placed security deposits with
        IBM for computer servers totaling $66,375 as of March 31, 2005 and 2004.

9.      Liquidity

        The Company incurred development losses from inception to March 31, 2003
        amounting  to  $21,549,095.  The Company has earned  profits in each the
        last two fiscal years. In the future,  the Company believes that it will
        generate sufficient cash flow from operations to fund its growth. In the
        event that cash flow requirements are not met by operations,  management
        intends to raise additional capital through private placement offerings.

10.     Stock Options and Warrants

        In December  2001,  the  Company  established  a stock  option plan (the
        "Plan") to provide incentives to its directors,  officers, employees and
        advisors  to do  business  with the Company and to enable the Company to
        obtain and  retain  the  services  of the type of  directors,  officers,
        advisors and employees  considered  essential for long-term success. The
        granting of options is at the  discretion of the Stock Option  Committee
        of the Board.  The Committee  may determine the terms and  conditions of
        options,  consistent  with the Plan.  The Plan  currently has authorized
        9,000,000 shares for distribution.

        As of March 31, 2005,  there were outstanding a total of 8,254,092 stock
        options and warrants to purchase  Company common stock granted under the
        Plan, all of which have an exercise price of between $0.20 and $0.65 per
        share.  Options  granted  under the Plan  vest over a one to three  year
        period. Of the options outstanding under the Plan,  3,147,000 are vested
        as of March 31, 2005.

                                      F-17
<PAGE>

        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. Unearned compensation represents the intrinsic
        value of stock  options  granted  but not yet  vested.  The  Company has
        $19,357  and $0  unearned  compensation  as of March 31,  2005 and 2004,
        respectively.

        The Company has adopted only the disclosure  provisions of SFAS No. 123,
        "Accounting  for Stock Based  Compensation"  and applies APB Opinion 25,
        "Accounting for Stock Issued to Employees" to stock options.
<TABLE>
<CAPTION>

                                                     Year Ended March 31,
                                          -----------------------------------------
                                              2005           2004           2003
                                          -----------    -----------    -----------
<S>                                       <C>            <C>            <C>
        Net income, as reported           $ 3,175,372    $ 1,850,153    $(1,275,015)

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

        Deduct:  total stock-based
        employee compensation expense
        determined under fair value
        based method for all awards           (56,480)       (10,868)        (7,152)
                                          -----------    -----------    -----------
        Pro forma net income              $ 3,125,810    $ 1,839,285    $(1,282,167)
                                          ===========    ===========    ===========
</TABLE>

        Information on stock options  outstanding as of March 31, 2005 and  2004
        is as follows:
<TABLE>
<CAPTION>

                                            Number of                     Weighted
                             Range of      Options and       Average       Average                    Weighted
              Year           Exercise        Warrants       Remaining     Exercise       Number        Average
             Ended            Prices       Outstanding        Life          Price      Exercisable      Price
            --------        ----------     -------------    ---------     ---------    ------------   ----------
<S>         <C>             <C>                <C>           <C>            <C>           <C>           <C>
            03/31/05        $0.20-0.65         8,254,092     90 mos.        $0.32         3,147,000     $0.30

            03/31/04        $0.20-0.70         7,738,092     93 mos.        $0.38         2,303,700     $0.38
</TABLE>

11.     401K Profit Sharing Plan

        The Company has an employee benefit program  consisting of a 401K Profit
        Sharing Plan (the "401K Plan").  The 401K Plan provides for employees to
        contribute on a pretax basis, provides employer matching, and presents a
        broad  portfolio of  investment  options to be selected by the employee.
        Employer  matching  contributions  are  made at the sole  discretion  of
        management.  The Company has not contributed to the 401K Plan during the
        years ended March 31, 2005 and 2004.

                                      F-18
<PAGE>

12.     Related Party Transactions

        Certain  founding  shareholders  acquired common stock of the Company in
        return for contributions  and development of the Company's  predecessor,
        Arkona, L.L.C. These founding shareholders received a total of 7,523,000
        shares of common stock and then, collectively, entered into an agreement
        with Caldera  Holding  Company,  L.C.  ("Caldera"),  wherein Caldera was
        given the right to grant secondary options to third parties with respect
        to 1,550,000 of such shares in order to encourage  the  development  and
        increased  productivity  of the Company.  The secondary  options have an
        exercise price of $0.30 per share and expire December 31, 2006.  Holders
        of the shares underlying the secondary options are entitled to dividends
        and  distributions  with  respect to such  shares  until the options are
        exercised.  However,  Caldera has been granted  dispositive voting power
        with respect to all shares  subject to its  agreement  with the founding
        shareholders so long as the agreement  remains in place.  Certain of the
        secondary options have been granted to officers of the Company. Exercise
        of these secondary  options will not yield any assets to the Company nor
        dilute the Company's equity position.

        Prior to fiscal year 2004, the Company's Chief Executive  Officer loaned
        the Company an aggregate of $150,000. Outstanding principal and interest
        on such loans were  convertible  into units,  comprised  of one share of
        common  stock and one  warrant to purchase  common  stock at an exercise
        price of $.20 per  share.  During  the year ended  March 31,  2004,  the
        outstanding  principal and interest on the loans were  converted into an
        aggregate  of 940,000  shares of common  stock and  940,000  warrants to
        purchase common stock.

13.     Preferred Stock Rights

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

                                      F-19
<PAGE>

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

14.     Long-Term Note Payable

        The Company  has a note  payable  with a related  party in the amount of
        $50,000.  The note has an  interest  rate of 12% and is  unsecured.  The
        principal payments are at the discretion of the Company.  During each of
        the years  ended  March 31,  2005 and 2004 the  Company  paid  $6,000 in
        interest.

15.     Prior Period Adjustments

       During 2005, the Company  determined  that their  accounting for software
       development costs was erroneously  reported in prior periods. The Company
       had expensed all software  development costs during the years ended March
       31, 2001,  2002 and 2003.  Beginning with the fiscal year ended March 31,
       2004,  the Company  capitalized  software  development  costs  related to
       automobile  manufacturer  integration software that were incurred between
       the date technical  feasibility was established and the date the software
       became ready for its  intended  use.  Similar  expenses  incurred  during
       fiscal  years  2001,   2002  and  2003  should  have  been   consistently
       capitalized.  Accordingly,  the Company has booked $119,165, $389,988 and
       $376,497  in  fiscal  years  2001,  2002  and  2003,   respectively,   to
       retroactively capitalize the asset.

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

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

                                      F-20
<PAGE>

       The effect on certain line items affected by these  recalculations is set
forth below:
<TABLE>
<CAPTION>

                                    For the Years Ended March 31, 2005, 2004 and 2003
                  --------------------------------------------------------------------------------------
                   Reconciliation from 2005      Reconciliaiton from 2004      Reconciliation from 2003
                  10-KSB filed July 14, 2005     10-KSB filed July 7, 2004    10-KSB filed June 30, 2003
                  --------------------------    --------------------------    --------------------------

                   Acquired                      Acquired                      Acquired
                   Software      Accumulated     Software      Accumulated     Software      Accumulated
                    Asset        Amortization       Asset      Amortization      Asset      Amortization
                  -----------    -----------    -----------    -----------    -----------    -----------
                  <C>            <C>            <C>            <C>            <C>            <C>
Previously
reported          $      --      $      --      $   305,682    $  (229,262)   $   305,682    $  (229,262)

Adjustment        $   305,682    $  (229,262)   $      --      $      --      $      --      $      --
                  -----------    -----------    -----------    -----------    -----------    -----------
Adjusted amount   $   305,682    $  (229,262)   $   305,682    $  (229,262)   $   305,682    $  (229,262)



                     OEM                           OEM                           OEM
                   Software      Accumulated     Software      Accumulated      Software     Accumulated
                    Asset        Amortization     Asset        Amortization      Asset       Amortization
                  -----------    -----------    -----------    -----------    -----------    -----------
Previously
reported          $ 1,041,395    $  (236,846)   $   357,312    $      --      $      --      $      --

Adjustment        $   579,967    $  (235,581)   $   885,650    $  (224,246)   $   885,650    $   (92,426)
                  -----------    -----------    -----------    -----------    -----------    -----------
Adjusted amount   $ 1,621,362    $  (472,427)   $ 1,242,962    $  (224,246)   $   885,650    $   (92,426)


                                                                                Income
                     Income                        Income                       (Loss)
                  (Loss) from     Net Income    (Loss) from     Net Income       from        Net Income
                  Operations        (Loss)       Operations       (Loss)       Operations      (Loss)
                  -----------    -----------    -----------    -----------    -----------    -----------

Previously
reported          $  (236,565)   $ 3,289,519    $   478,683    $ 1,996,971    $(1,524,206)   $(1,559,085)

Adjustment        $  (114,147)   $  (114,147)   $  (146,818)   $  (146,818)   $   284,070    $   284,070
                  -----------    -----------    -----------    -----------    -----------    -----------
Adjusted amount   $  (350,712)   $ 3,175,372    $   331,865    $ 1,850,153    $ (1,240,136)  $(1,275,015)



                   Basic EPS     Diluted EPS     Basic EPS     Diluted EPS     Basic EPS     Diluted EPS
                  -----------    -----------    -----------    -----------    -----------    -----------
Previously
reported          $     0.103    $     0.085    $     0.064    $     0.055    $    (0.058)   $    (0.058)

Adjustment        $    (0.004)   $    (0.003)   $    (0.002)   $    (0.002)   $    (0.009)   $    (0.009)
                  -----------    -----------    -----------    -----------    -----------    -----------
Adjusted amount   $     0.099    $     0.082    $     0.062    $     0.053    $    (0.049)   $    (0.049)

</TABLE>

                                      F-21
<PAGE>

        The following table shows the restated major line items from each of the
quarters in the fiscal year ended March 31, 2005:
<TABLE>
<CAPTION>

=================================================================================================
                                    Quarter      Quarter     Quarter      Quarter   Total for the
                                                  Ended       Ended        Ended      Year Ended
                                   06/30/04     09/30/04     12/31/04     03/31/05    03/31/05
-------------------------------   ----------   ----------   ----------   ----------   ----------
<S>                               <C>          <C>          <C>          <C>          <C>
Total Revenues                    $1,634,599   $1,541,022   $2,089,081   $1,989,959   $7,254,661
-------------------------------   ----------   ----------   ----------   ----------   ----------
Cost of Sales                     $  969,125   $  814,948   $1,032,061   $1,243,821   $4,059,955
-------------------------------   ----------   ----------   ----------   ----------   ----------
Gross Profit                      $  665,474   $  726,074   $1,057,020   $  746,138   $3,194,706
-------------------------------   ----------   ----------   ----------   ----------   ----------
Total Operating Expenses          $  823,301   $  737,328   $  886,973   $1,097,816   $3,545,418
-------------------------------   ----------   ----------   ----------   ----------   ----------
Net Income (Loss)                 $  781,255   $  854,963   $1,037,357   $  501,797   $3,175,372
-------------------------------   ----------   ----------   ----------   ----------   ----------
Basic Earnings per Share          $    0.025   $    0.027   $    0.032   $    0.016   $    0.099
-------------------------------   ----------   ----------   ----------   ----------   ----------
Diluted Earnings per Share        $    0.020   $    0.022   $    0.027   $    0.013   $    0.082
-------------------------------   ----------   ----------   ----------   ----------   ----------
Current Assets                    $  462,951   $  535,232   $  817,216   $  626,196
-------------------------------   ----------   ----------   ----------   ----------   ----------
Fixed Assets                      $  231,227   $  254,499   $  261,438   $  359,810
-------------------------------   ----------   ----------   ----------   ----------   ----------
Other Assets                      $3,799,545   $4,704,066   $5,606,012   $6,543,294
-------------------------------   ----------   ----------   ----------   ----------   ----------
Total Assets                      $4,493,723   $5,493,797   $6,684,666   $7,529,300
-------------------------------   ----------   ----------   ----------   ----------   ----------
Current Liabilities               $   88,050   $  149,861   $  283,373   $  594,850
-------------------------------   ----------   ----------   ----------   ----------   ----------
Total Liabilities                 $  138,050   $  199,861   $  333,373   $  644,850
-------------------------------   ----------   ----------   ----------   ----------   ----------
Stockholders' Equity              $4,335,673   $5,293,936   $6,351,293   $6,884,450
-------------------------------   ----------   ----------   ----------   ----------   ----------
Total Liabilities & Equity        $4,493,723   $5,493,797   $6,684,666   $7,529,300
-------------------------------   ----------   ----------   ----------   ----------   ----------
</TABLE>

16. Earnings per share

        The following is an illustration of the reconciliation of the numerators
        and denominators of the basic and diluted EPS computations:
<TABLE>
<CAPTION>

                                               For the Year Ended March 31, 2005
                                         ---------------------------------------------
                                            Income         Shares    Per Share Amount
                                         (Numerator)   (Denominator)     (Amount)

<S>                                       <C>          <C>          <C>
        Basic EPS:
            Income available to
            common stockholders           $3,175,372   31,956,688   $        0.099
        Effect of diluted securities:
            Warrants and options                --      2,875,000             --
            Convertible preferred stock         --      4,095,170             --
        Diluted EPS:                            --           --               --
            Income available to common
            stockholders and assumed
            conversions                   $3,175,372   38,926,858   $        0.082
                                          ==========   ==========   ==============
</TABLE>


                                      F-22