SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   Form 10-QSB
                                   -----------



(Mark One)

(X)      Quarterly  report  pursuant  to Section  13 or 15(d) of the  Securities
         Exchange Act of 1934 for the quarterly period ended June 30, 2003

                                       OR

( )     Transition  Report  pursuant  to 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 as specified in its charter)



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


                      10542 South Jordan Gateway, Suite 200
                            South Jordan, Utah 84095

              (Address of principal executive offices and Zip Code)

                                 (801) 501-7100

              (Registrant's telephone number, including Area Code)



Check  whether the  registrant:  (1) filed all  reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter  period that the  registrant  was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
                                                                Yes [ ]   No [X]

As of August 8, 2003 there were issued and outstanding  28,416,840 shares of the
Company's Common Stock, par value $.001 per share.



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


                                       1

<PAGE>



                      PART I - Item 1. Financial Statements


                                ARKONA, INC.
                               Balance Sheets

                                                     30-Jun-03     31-Mar-03
ASSETS                                              (Unaudited)    (Audited)
                                                   -----------    -----------
    Current Assets
       Cash and cash equivalents                       135,503         18,307
       Marketable securities                              --             --
       Accounts receivable, net of allowance           330,642        102,935
       Prepaid expenses                                   --             --
                                                   -----------    -----------
    Total Current Assets                               466,146        121,242
                                                   -----------    -----------
       Equipment                                       610,827        632,481
       Less: Accumulated depreciation                 (501,133)      (509,144)
                                                   -----------    -----------
       Equipment, net                                  109,695        123,337
                                                   -----------    -----------
    Other Assets
       Deposits                                         17,779         13,205
       Other assets, net amortization                  278,910        260,127
                                                   -----------    -----------
    Total Other Assets                                 296,689        273,332
                                                   -----------    -----------
TOTAL ASSETS                                           872,530        517,911
                                                   ===========    ===========

LIABILITIELIABILITIESHANDESTOCKHOLDERS' EQUITY
    Current Liabilities
       Accounts payable                                170,769        347,289
       Accrued liabilities                             275,310        244,040
       Deferred revenue                                148,600        172,433
       Current portion of long-term debt                30,588         69,322
                                                   -----------    -----------
    Total Current Liabilities                          625,267        833,084
                                                   -----------    -----------
    Long-Term Liabilities
       Current portion of long-term debt               (30,588)       (69,322)
       Notes payable legal                             120,440        152,174
       Note payable - related party                    286,321        286,822
                                                   -----------    -----------
    Total Long-Term Liabilities                        376,173        369,674
                                                   -----------    -----------
    Total Liabilities                                1,001,440      1,202,758
                                                   ===========    ===========
    Stockholders' Equity
       Common stock                                     28,619         28,436
       Series B preferred stock                            575           --
       Additional paid in capital                   22,070,222     21,645,977
       Accumulated unrealized loss on investment
          securities available for sale                (16,942)       (16,942)
       Retained earnings (deficit)                 (22,211,384)   (22,342,318)
                                                   -----------    -----------
    Total Stockholders' Equity                        (128,910)      (684,847)
                                                   -----------    -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY             872,530        517,911
                                                   ===========    ===========

       SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                       2

<PAGE>



                                  ARKONA, INC.

            Unaudited Condensed Consolidated Statements of Operations


                                                         Three Months Ended
                                                     30-Jun-03      30-Jun-02
                                                    -----------    -----------

Revenues                                              1,103,242        641,720
Operating Expenses
    Cost of Sales                                       455,531        320,714
    Research and Development                            130,338        196,587
    Marketing, Admin & Sales                            372,164        573,992
                                                    -----------    -----------
Total Operating Expenses                                958,034      1,091,293
                                                    -----------    -----------

Net Income / (Loss) From Operations                     145,208       (449,573)
    Interest Income                                        --             --
    Interest Expense                                    (14,273)        (2,112)
                                                    -----------    -----------
Net Income / (Loss) From Operations                     130,935       (451,685)
                                                    ===========    ===========


    Basic and Diluted Net Income (Loss) per share          0.01          (0.02)
                                                    -----------    -----------
    Weighted average and diluted number
    Of Shares Outstanding                            28,416,840     23,947,579
                                                    ===========    ===========


       SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                       3

<PAGE>



                                  ARKONA, INC.

            Unaudited Condensed Consolidated Statements of Cash Flows


                                                         Three Months Ended
                                                       30-Jun-03   30-Jun-02
                                                       --------    --------
Cash Flows (used by) Operating Activities:
    Net (Loss)/Income                                   130,935    (451,686)
    Adjustments to reconcile net income to
    net cash used for operating activities:
        Depreciation and Amortization                    23,914      83,765
        Amortization of unearned compensation              --          --
        Changes is assets and liabilities:
             Accounts receivable                       (227,707)    (18,879)
             Accounts Payable                          (176,520)    112,079
              Deferred revenue                          (23,834)     19,857
             Accrued Liabilities                         (7,464)     (5,047)
                                                       --------    --------
Net Cash (Used By) Operating Activities                (280,676)   (259,911)
                                                       --------    --------

Cash Flows (Used for) Investing Activities:
    Additions to Equipment                               (9,125)     (3,000)
    Other assets                                        (23,357)    (10,400)
                                                       --------    --------
Net Cash Used for Investing Activities                  (32,482)    (13,400)
                                                       --------    --------

Cash Flows Provided By Financing Activities:
    Proceeds from Issuance of Preferred  Stock          425,000     160,000
    Loan from officer                                     6,500     100,000
    Leases                                               (1,145)     (2,231)
                                                       --------    --------
Net Cash Provided By Financing Activities               430,355     257,769
                                                       --------    --------

Net Increase/(Decrease) in Cash and Cash Equivalents    117,197     (15,542)
                                                       --------    --------

Beginning Cash Balance                                   18,307     120,290
                                                       --------    --------
Ending Cash Balance                                     135,503     104,748
                                                       ========    ========

       SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                       4
<PAGE>



                                  ARKONA, INC.

                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED

                              FINANCIAL STATEMENTS



Note 1 Basis of Presentation

The  Company has  prepared  the  accompanying  condensed  financial  statements,
without  audit,  according to the  applicable  regulations of the Securities and
Exchange  Commission.  Certain information and disclosures  normally included in
financial   statements  prepared  according  to  generally  accepted  accounting
principles  have been  condensed  or  omitted.  The  Company  believes  that the
following disclosures are adequate and not misleading. These unaudited condensed
financial  statements  reflect  all  adjustments   (consisting  only  of  normal
recurring  adjustments) that, in management's  opinion, are necessary to present
fairly the  financial  position and results of operations of the Company for the
periods  presented.  It is suggested that these  unaudited  condensed  financial
statements are read in conjunction  with the consolidated  financial  statements
and the notes thereto  included in the Company's Annual Report on Form 10-KSBfor
the fiscal year ended March 31, 2003.



Note 2  Concentration

The Company is limited in that its products are currently  specifically designed
for customers in the auto dealership  industry.  With minimal  development,  the
Company's products could be customized to meet customer needs in the RV, Marine,
ATV and motorcycle markets.  However, sales of Company products and services are
not  limited  to any  geographic  area.  If the  industry  environment  were  to
experience significant negative conditions, the Company could also be affected.

The Company maintains cash balances in a financial  institution located in Orem,
Utah.  Accounts at this institution are insured by the Federal Deposit Insurance
Corporation up to $100,000.

 Note 3  Equity

During the three  months  ended June 30, 2003,  the Company  raised  $425,000 by
selling  425,000  shares of Series B  Preferred  Stock at $1.00 per share.  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 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,  shares of Series B Preferred  Stock are  redeemable  with 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.
                                       5
<PAGE>

                                  ARKONA, INC.

                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED

                              FINANCIAL STATEMENTS


Note 4  Significant Accounting Policies

(a) Income Taxes

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

(b) Net Loss Per Common Share

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

(c) Cash & Cash Equivalents

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

(d) Use of Estimates in Preparation of Financial Statements

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

(e) Revenue Recognition

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

(f) Patents

The Company has obtained  various  patents for certain  aspects of its products.
The costs of obtaining  patents are  capitalized  as incurred and are  amortized
over  estimated  useful  lives.  Amortization  is computed on the  straight-line
method.  One patent has been issued as of June 30, 2003, and is being  amortized
over seven years.

                                       6
<PAGE>

(g) Investment in Marketable Securities

Investments in marketable securities are  "available-for-sale"  and are recorded
at fair market value with the  associated  adjustment  recorded as an unrealized
gain  or  loss.  The  unrealized  loss  is  based  on the  original  cost of the
securities  verses current market value.  The June 30, 2003  unrealized  loss on
investments  of $16,942 is related to securities  that have been written off but
not disposed.

(h) Software Costs

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

(i) Stock-Based Compensation

Stock-based  compensation  is  accounted  for using APB 25. Under APB 25, if the
exercise  price of the options is greater  than or equal to the market  price at
the date of grant, no compensation expense is recorded. We have also adopted the
disclosure   only   provisions  of  SFAS  123,   "Accounting   for   Stock-based
Compensation" for options issued, as amended by SFAS 148.

To estimate  compensation  expense that would be  recognized  under SFAS 123, we
have used the modified  Black-Scholes  option pricing model. If we had accounted
for our stock options using the  accounting  method  prescribed by SFAS 123, our
net income and income per share would be as follows:


                                                            Three Months Ended
                                                                June 30,
                                                         -----------------------
                                                           2003        2002
                                                         --------   -----------
Net Income / (loss) applicable to shareholders (basic
and diluted) as reported                                 $130,932   ($  451,686)
Deduct: stock-based employee compensation
expense included in reported net loss, net of
 related tax effects                                       88,452          --
Add: total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax effects            --            --
                                                         --------   -----------

Pro forma net income (loss) applicable to shareholders   $ 42,480   ($  451,686)
                                                         ========   ===========

Income (loss) per common share (basic and diluted):
As reported                                              $   0.01   $     (0.02)
                                                         ========   ===========
Pro forma                                                $   0.00   $     (0.02)
                                                         ========   ===========


(i) Advertising Costs

Advertising costs of the Company are charged to expense as incurred.
                                       7
<PAGE>

Item 2.  Management's Discussion and Analysis

Overview

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

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

         We believe that we can increase out monthly  installs in the future due
to our  relationship  with  Mitsubishi,  other  OEMs,  and  several  third party
companies.  In July of last year,  Mitsubishi  announced  at its annual  dealers
conference  that ARKONA was its preferred  provider of DMS products.  ARKONA and
Mitsubishi  entered  into an  agreement  to work  together  to  roll  out  joint
marketing programs to all existing and new Mitsubishi dealers. Since the signing
of  that  agreement,  we  have  installed  our  system  in  over  30  Mitsubishi
dealerships.

Results of  Operations  for the Three Month  period Ended June 30, 2003 and June
30, 2002

Revenues  for the  three-month  period ended June 30, 2003 were  $1,103,242,  as
compared  to $641,720  for the  three-month  period  ended June 30,  2002.  This
represents  a 72%  increase  year over year.  We  attribute  the increase to the
continued  success we are experiencing  replacing our competitor's  systems with
our Dealer Management Software (ADMS). More specifically,  the increase in sales
is due not only to increases in  installations  of ADMS, but also the associated
monthly maintenance and support revenue. The number of dealerships installed has
doubled for the three-month  period ending June 30, 2003 as compared to the same
period  last year.  In the past we have  experienced  a season  slow down in the
summer due to the fact that during the summer months dealerships find themselves
very busy and prefer to install a new system when they are not quite so busy. So
far this year,  things don't appear to be slowing  down.  In this quarter  ended
June 30, 2003 we installed  28 new  dealership  points,  and we expect to exceed
that number in the quarter ending September 30, 2003.

We  currently  have sales lined up through the end of October and into  November
and are now  scheduling  installs well into  December.  We believe that revenues
will continue to increase in the future and are  predicting a profitable  fiscal
year 2004.

                                       8
<PAGE>

There are several  factors that have  contributed  to the increase in our sales;
(i) our ASP model  results in  increased  security  of data and at the same time
substantial decreases in cost associated with the upfront investment of a system
and the continued maintenance; (ii) our reporting of a net income, rather than a
net loss, for the three-month  period ended June 30, 2003 has demonstrated  that
we can  operating  profitably,  , which has minimized  past  concerns  about our
ability to continue as a going concern;  and (iii) our customers  continue to be
excellent references.

Cost of sales totaled $455,531,or 41% of sales, for the three-month period ended
June 30,  2003.  This  compares to cost of sales  totaling  $320,714,  or 50% of
sales,  for the same  three-month  period 2002. The decrease in cost of sales is
due to  increased  efficiencies  in our  installation  process,  more  effective
training  programs that bring new  technicians up to speed faster,  and improved
scheduling, which results increased utilization of our installation capacity. We
expect to continue to improve our  training and  installation  process and, as a
result, we expect  additional  decreases in the cost of sales as a percentage of
revenue.

Research and  development  expenses  decreased from $196,587 for the three-month
period ended June 30, 2002 to $130,338 for the three-month period ended June 30,
2003.  This  decrease for the period is primarily due to  engineering  resources
being allocated to customer support.  This decrease is temporary,  and we expect
increases in  engineering  to occur in the future.  We are currently  hiring new
engineers  and see  this  area of our  business  continuing  to grow to meet the
demand of an expanding customer base and new product innovation.

Marketing,  administrative  and sales  expenses  decreased from $573,992 for the
three-month  period ended June 30, 2002 to $372,164 for the  three-month  period
ended June 30, 2003. The decrease is due primarily to decreases in  professional
services  and an  continuing  effort  by  management  to  economize  where  ever
possible.

We had no interest income during the three-month periods ended June 30, 2003 and
June 30, 2002. This was due to decreased cash balances we maintained in banks.

Operating  expenses totaled  $958,034 for the three-month  period ended June 30,
2003 compared to operating expenses totaling $1,091,293 for the same period last
year. The decrease in operating  expenses for the three-month  period ended June
30,  2003 of  $133,259,  or 12 percent,  is due to  decreases  in  research  and
development  expenses and  marketing  administration  and sales but is partially
offset by the increase in cost of sales.

To the extent of  available  capital,  we plan to increase  expenditures  in all
areas of our business during the next twelve months as development and promotion
of existing and new products continues.  One of our biggest challenges currently
is meeting the demand for our ADMS  product.  We currently  have the capacity to
install the Arkona Dealer Management System in 10-12 stores per month.

Net income for the three-month period ended June 30, 2003 was $130,935, or $0.01
per  share,  compared  to a loss of  ($451,685)  or  ($0.02)  per  share for the
corresponding  period  in  2002.  This  is a  major  milestone  for  Arkona  and
represents a substantial  improvement in the financial  results for the Company.
Our  reporting of net income for the first time is, as explained  above,  due to
increased sales,  increased  recurring support sales,  decreases in expenses and
increased  efficiencies  throughout  the Company.  Since we entered this market,
some of our  competitors  have used our  financial  condition as a major selling
point  for  their  system.  Now that we appear  to be  turning  the  corner as a
company,  these  competitors  are going  have to  compete  with us on  features,
service and cost. We believe this is one of the most significant benefits of our
reporting of a net profit for this quarter.

                                       9
<PAGE>

Based upon these  results and our  projected  sales for the next year, we expect
the Company to continue to be profitable in the foreseeable  future. The primary
marketing focus for the  three-month  period ended June 30, 2003 continued to be
establishing  our identity in the marketplace and building a secure platform for
future  growth,  including  recruiting  the key personnel and business  partners
required to build end-user solutions and grow sales.

Liquidity and Capital Resources

At June 30, 2003, we had cash and cash  equivalents of $135,503,  as compared to
cash and cash equivalents of $18,307 as of March 31, 2003.

In order to meet operating costs during the  three-months  period ended June 30,
2003, we relied upon increased installation revenues, recurring revenues and the
proceeds  from our issuance of 425,000  shares of Series B Preferred  Stock at a
price of $1.00  per  share to five  accredited  outside  investors  who are also
customers.

We expect our revenues to continue to increase and to become more  profitable in
the future. To the extent profitability  continues, we do not anticipate needing
to raise additional funds to fund our operations. However, in an attempt to grow
and become more profitable,  we may issue additional  equity securities in order
to  raise  capital  necessary  to  accelerate  expansion  and new  products.  In
addition,  we are currently working with a local bank to secure a line of credit
which,  if secured,  would  allow us to smooth out cash flow  needs.  Unless and
until we receive approval on a line of credit, we may need to rely on additional
equity  financing to finance our planned growth and to smooth out our cash flow.
We have not commitments from any parties to provide  additional  capital but, if
additional  capital is required,  believe that we can rely on key  shareholders,
customers and others for additional equity financing.  If adequate funds are not
available or are not  available  on  acceptable  terms,  our ability to fund our
marketing  and planned  product  development  programs or  otherwise  respond to
competitive pressures could be hindered.

The  following  table  discloses  aggregate  information  about our  contractual
obligations  including long-term debt,  operating and capital lease payments and
office lease payments,  and the periods in which payments are due as of June 30,
2003:
<TABLE>
<CAPTION>

                                                      Less Than               After
Contractual Obligations           Total     1 Year    1-3 years  4-5 Years   5  Years
                                --------   --------   --------   --------   --------
<S>                             <C>        <C>        <C>        <C>        <C>
Long-term debt                  $350,000   $200,000   $150,000   $      0   $      0
                                --------   --------   --------   --------   --------
Operating Leases                  30,054     53,429     83,483          0          0
                                --------   --------   --------   --------   --------
Capital Leases                    20,784      7,736     28,520          0          0
                                --------   --------   --------   --------   --------
Office Lease                     517,165    171,000    346,165          0          0
                                ========   ========   ========   ========   ========
Total Contractual Obligations   $978,898   $421,838   $557,330   $      0   $      0
                                --------   --------   --------   --------   --------
</TABLE>

Critical Accounting Policies and Estimates

         Management  is basing this  discussion  and  analysis of our  financial
condition and results of operations on our  consolidated  financial  statements.
The preparation of these financial  statements requires us to make estimates and
judgments that affect the reported amounts of assets,  liabilities,  revenue and
expenses,  and related  disclosure of contingent  assets and liabilities.  On an
on-going  basis,  we evaluate our critical  accounting  policies and  estimates,
including   those  related  to  revenue   recognition,   valuation  of  accounts
receivable, property, plant and equipment, long-lived assets, intangible assets,
and contingencies. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances,  the
results of which form the basis for making  judgments  about the carrying values
of assets and  liabilities  that are not readily  apparent  from other  sources.
Actual results may differ from these estimates  under  different  assumptions or
conditions.

                                       10
<PAGE>

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

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

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

o        Equipment.  We  utilize  significant  amounts  equipment  in  providing
         service to our customers.  We utilize  straight-line  depreciation  for
         equipment  over  our  estimate  of  their  useful  lives.   Changes  in
         technology  or changes in the intended  use of equipment  may cause the
         estimated  period of use or the value of these  assets  to  change.  We
         perform an annual analysis to confirm the  appropriateness of estimated
         economic  useful lives for each  category of  equipment.  Estimates and
         assumptions used in setting depreciable lives require both judgment and
         estimates.

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

                                       11
<PAGE>

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

Cautionary Statement Regarding Forward-Looking Statements

We consider all forward-looking statements contained in this Quarterly Report to
be covered by and to qualify for the safe harbor protection  provided by Section
21E of the  Securities  Exchange  Act of  1934,  as  amended.  Shareholders  and
prospective  shareholders  should understand that several factors govern whether
the results  described by any such  forward-looking  statement will be or can be
achieved.  Any one of  those  factors  could  cause  actual  results  to  differ
materially from those projected in this Report.

The  forward-looking  statements  contained  in this  report  include  plans and
objectives of management for future  operations,  plans relating to the products
and predictions  regarding the economic performance of the Company.  Assumptions
applicable  to the  foregoing  involve  judgments  with  respect to, among other
things,  future economic,  competitive,  and market conditions,  future business
decisions,  and the time and money required to successfully complete development
projects,  all of which are difficult or impossible  to predict  accurately  and
many of which are beyond our control.  Although we believe that the  assumptions
underlying  the  forward-looking   statements  are  reasonable,   any  of  those
assumptions could prove inaccurate. Therefore, we cannot assure that the results
contemplated in any of the forward-looking  statements  contained herein will be
realized.  The impact of actual  experience and business  developments may cause
the Company to alter its marketing, capital expenditure plans, or other budgets,
which may in turn affect the Company's  results of  operations.  In light of the
inherent uncertainties in forward-looking  statements, the inclusion of any such
statement does not guarantee that the objectives or plans of the Company will be
achieved. Among other risk factors to consider are the factors identified in the
subsection entitled "Factors That May Affect Future Results" below.

Factors That May Affect Future Results.

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

We have  incurred  substantial  losses since our  inception  and may continue to
incur losses in the future.
         We  acquired  the assets that  generate  all of our revenue in November
2000, and,  accordingly,  our current business has a limited  operating  history
upon  which  an  evaluation  of our  prospects  and us can  be  based.  We  have
experienced net losses in each three-month period since inception except for the
three-month period ended June 30, 2003.  Although we have projected that we will
report a net profit during the remainder of this fiscal year,  such  projections
assume that we will  continue to add new  customers  at a constant or  increased
rate and that our operating expenses will increase slower than our revenues.  We
may not be able to continue  to add new  customers  at a constant  or  increased
rate, and we may even begin losing  customers.  Assuming we add more  customers,
our labor costs, server and other capital equipment costs and other expenses may
begin to increase dramatically, or we may experience unexpected costs related to
litigation, insurance, acquisitions, product development or other items that may
cause our  expense to increase  at a faster  rate than  expected.  Even if we do
become profitable,  we may not be able to maintain  profitability or to increase
profitability in the future.

We may require  additional  capital to continue  development of our products and
fund our operations.

         Although we believe that we have working capital sufficient to meet our
immediate term obligations,  such projection assumes that we will not experience
an unexpected  need for cash and will not  significantly  expand our  operations
through acquisition or otherwise. We do not have a significant cash reserve, and
our cash flow  from  operations  is  presently  approximately  equal to our cash
expenditures. In the event we experience an unexpected need for cash, expand our
operations in any significant  way or otherwise need additional  cash, we expect
to  continue  to rely  primarily  on the  offer and sale of  convertible  notes,
warrants and equity  securities to obtain such cash. If financing is needed,  we
cannot assure you that additional financing will be available on terms favorable
to us, or at all. If adequate funds are not  available,  or are not available on
acceptable  terms,  our ability to expand our operations,  or to continue normal
operations, may be limited.

                                       12
<PAGE>

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

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

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

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

Our competitors have greater resources than we do.

         The market for automobile dealership data management software is highly
competitive,  and we must compete with companies that possess greater financial,
technical and marketing  resources than we do. These  advantages may enable them
to respond more quickly to new or emerging  technologies and changes in customer

                                       13
<PAGE>


preferences.  These  advantages  may also allow them to engage in more extensive
research and development,  undertake extensive far-reaching marketing campaigns,
adopt  more  aggressive  pricing  policies  and make more  attractive  offers to
potential  employees and strategic  partners.  As a result,  we may be unable to
obtain a significant  market share in the automobile dealer  management  systems
business. In addition, competition may result in price reductions, reduced gross
margin and loss of market share. We may not be able to compete successfully, and
competitive  pressures may adversely affect our business,  results of operations
and financial condition.

Our services are subject to system failure and security risks.

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

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

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

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

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

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

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

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

                                       14
<PAGE>

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

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

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

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

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

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

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

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

                                       15
<PAGE>

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

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

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

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

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

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

         Our management owns and has the power to vote  approximately 29% of our
issued and outstanding common stock. Two additional  shareholders have the power
to vote  approximately  15% of our issued and  outstanding  common  stock.  As a
result,  these  stockholders  have  substantial  control over matters  requiring
approval by our stockholders,  such as the election of directors and approval of
significant corporate transactions. In addition, this concentration of ownership
may also have the effect of delaying or preventing a change in control.

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

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

                                       16
<PAGE>

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

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

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

Our stock price is volatile and subject to manipulation.

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

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

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

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

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

o        Disputes relating to patents or proprietary rights,

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

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

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

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

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

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


                                       17
<PAGE>

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

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

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

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

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

o        Is priced under five dollars;

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

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

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

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

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

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

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

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

                      o  bid and offer price quotes and volume information;
                      o  the broker-dealer's compensation for the trade;
                      o  the compensation  received by certain  salespersons for
                         the trade;
                      o  monthly accounts statements; and
                      o  a  written   statement  of  the  customer's   financial
                         situation and investment goals.

                                       18
<PAGE>

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

Item 3.       Controls and Procedures


     (a) Based on the evaluation of our "disclosure controls and procedures" (as
defined in the  Securities  Exchange Act of 1934 Rules  13a-15(e) or  15d-15(e))
required by paragraph (b) of Rules 13a-15 or 15d-15, our chief executive officer
and our chief financial  officer,  have concluded that, as of June 30, 2003, our
disclosure controls and procedures were effective.


     (b) There have been no  changes  in our  internal  control  over  financial
reporting identified in connection with the evaluation required by paragraph (d)
of  Exchange  Act Rules  13a-15 or 15d-15 that  occurred  during our last fiscal
quarter that have materially  affected,  or are reasonably  likely to materially
affect, our internal control over financial reporting.


                           PART II. OTHER INFORMATION

Item 2.   Changes In Securities And Use Of Proceeds


During the three  months  ended June 30, 2003,  the Company  raised  $425,000 by
selling  425,000  shares of Series B  Preferred  Stock at $1.00 per share.  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 $1.00
per share of Series B Preferred Stock, plus accrued and unpaid dividends on each
share. In the event of a liquidation,  the balance of proceeds is paid to common
stock.  A merger,  reorganization  or other  transaction in which control of the
Company is  transferred is treated as a  liquidation.  If not earlier  converted
into common stock,  shares of Series B Preferred  Stock are  redeemable  with 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.

The above-described  issuances of our shares of preferred stock were effected in
reliance  upon the  exemptions  for sales of  securities  not involving a public
offering set forth in Rule 506 promulgated  under the Securities Act and Section
4(2) of the  Securities  Act,  based  upon  the  following:  (a)  the  investors
represented  and  warranted  to us that they  were  "accredited  investors,"  as
defined in Rule 501 of Regulation D promulgated  under the  Securities  Act, and
had such background, sophistication,  education, and experience in financial and
business matters as to be able to evaluate the merits and risks of an investment
in the securities; (b) there was no public offering or general solicitation with
respect to the offering,  and the investors  represented and warranted that they

                                       19
<PAGE>


were  acquiring the  securities  for their own account and not with an intent to
distribute such securities;  (c) the investors were provided certain  disclosure
materials regarding the Company and any and all other information requested with
respect to the Company, (d) the investors acknowledged that all securities being
purchased were  "restricted  securities" for purposes of the Securities Act, and
agreed to transfer such securities only in a transaction registered with the SEC
under the Securities Act or exempt from  registration  under the Securities Act;
and (e) a legend was placed on the certificates and other documents representing
each such security  stating that it was restricted and could only be transferred
if  subsequently  registered  under  the  Securities  Act  or  transferred  in a
transaction exempt from registration under the Securities Act.

Item 6.   Exhibits And Reports On Form 8-K

         (a)  Exhibits.  See the Exhibit  Index  following  the  signature  page
hereof.

         (b) Reports on form 8-K. None.


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<PAGE>



                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly caused this report to be signed on its behalf on August 14,
2003 by the undersigned thereunto duly authorized.

                                  Arkona, Inc.

         August 14, 2003                          /s/ Alan Rudd
                                                  ----------------------------
                                                       Alan Rudd
                                                       Chief Executive Officer


         August 14, 2003                          /s/ Stephen Russo
                                                  -----------------------------
                                                      Stephen Russo
                                                      Chief Financial Officer


                                       21
<PAGE>

<TABLE>
<CAPTION>

                                  EXHIBIT INDEX


   Exhibit
    Number                       Title of Document                                  Location
---------------    ----------------------------------------------    ---------------------------------------
<S>                <C>                                               <C>
3.1                Certificate of Incorporation , as amended to      Filed herewith
                   date (including Certificate of Designation
                   for Series B Preferred Stock)

3.2                Bylaws                                            Incorporated by reference to
                                                                     Company's egistration 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

31.1               Section 302 Certification of Chief Executive      Filed herewith
                   Officer

31.2               Section 302 Certification of Chief Financial      Filed herewith
                   Officer

32.1               Section 906 Certification of Chief Executive      Filed herewith
                   Officer

32.2               Section 906 Certification of Chief Financial      Filed herewith
                   Officer
</TABLE>

                                       22