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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                 _______________

                                   FORM 10-KSB
                                 _______________


    [X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
          OF 1934

          For the year ended May 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:           0-27587
                                  ---------------------------------------------




                                CDKNET.COM, INC.
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                 (Name of small business issuer in its charter)


          Delaware                                                22-3586087
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(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


948 US Highway 22, North Plainfield, NJ                              07060
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(Address of principal executive offices)                          (Zip Code)


Issuer's telephone number:  (908) 769-3232
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Securities registered under Section 12(b) of the Exchange Act:

      TITLE OF EACH CLASS              NAME OF EACH EXCHANGE ON WHICH REGISTERED

---------------------------------      -----------------------------------------

---------------------------------      -----------------------------------------


Securities registered under Section 12(g) of the Exchange Act:

                         Common Stock, $.0001 par value
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                                (Title of class)


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                                (Title of class)


         Check whether the issuer (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.[X] Yes [_] No

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<PAGE>

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not 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. [_]

         Indicate by check mark whether the registrant is a shell company (as
defined by Rule 12b-2 of the Exchange Act:  [_] Yes  [X] No

         State issuer's revenues for its most recent fiscal year.  $832,910

         The aggregate market value of the voting common equity held by
non-affiliates(1) computed by reference to the last price at which the common
equity was sold on September 15, 2005 was $11,339,017.

         As of September 15, 2005, there were 23,768,267 shares of common stock,
$.0001 par value, outstanding.

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









(1)   The information provided shall in no way be construed as an admission that
any person whose holdings are excluded from the figure is not an affiliate or
that any person whose holdings are included is an affiliate and any such
admission is hereby disclaimed. The information provided is included solely for
record keeping purposes of the Securities and Exchange Commission.





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                      NOTE RE: FORWARD LOOKING INFORMATION

         All statements in this annual report on Form 10-KSB that are not
historical are forward-looking statements, including statements regarding our
"expectations," "beliefs," "hopes," "intentions," "strategies," or the like.
Such statements are based on management's current expectations and are subject
to a number of risks and uncertainties that could cause actual results to differ
materially from those set forth or implied by any forward looking statements.
Some of these risks are detailed in Part I, Item 1 "Risk Factors" and elsewhere
in this report. We caution investors that there can be no assurance that actual
results or business conditions will not differ materially from those projected
or suggested in such forward-looking statements as a result of various factors,
including, but not limited to, the risk factors discussed in this Annual Report
on Form 10-KSB. We expressly disclaim any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements contained
herein to reflect any change in our expectations with regard thereto or any
change in events, conditions, or circumstances on which any such statements are
based.





























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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

         The registrant, CDKnet.com, Inc., is a holding company incorporated in
the State of Delaware in 1998. Since our merger in May 2004 (described in more
detail below), we, through our wholly owned subsidiary, Arkados, Inc.
("Arkados"), are principally engaged in development activities focused on the
segment of the industry that provides the technology and solutions enabling
broadband communication over standard electrical lines. We conduct these
activities through Arkados, Inc., a wholly owned subsidiary and plan to use the
"Arkados" name in our marketing efforts, build "Arkados" brand awareness and
plan to seek stockholder approval to amend our certificate of incorporation to
include the Arkados trademark in some fashion. Arkados is a member of the Home
Plug Power Alliance, an independent trade organization which has developed
global standards for high speed powerline communications.

         Since we do not own any semiconductor fabrication facilities we are
known as a "fabless" semiconductor company. Our powerline communications
solutions enable high-speed digital transmission of voice, video, and data over
the existing powerline infrastructure. Our highly integrated semiconductors are
designed for the home networking and broadband communications markets, within
which we plan to address the needs of specific industries with customizable
software.

         Arkados, our operating subsidiary, is principally engaged in developing
semiconductors for home networking markets, Multi-dwelling/Multi-tenant
(MDU/MTU) markets, and broadband powerline communication ("BPL") markets often
referred to as "last-mile" or "access" markets. Arkados is a member of the
HomePlug Alliance and IEEE P1901 Working Group. HomePlug networking is the only
globally recognized technology for high-speed powerline communication with the
multiple silicon manufacturers support and established interoperability
certification. We plan to use the "Arkados" name in our marketing efforts and
build "Arkados" brand awareness. Recently Arkados received the first silicon of
our AI-1100 system-on-chip, designed to be embedded into various consumer
electronics and multimedia networking devices and deliver high-speed Internet
connectivity and multimedia over the power lines. The AI-1000 is the first in
our ArkTIC(TM) family of turnkey hardware and software solutions.

         We design, develop and market comprehensive platform solutions,
including a system-on-chip, firmware and software, for manufacturers of
networked multimedia appliances and feature-rich networking devices. Networked
multimedia appliances play digital media such as audio, photos, and video.
Networking devices allow consumers to share broadband connections and connect
computers, laptops, gaming consoles, TiVO, and other devices together. Our
platform solutions support a system based approach to networking and will allow
our customers to build products that are simple and intuitive to install and
operate with intuitive and customizable user interfaces. Our lead customer,
Leviton Manufacturing Company is developing products that are based on our
platform with the goal of producing high-performance, feature-rich
differentiated networked multimedia appliances and networking devices in a
cost-effective manner with a short time to market.

         Our executive offices and the offices of Arkados are located at 948 US
Highway 22, North Plainfield, NJ 07060. We can be reached at our principal
offices by telephone at (908) 769-3232. Arkados maintains a website at
www.arkados.com.

         Except for the documents on our websites that are expressly
incorporated by reference into this report, the information contained on our
websites is not incorporated by reference into this report and should

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not be considered to be a part of this report. This includes the websites
referred to in the paragraph above, as well as other websites that we refer to
elsewhere in this report. All of these website addresses are included in this
document as inactive textual references only.

CORPORATE BACKGROUND

         On May 24, 2004, a wholly owned subsidiary we formed, filed a merger
certificate completing the acquisition of Miletos, Inc., a previously
unaffiliated Delaware corporation (the "Merger"). The consideration for the
Merger was 16,090,577 restricted shares of our common stock and the assumption
of certain liabilities of Miletos' predecessor and former controlling equity
holders. The Merger was completed according to the terms of a Agreement and Plan
of Merger dated as of May 7, 2004.. Under the Merger Agreement, we also issued
an additional 250,000 shares of common stock to certain former holders of
Miletos stock which were placed in escrow. If we have liability for a breach of
representation or warranties under the Merger Agreement, the shares could be
released to those holders, or, if at the end of one year we do not have any
indemnification liabilities, the shares will be returned and cancelled. The same
former Miletos shareholders also placed 1,155,000 of the 16,090,577 shares
issued in the Merger in escrow to cover any indemnification liabilities they may
have. Miletos merged into our wholly owned subsidiary and changed its name to
"Arkados, Inc."

         Simultaneously with the Merger, we completed a private placement of
883,334 shares of our common stock for aggregate proceeds of $1,060,000, of
which approximately $950,000 were subscriptions for cash, $50,000 (41,667
shares) was for outstanding debt of Arkados, and $59,800 (49,834) was in lieu of
consulting fees. The sale was made to 10 accredited investors ("Investors")
directly by us without any general solicitation or broker. The offering is
claimed to be exempt from registration pursuant to Section 4(2) under the
Securities Act of 1933, as amended. In addition, we settled liabilities relating
to outstanding convertible notes and payables for 700,000 common shares.

         Prior to the Merger, on March 23, 2004, Miletos acquired the assets and
business of Enikia, LLC, a Delaware limited liability company at a public
foreclosure sale, including the intellectual property upon which Arkados'
development efforts are based. Miletos was formed in February 2004, by control
affiliates of Enikia. These control affiliates were both secured creditors of
Enikia and holders of the controlling equity interest in Enikia. They
contributed a secured promissory note to Miletos in the initial principal amount
of $9,221,000, dated June 1, 2002. The promissory note also represents
obligations to the lender for additional advances to Enikia by the control group
which brought the aggregate principal due at the time of foreclosure to
approximately $11,100,000. At the foreclosure sale, Miletos forgave $4,000,000
of the secured obligation in exchange for substantially all of the assets of
Enikia. Since CDK and Subsidiaries prior to the Merger had no meaningful
operations, the Merger has been treated as a reorganization of Arkados via a
revere merger with CDKNet.com, Inc. The assets acquired at the foreclosure sale
and certain liabilities assumed by CDK have been recorded as historical cost.

DEPENDENCE ON FINANCING ACTIVITIES

         Since we are not generating significant revenue, we are dependent on
outside sources of financing. During the period from June 1, 2004 to May 31,
2005 ("Fiscal 2005") we completed a "bridge financing" in the aggregate
principal amount of $750,000 The entire principal balance of the bridge
financing was due, with interest at the annual rate of 10% on September 8, 2005,
however the holders of $712,500 of the principal amount outstanding have agreed
to extend the due date until December 8, 2005. We agreed to pay a total fee of
$22,667 and issued 85,000 shares of our common stock to obtain this extension.

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         We sold 9.865 units, consisting of notes and warrants (the "Units") to
accredited investors in a private placement and received gross proceeds of
$986,500 since the end of Fiscal 2005, Each Unit consists of $100,000 principal
amount of a total authorized $2.4 million of our 6% convertible subordinated
promissory notes due July 7, 2007 and 14,286 detached warrants to purchase a
like number of our common stock for $0.35 per share. We have agreed to extend
the offering until September 22, 2005 but may terminate the offering at any
time. The offering of notes, warrants and shares of our common stock issuable
upon the possible conversion and exercise, respectively, have not been
registered under the Securities Act of 1933, as amended (the "Securities Act")
and may not be offered or sold by the investors without an effective
registration of such offers and sales under the Securities Act or the
availability of an applicable exemption from such registration requirements. The
terms of the notes and the warrants are more fully summarized in Item 5 of this
report.

         In these financing activities, certain of our stockholders and related
family entities have provided us with unsecured loans in the aggregate principal
amount of $647,500 and interest as of August 31, 2005 of $20,521. We paid a
total $135,000 in principal, reducing the principal balance to $512,500. As of
August 31, 2005, we owe Andreas Typaldos, our Chairman of the Board and a
principal stockholder, $225,000 for fees under an consulting agreement we
entered into with him in May, 2004. Under the consulting agreement, fees are
accrued and paid after we have raised equity financing in the aggregate amount
of $1,000,000

         We have sought and will continue to seek various sources of financing
but there are no commitments from anyone to provide us with financing, except on
the part of the placement agent in the above described offering of 6%
convertible promissory notes to use its "best efforts" to find purchasers for
the notes. Our ability to continue our operations depends on our ability to
obtain financing. If adequate funds are not available on acceptable terms, we
may not be able to retain existing and/or attract new employees, support product
development and fabrication, take advantage of market opportunities, develop or
enhance new products, pursue acquisitions that would complement our existing
product offerings or enhance our technical capabilities to develop new products
or execute our business strategy.

INDUSTRY BACKGROUND

         Multimedia distribution is experiencing the shift from old-fashioned
analog signals into a digital distribution. InStat, in a report titled "Media
Networking 2005: The Networked Living Room Becomes a Reality," predicted growth
trends in home media networking, including the prediction that total media
networking connections in homes will grow from over 50 million in 2005 to over
200 million in 2009, a 29% compound annual growth rate. We believe that this
shift creates demand for new products, and new products will require new types
of semiconductors that incorporate digital technologies supporting such
functions as communication and media rendering. Our ArkTIC(TM) family of turnkey
hardware and software solutions is designed to address these requirements.

POWERLINE COMMUNICATION ENABLES SEVERAL MARKETS

         We view the market for powerline communication semiconductors
comprising three major segments: In-Home Networking, Broadband Powerline (BPL),
and MDU/MTU Networking.


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<PAGE>
         IN-HOME NETWORKING

         Technology and solutions used to connect devices in a home through
powerline or wireless means, for the purpose of sharing entertainment content or
connectivity using HomePlug standard technology. This is a proven marketplace
with consumer products available today.

         MDU/MTU NETWORKING

         Technology and solutions for the purpose of connecting individual rooms
or units of a building (such as a hotel, apartment, or office complex) to an
Internet connection or other services. It is a mature market with an
ever-increasing need for products that offer non-invasive and cost-effective
installation. Powerline communication technology has the potential to become a
significant player in this market segment. Arkados has acquired significant
experience in this market through the previous engagements of Arkados' team with
a major international corporation.

         BROADBAND POWERLINE

         Technology and solutions used to deliver Internet access and broadband
services to homes via power lines. This is an early stage market segment.
Utilities and service operators are testing proprietary technologies and
services. Standards development has begun, which will spur the market. Broadband
Powerline has the potential to become a significant player along with DSL,
Cable, and other access technologies. Overseas and rural markets offer
substantial growth potential.

ARKADOS AND THE HOMEPLUG POWERLINE ALLIANCE

         Members of the Arkados team participated in the creation of the
HomePlug Powerline Alliance, an independent industry association.

         The Alliance's mission is to enable and promote rapid availability,
adoption and implementation of cost effective, interoperable and standards-based
home powerline networks and products.

         Formed in 2000, the Alliance developed the HomePlug 1.0 specification
that unified product vendors in support of a single powerline solution for home
networking. Recently the Alliance ratified HomePlug AV specification that is
going to enable 200Mbps class communication over power lines. In-Stat believes
that HomePlug AV will be a potentially important technology for multimedia
networking, as the technology could provide a home network backbone. Presently
the alliance is working on the new HomePlug BPL and HomePlug Command and Control
specifications.

         Arkados is a Contributing Member of the Alliance. Members of the
Arkados team hold leadership positions in the Alliance in several HomePlug
working groups. At the present time, Oleg Logvinov, our president and CEO,
serves as the Chief Strategy Officer president of the HomePlug Alliance. Mr.
Logvinov is also the immediate past president of the Alliance having been
succeeded by Matthew Theall of Intel.

         Arkados is also a member of newly created IEEE P1901 group that is
focused on the development of powerline communication Physical Layer (PHY) and
Media Access Control (MAC) specifications.


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         OUR SOLUTION

         We are a fabless semiconductor company that develops comprehensive
platform solutions, including a system-on-chip, or SoC, firmware and software,
for manufacturers of networked multimedia appliances and feature-rich networking
devices. Our platform solutions are designed to enable a systems-based approach
to networking and will allow our customers to build products that are simple and
intuitive to install and operate with intuitive and customizable user
interfaces.

         Key elements of our solution are as follows:

o        Comprehensive platform solutions.

         Our platform solutions consist of an integrated package of hardware,
         firmware and software designed to enable our customers to develop
         differentiated products in a cost-effective manner with short time to
         market. In addition to a high-performance SoC, we plan to provide our
         customers with customizable, high functionality firmware and software
         development kits to allow them to rapidly develop and differentiate
         their products. As a result, we would be able to reduce our customers'
         investment in costly and time-consuming internal firmware and software
         development for their products, and from having to source different
         firmware and software for their end products from multiple suppliers.

o        Customizable firmware and software.

         Our firmware, which is sold as a bundled solution with our SoCs,
         includes a real-time operating system and a set of application specific
         modules that support a wide range of functions including Web-based
         management, audio distribution, traffic classifications, etc. Our
         software development kit will include a comprehensive suite of
         components, such as device link libraries and drivers, tools, sample
         code and documentation to create applications that would allow a wide
         range of networking devices and networked multimedia appliances.

o        Targeted, high-performance SoCs.

         Our SoC solutions are specifically designed for the powerline
         communication market. They are driven by function-specific blocks that
         allow simultaneous execution of complex operations, such as
         transmission of data over power lines and MPEG audio decoding and
         playback. Our SoCs support most major peripheral connection protocols,
         including USB, Ethernet, Infrared, I(2)S, and a number of specialized
         and general purpose interfaces. This support enables connectivity to a
         variety of playback, display and content creation devices including
         cameras, PCs, televisions and car and home audio systems.

         In contrast, competitors that do not provide comprehensive platform
solutions such as ours may be able to produce a greater variety of customized
SoCs to more specifically address a particular OEM's requirements. In addition,
solutions which do not include customizable firmware and software like ours may
allow OEMs to take advantage of a wider range of third-party developers.
Furthermore, these alternative solutions may be lower in cost in comparison to
our platform solutions due to lesser complexity and fewer interface options.

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         OUR STRATEGY

         Our objective is to be the leading supplier of comprehensive platform
solutions for high-performance and feature-rich networked multimedia appliances
and networking devices. Key elements of our strategy are:

o        Maintain a full platform solution approach with industry-leading SoCs,
         firmware and software. We plan to commit resources to each of our
         hardware, firmware and software teams to drive innovation so that our
         integrated, comprehensive platform solutions are at the forefront of
         the networked multimedia appliances and networking devices industries
         and capture a leading market share. We intend to continue to devote
         resources to increase the performance and functionality of our SoCs and
         expand the features and capabilities of our firmware and software.

o        Maintain our focus on feature-rich networked multimedia appliances and
         networking devices. We intend to build on our experience as a platform
         provider by continuing to focus primarily on customers that produce
         feature-rich networked multimedia appliances and networking devices. In
         addition, we intend to continue to work closely with manufacturers of
         other media rendering components to ensure that our platform solutions
         interface with their current and future technology components for
         optimal performance of their end products.

o        Building on our leadership in the integration of powerline and audio
         rendering functions secure the leadership position in networked
         multimedia appliances and networking devices. We believe that the
         networked audio markets will continue to represent the largest volume
         opportunity for networked multimedia appliance and networking device
         manufacturers in the near term. We intend to continue to focus on
         advancing functionality to win designs in this large and growing
         market.

o        Enable new growth markets, such as photo- and video-enabled networked
         multimedia appliances. We intend to build on our existing expertise to
         be the leading provider of comprehensive platform solutions in new
         markets. We intend to continue to invest our research and development
         efforts and engineering resources to develop new platforms and products
         and to strengthen our technological expertise.

o        Expand our customer base while securing additional design wins with
         existing customers. We plan to be the leading supplier of new designs
         to our existing customers, and to secure high market share with new
         customers entering this market. We intend to continue the expansion of
         our customer base by marketing our platform solutions to additional
         manufacturers of consumer devices. Further, we intend to broaden our
         reach within our existing customer base into their adjacent product
         lines that can utilize technologies that we intend to implement in the
         near future.

ARKADOS PRODUCTS

         Arkados designs and develops highly integrated SoC semiconductors that
are designed to cater to the markets for powerline communications. Arkados' chip
designs offer flexible solutions through programmability and remote firmware
upgrades.

         Arkados Total Integration ConceptTM, or ArkTICTM, family of converged
multimedia and networking solutions targets data-, audio-, photo-, and
video-enabled networked multimedia appliances and networking devices. The ArkTIC
family is a portfolio of turnkey hardware and software solutions that enable
OEMs and ODMs to quickly develop digitally networked consumer electronic
products with a
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competitive cost structure to address this rapidly developing market. Among
other networking interfaces the first member of the ArkTIC family will support a
powerline communication interface based on the HomePlug Powerline Specification
1.0.1.

         The ArkTIC family of processors, with its first-in-the-industry
integration of a HomePlug MAC/PHY, a variety of common interfaces and
application specific interfaces, and a powerful CPU represents the ultimate
vehicle for full-house multimedia distribution and content rendering.

         The AI-1100 is the first in a series of devices built around existing
and emerging HomePlug Powerline Alliance networking specifications. This first
device will completely support the HomePlug 1.0.1 specification along with a
variety of multimedia applications. Furthermore, the programmable nature of the
Arkados implementation allows OEMs to extend the functionality of the HomePlug
technology. Future devices can implement new HomePlug standards, such as
HomePlug AV, as they become available.

         Recently we have received the first silicon of our AI-1100
system-on-chip, designed to be embedded into various consumer electronics
devices and deliver high-speed Internet connectivity and multimedia over the
power lines in a home. The AI-1000 is the first in ArkTIC(TM) family of turnkey
hardware and software solutions. The AI-1100 chip is the first to offer a single
chip integration of HomePlug 1.0.1 powerline technology, ARM 926-JES CPU
operating at 160 MHz, dual Ethernet interface, I(2)S Audio Interface, and a wide
variety of other interfaces designed to support connected home applications.
Furthermore, the programmable nature of the Arkados implementation allows OEMs
to extend the functionality of the HomePlug 1.0.1 based MAC and PHY.

         Arkados has modularized a core Orthogonal Frequency Division
Multiplexing (OFDM) and communication platform to rapidly develop customized
solutions for each powerline market. This enables efficient reuse and
repurposing of technology blocks, which can be used to create many specific
solutions.

         Arkados' Intellectual Property licensing program offers numerous
opportunities for near-term revenue. We have leveraged years of experience in
characterizing the powerline for use as a communications medium to develop our
technology and solutions.

         Additionally, we provide consulting, software, and applications
support, thereby facilitating system integration and reducing our customers'
time-to-market and our customers' development costs.

         In the in-home networking segment of the market we expect to deliver
highly integrated circuits that combine both networking blocks and blocks that
are capable of supporting end-use applications. Arkados' chips are designed to
offer a high degree of programmability and may become an attractive solution for
a diverse range of home-networking products.

         In the MDU/MTU segment of the market we expect to deliver highly
integrated circuits that combine both networking blocks and blocks that are
capable of supporting communications applications in demand from service
providers and utility companies. Downloadable firmware management capabilities
make this an attractive solution for remote management and service applications.

         In the broadband powerline segment of the market we expect to deliver
highly integrated circuits that combine both networking blocks and blocks that
are capable of supporting communications applications in demand from service
providers and utility companies. Downloadable firmware management capabilities
would make this an attractive solution for remote management and service
applications.
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         Some of the examples of the products that could be built based on the
above-described semiconductors by original equipment manufacturers (OEM) are:

o        CONSUMER ELECTRONICS - A growing market that includes audio & video
         devices with embedded powerline technology. We expect this market to
         grow over the next few years as more video and audio products are
         released with networking technologies built-in. Televisions, stereos,
         powered speakers, receivers, DVD and CD players, are targeted
         applications for powerline networking technology. We believe that
         Internet streaming content and home content servers should greatly
         increase the demand for HomePlug 1.0 and AV products.

o        SOHO NETWORK GEAR - New types of routers, switches, gateways, network
         attached storage, and other devices that offer various types of
         services to the SOHO (Small Office Home Office) network.

o        INTERNET TELEPHONY - As companies like Vonage, Comcast, Verizon and
         other service providers begin to roll-out new voice services to the
         home, an easy-to-use and reliable home network is needed. VoIP
         (Voice-over-IP) phones are currently produced by several vendors and we
         expect to see such products with HomePlug technology embedded into
         them.

o        HOME SECURITY - Many companies have created home security cameras that
         are networked through various means. Early market entrants ST&T & Asoka
         have already created powerline networked security cameras with embedded
         web servers that allow direct access to the camera's feed.

CUSTOMERS

         At present our only revenue has come from product development
agreements, such as our agreement with Leviton. We expect that such agreements
will lead to volume orders, but we cannot assure you that they will. We are
targeting the sale of our powerline connectivity products to a broad range of
communications, computing and consumer electronics OEMs. We have not yet derived
significant product revenue from these OEMs. However, we are working closely
with many of the leading communications, digital entertainment and consumer
electronics companies some of which may result in design wins and orders for our
integrated circuits. when they become available. We are sampling and testing our
AI-1100 SoC prototypes , but factors such as design flaws, compatibility issues
and manufacturing errors could delay the functioning and the volume shipments of
the products and prevent us from making any sales.

STRATEGIC RELATIONSHIPS

         We are working on developing strategic relationships with key customers
and technology leaders in order to accelerate the development of our
connectivity solutions. As indicated earlier, in June, 2004, Arkados entered
into an agreement with Leviton Manufacturing Co. Inc., modifying terms of a
Development Agreement that Enikia executed in July 2003. Under the agreement,
Arkados will develop powerline products for Leviton for which Leviton will pay
up to $1.194 million based upon Arkados meeting certain milestones.

         In July 2004, Arkados entered into a five-year Silicon Product
Development and Product Collaboration Agreement with GDA Technologies, Inc.,
under which GDA will assist Arkados in translating Arkados chip designs into a
mask that can be used by a semiconductor foundry to manufacture Arkados designed
integrated circuits in a cost effective manner. Arkados was obligated to pay GDA

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$175,000 under the agreement over a period of seven months and will pay GDA 20%
of production costs as compensation for production management services. In
addition, CDK issued 150,000 shares of its restricted common stock to GDA for
nominal consideration, of which 75,000 were subject to forfeiture if GDA does
not make certain deliveries of designs under the collaboration agreement at
least 30 days prior to the target date. At this point the work performed by GDA
resulted in the tapeout and subsequent sampling of AI-1100 SoC.

MANUFACTURING

         We are and will contract with third parties for all of our wafer
fabrication and assembly, as well as for a portion of our design and testing.
Our fabless manufacturing strategy is designed to allow us to concentrate on our
design strengths, minimize fixed costs and capital expenditures, access advanced
manufacturing facilities, and provide flexibility on sourcing multiple
leading-edge technologies through strategic alliances. Our manufacturing process
is designed to follow the following steps. After wafer fabrication by the
foundry, third-party assembly vendors package the wafer die. The finished
products are then sent for testing, either to third-party testers or to our
internal test facility, before shipment to our customers. We expect to qualify
each product, participate in process and package development, define and control
the manufacturing process at our suppliers were possible and practicable,
develop or participate in the development of test programs, and perform
production testing of products in accordance with our quality management system.
If possible, we plan to use multiple foundries, assembly houses, and test
houses. At the present we are using foundries in Japan operated by Fujitsu.

PATENTS, LICENSES AND TRADEMARKS

         We rely on trade secret, patent, copyright, and trademark laws to
protect our intellectual property products and technology. We intend to continue
this practice in the future to protect our products and technologies. As of May
18, 2005, Arkados has been granted three U.S. patents, with 43 pending, and has
various corresponding international patents and applications. Because of a lack
of cash resources we may be unable to prosecute patent claims effectively and if
an application is deemed abandoned, we may not be able to revive it.

         To complement our own research and development efforts, we have also
licensed, and expect to continue to license, a variety of intellectual property
and technologies important to our business from third parties.

         Although we believe that our technology has been independently
developed and that none of our technology infringes on the rights of others,
third parties could assert infringement claims against us or seek an injunction
on the sale of any of our products in the future. If such infringement were
found to exist, we may attempt to acquire the requisite licenses or rights to
use such technology or intellectual property. However, we cannot assure you that
such licenses or rights could be obtained on favorable terms or at all.

RESEARCH AND DEVELOPMENT

         We concentrate our research and development efforts on the design and
development of new products for each of our principal markets. We also fund
certain research activities focused on other emerging product opportunities. Our
future success is highly dependent upon our ability to develop complex new
products, to transfer new products to volume production in a timely fashion, to
introduce them to the marketplace ahead of the competition, to maintain
competitive features, and to have them selected for design into products of
leading systems manufacturers. Our future success may also depend on assisting
our
                                       12
<PAGE>
customers with integration of our components into their new products, including
providing support from the concept stage through design, launch, and production
ramp. We believe that our focus on application related features and software may
contribute to our success.

COMPETITION

         Markets for our products are highly competitive, and we expect that
competition will continue to increase. We compete with other semiconductor
suppliers that offer standard semiconductors, application-specific integrated
circuits, and fully customized integrated circuits, including embedded software,
chip, and board-level products. Our competitive strategy has been to provide
cost-effective integrated products bundled with software that is designed to
support a variety of applications.

         We face significant competition in each of our product lines. We face
competition both from established players that are beginning to focus on
powerline networking technology as well as recent entrants in the field. Some of
these competitors already have products in the market place that are compliant
with HomePlug Alliance 1.0.1 specification while other competitors' products are
based on proprietary technologies. Immediate key competitors in the powerline
networking segment include Conexant (CNXT), Maxim Integrated Products (MXIM),
Intellon, DS2, Panasonic, Spidcom, and Yitran, many of whom have substantially
greater resources than we do. We expect to face additional competition from new
entrants in each of our markets, which may include both large domestic and
international integrated circuit manufacturers and smaller, emerging companies.

         In addition, there are other organizations worldwide that seek to
foster the development of powerline connectivity technology solutions and may
attempt to create technology standards that compete with the industry standard
established by the HomePlug Powerline Alliance. These include the R7.3
subcommittee of the Consumer Electronics Alliance (CEA), PLCForum, the recently
announced industry groups CEPCA and Universal Powerline Association (UPA), and
the IEEE P1901. The R7.3 subcommittee of the CEA, a consumer electronics trade
association, had pursued a specification for powerline connectivity in the past,
but later abandoned it. The PLCForum is a European organization primarily
focused on addressing regulatory issues, market factors, and business cases for
the technology. The two recent entrants, CEPCA and UPA, are focused on
generating industry acceptance of certain technologies from individual
companies, and both have announced intentions to build coexistence methods that
would allow standards-based and proprietary technologies to share bandwidth on
the powerline, allowing coexistence. The IEEE has recently launched MAC and PHY
standartization process through the IEEE P1901 Working Group. We believe the
HomePlug alliance is the only organization solely focused on using open
standardization processed to build interoperable solutions for both in-home and
to-the-home applications that allow for the coexistence of services. We also
participate in IEEE efforts.

         The HomePlug 1.0 specification consists of the electrical
characteristics and protocols related to the transmission of data over
conventional power lines. As a member of the HomePlug Alliance we are obligated
to license Necessary Patent Claims (intellectual property rights without the use
of which products cannot conform to the HomePlug specifications) to any member
of the alliance as defined in the Sponsor Agreement and Contributor Agreement on
a non-discriminatory basis. Under our license and development agreements we
retain title to our patents, patent applications and other licensed technology,
and to any improvements that we develop.

         As a provider of powerline home connectivity integrated circuits, we
face additional competition from other home connectivity technologies such as
twisted pair cable, coaxial cable and wireless media. Despite the broad array of
different technologies deployed to date, we believe those technologies that do

                                       13
<PAGE>
not require new wires such as HomePNA, MoCA, 802.11 and other wireless
alternatives, will provide the strongest competition to powerline solutions.

         Many HomePlug members are also promoting these competing connectivity
technologies. Although several of these competing technologies have already been
introduced in the market, none has achieved 100% penetration, particularly in
the transmission of entertainment content. We believe the principal factors
driving competition between home connectivity technologies include
pervasiveness, performance, reliability, ease-of-use and cost effectiveness. We
believe powerline based home connectivity solutions will compete favorably with
respect to each of these competitive factors. Many of our competitors have
substantially greater financial, engineering, manufacturing, marketing,
technical, distribution and other resources, broader product lines, greater
intellectual property rights, and longer relationships with customers than we
have.

         The principal competitive factors in our markets include
time-to-market; total cost of the finished product; quality of hardware/
software design and end-market systems expertise; price; product benefits that
are characterized by performance, features, quality and compatibility with
standards; access to advanced process and packaging technologies at competitive
prices; and sales and technical support, including assisting our customers with
integration of our components into their new products, including providing
support from the concept stage through design, launch, and production ramp.

SALES AND MARKETING

         We expect to sell our products worldwide using the following channels:

         o    Sales and Marketing Partnerships with established companies. These
              relationships generally help to establish the presence in the
              specific regions and access customers through already developed
              relationships. The benefits of using this channel are numerous,
              among them are added credibility, reduction of upfront sales and
              marketing expenses, acceleration of volume sales through
              incumbency of the customer base, and local customer support and
              account management.

         o    Advanced Development Partnerships with strategic customers. The
              benefits of using this channel are numerous. Among them are
              creation of product focus, reduction of upfront sales and
              marketing expenses, acceleration of sales volumes through early
              commitments, and creation of incremental development revenues.

         We expect to develop our domestic sales force to include a network of
regional direct sales offices. We expect to establish international sales
offices and develop relationships with appropriate organizations located
worldwide. We expect to supplement our direct sales force with sales
representative organizations and distributors. The scope and development of our
sales and marketing organization will depend among other things, on the amount
of capital available to us and when initial products are ready for testing.
Given our present financial situation, we have relied primarily on third party
agents and strategic relationships.

GOVERNMENT REGULATION

         Fabrication suppliers we plan to contract with are subject to a variety
of U.S. and foreign government regulations, including regulations related to the
discharge or disposal of toxic, volatile or otherwise hazardous chemicals used
in their manufacturing processes. Our failure or the failure of our suppliers to
comply with present or future governmental regulations could result in fines,
suspension of production or cessation of operations. Environmental regulations
could also require the acquisition of

                                       14
<PAGE>
equipment or the incurrence of other substantial expenses to comply with
environmental regulations. If substantial unanticipated expenses were incurred
by the us or our suppliers (and such costs were passed on to us), our
manufacturing costs could significantly increase, thus materially and adversely
affecting our business, financial condition and operating results. We are also
subject to a variety of government regulations relating to our operations,
including environmental, labor and export control regulations. Our failure to
maintain compliance with present or future regulations could result in fines
being imposed on us or suspension or cessation of our operations.

         When communicating over powerline, our technology operates on
frequencies that are not currently restricted by FCC regulations. Products
incorporating our semiconductors are regulated by the Federal Communications
Commission ("FCC") in US market and respective regulatory bodies in the rest of
the world. In certain countries, there may be regulations restricting the
transmission of high frequency over power lines. We cannot assure you that this
will continue to be the case. Should government regulations change in the
future, making operation of our customers' products at their current radio
frequency bands subject to restrictive regulation, or subjecting the frequencies
on which our products operate to restrictions, OEMs' desire to purchase our
products could diminish and our business may suffer.

         In April 2003, the FCC issued a Notice of Inquiry (NOI) on Broadband
over Power Lines (BPL) technologies and systems. The NOI was issued to solicit
comments to assist the FCC in reviewing its Part 15 rules to facilitate the
deployment of BPL while ensuring licensed services continue to be protected. In
the NOI, the FCC encouraged continued deployment of BPL systems that comply with
the existing Part 15 rules.

         In February 2004, the FCC released its Notice of Proposed Rule Making
proposing to amend Part 15 of its rules to adopt new requirements and
measurement guidelines for broadband power line (BPL) systems. The full text of
the NPRM can be found on FCC website at www.fcc.gov. The FCC indicates that its
proposals are intended to remove regulatory uncertainties and to facilitate the
introduction and use of BPL technology.

         On October 15, 2004 FCC announced the adoption of new rules for
Broadband Over Powerline that are designed to increase the competition and
promote broadband services to all Americans. The full text of the ruling will be
available on FCC website.

BACKLOG

         We expect sales outside of the strategic partnership agreements to be
made primarily pursuant to standard short-term purchase orders for delivery of
standard products. We expect the quantity actually ordered by the customer, as
well as the shipment schedules, to be frequently revised, without significant
penalty, to reflect changes in the customer's needs. As a result, we believe
that in the future, our backlog at any given time should not be used as a
meaningful indicator of future revenues.

EMPLOYEES

         As of May 31, 2005, we had 11 full-time equivalent employees, including
our CEO, Oleg Logvinov. All of our full time employees are engaged in research,
development, engineering or marketing. Andreas Typaldos, our Chairman of the
Board provides us with product marketing services, strategic planning and
leadership in our capital raising efforts on a part-time basis and Kirk Warshaw,
our Chief Financial Officer serves on a part-time basis as well. Our future
success depends, in part, on our ability to continue to attract, retain and
motivate highly qualified technical, marketing, engineering, and management
personnel. Due to

                                       15
<PAGE>
the highly competitive nature of the marketplace that we operate in, we may from
time to time lose key employees to certain of our competitors. We expect to be
able to hire qualified personnel to fill open positions created by such
occurrences, although there can be no assurance that we will be able to do this
in the future. None of our employees are represented by collective bargaining
agreements

RISK FACTORS

         An investment in our common stock is speculative in nature, involves a
high degree of risk and should not be made by any investor who cannot afford the
loss of his entire investment. Each prospective purchaser should carefully
consider the following risks and speculative factors associated with our
business and capital structure, as well as others described elsewhere in this
report, before making any decision to buy, sell or hold our common stock.

         This report contains certain statements relating to future events or
the future financial performance of our company. Readers are cautioned that such
statements are only predictions, involve risks and uncertainties, and that
actual events or results may differ materially. In evaluating such statements,
prospective investors should specifically consider the various factors
identified in this memorandum, including the matters set forth below, which
could cause actual results to differ materially from those indicated by such
forward-looking statements.

              Risks Related to Our Business and Financial Condition
              -----------------------------------------------------

IMMEDIATE NEED FOR FINANCING; INABILITY TO SERVICE OUTSTANDING OBLIGATIONS.

         Since we are not generating significant revenue we are dependent on
outside sources of financing. We have financed our operations by offering
convertible debt securities in private placements, in some cases with equity
incentives for the investor in the form of warrants to purchase our common stock
and have borrowed from affiliates of our Chairman of the Board. We have sought
and will continue to seek various sources of financing but there are no
commitments from anyone to provide us with financing, except on the part of a
placement agent to use its "best efforts" to find purchasers for our 6%
convertible notes. If we are unable to obtain financing, we may have to suspend
operations, sell assets and will not be able to execute our business plan.

INABILITY TO OBTAIN ADDITIONAL FINANCING WOULD RESULT IN THE SUSPENSION OF OUR
BUSINESS.

         Our ability to continue our operations depends on our ability to obtain
financing. If adequate funds are not available on acceptable terms, we may not
be able to retain existing and/or attract new employees, support product
development and fabrication, take advantage of market opportunities, develop or
enhance new products, pursue acquisitions that would complement our existing
product offerings or enhance our technical capabilities to develop new products
or execute our business strategy.

WE HAVE NOT GENERATED REVENUES FROM OUR PRINCIPAL INTENDED ACTIVITIES AND WE
HAVE BEEN DEPENDENT ON ONE CUSTOMER FOR SUBSTANTIALLY ALL OF OUT REVUE

         As a development stage company, we have generated limited revenue
principally from providing development services. We have not sold mass produced
semiconductors, which is the primary part of our expected revenue stream going
forward. In addition, substantially all of our revenue has been from one
customer. It is difficult, in a market that is rapidly evolving, to evaluate the
future sales performance of powerline technology, and our implementation of it.
We may not successfully address any of these risks and may never have
significant revenue.
                                       16
<PAGE>
WE EXPECT LOSSES WILL CONTINUE FOR THE FORESEEABLE FUTURE. OUR STOCK PRICE MAY
BE AFFECTED BY SUCH LOSSES.

         In our short history, we have not reported an operating profit and do
not expect to report a profit in the near future, if at all. We have experienced
losses from operations since Enikia, from whom we acquired our intellectual
property assets, began operations. Losses are likely to continue, and may cause
volatility in our stock price.

CONSUMER DEMAND MAY NOT DEVELOP AS WE ANTICIPATE, AND OUR BUSINESS WILL SUFFER.

         The initial and primary customers of our semiconductors are expected to
be OEMs of devices with uses for connectivity. OEM acceptance of powerline
technology will be driven by consumer demand for home connectivity. If consumer
demand does not develop as we anticipate, our products will sell slowly, or not
at all, and our business will suffer.

         There are several factors that may affect the expansion of the home
connectivity market:

         o   the emergence of competing standards for home connectivity
         o   new content or products that attract a large consumer base
         o   interoperability between different products in the same market
         o   the success of marketing by OEMs
         o   the cost and availability of connected products using this
             technology or competing technologies

         We have only limited ability to influence in the resolution of the
foregoing.

POWERLINE SOLUTIONS FOR HOME CONNECTIVITY MAY NOT GAIN ACCEPTANCE.

         Ethernet and Wireless technologies enjoy a large market share of the
home connectivity market. As the market broadens to include audio/video
applications, it is unclear which medium will be predominant. Among the
competing physical mediums, including coaxial cable, Ethernet, phone line, and
wireless, many are actively supported by various trade associations that
represent the interests of a variety of companies. Some have greater market
acceptance. If powerline technology does not achieve market acceptance, there
may be less demand or no demand at all, and our business will suffer.

POWERLINE TECHNOLOGIES, OTHER THAN THE TECHNOLOGIES IMPLEMENTED BY ARKADOS MAY
PROLIFERATE.

         Arkados is developing products that comply with the specification for
in-home powerline networking developed by members of the HomePlug Powerline
Alliance. However, there may be other competing, independent efforts in this
market. To the extent that a competing effort establishes the predominant
industry standard for powerline technologies that are not based on Arkados'
chosen technologies, or if no standard predominates in each market, our business
will suffer.

PRODUCTS THAT INCORPORATE OUR CHOSEN TECHNOLOGIES MAY FAIL IN OPERATION, OR FAIL
TO BE CERTIFIED BY STANDARDS ORGANIZATIONS.

         Our OEM customers may produce products that fail to work properly,
either as a consequence of the inclusion of our semiconductors and software, or
an unrelated problem, our business may suffer. If products that incorporate our
solutions fail to pass standards test, our business will suffer.

                                       17
<PAGE>
WE MAY BE UNABLE TO SELL VOLUMES OF SEMICONDUCTORS.

         While we plan to attract customers with plans for large numbers of
products, there may be cases when significant effort results in few
semiconductors sold. When a company agrees to develop products that use our
solutions, and agrees to purchase our solutions in volume, we consider the
agreement a "design win." Achieving a design win does not create a binding
commitment from that customer. A design win is merely an expression of interest
by a customer to make volume purchases, but at any time a customer can
discontinue using our solutions. To the extent that we are unable to convert
design wins into volume sales, our business will suffer.

WE MAY NOT BE ABLE TO ATTRACT AND RETAIN ENGINEERING AND TECHNICAL TALENT, OUR
BUSINESS MAY SUFFER.

         The needs of the business will dictate our hiring, but we expect to
need personnel in our technical and engineering disciplines, as well as in
operational roles. Since powerline technologies is a narrow engineering and
technical specialty and we have limited financial resources, attracting
experienced talent is difficult. If we are unable to attract and retain
qualified personnel our ability to develop and produce our products will be
limited.

OUR SOLUTIONS HAVE A LONG DEVELOPMENT AND SALES CYCLE. WE MAY CONTINUE TO INCUR
SIGNIFICANT EXPENSES BEFORE REVENUES ARE REALIZED.

         Significant company resources must be dedicated to research and
development, production and sales and marketing in order to properly sell
solutions into our target markets. Products are developed based on a forecasts
from analysts, and we will incur substantial product development expenses before
generating associated revenues. Customers typically spend two to nine months in
testing before volume production of its own products, which incorporate our
solution. Sales cycles are lengthy and produce delays between the time we incur
expenses for research, development, sales and marketing efforts, and the time
that we generate revenue, if any revenue is generated. If we do not generate
revenue after we have incurred substantial expenses to develop and market any of
our products, our business will suffer.

WE WILL DEPEND ON OUR OEM AND ODM CUSTOMERS TO PRODUCE SUCCESSFUL PRODUCTS THAT
INCORPORATE OUR SOLUTIONS.

         Our customers are OEMs and ODMs in our target markets. They integrate
our integrated circuits into their products. If their products are not
successful, we may not sell volume quantities of our semiconductors. OEM and ODM
products may be unsuccessful for many reasons which are beyond our control. Any
of these reasons may harm our business.

WE WILL RELY ON THIRD PARTIES TO FABRICATE, ASSEMBLE AND TEST OUR SOLUTIONS,
WHICH MAY INCREASE COSTS OR CREATE DELAYS.

         As a "fabless" semiconductor manufacturer, we do not own or operate a
semiconductor fabrication, assembly or testing facility. For our first
semiconductor product we have entered into an agreement with GDA Technologies,
to manage this process for us. In the future GDA or contract foundries,
assembly, and test houses selected by us may also be adversely affected for
reasons beyond our control. This may result in our inability to obtain products
within the time frames, volumes or costs we require, or at all. Any disruption
in the availability of products, or problems associated with the delivery,
quality or cost of fabrication, assembly and testing of our products may cause
our business to suffer.
                                       18
<PAGE>
OUR SPECIFICATIONS MAY RESULT IN UNACCEPTABLE MANUFACTURING YIELDS FROM OUR
SUPPLIERS, WHICH MAY INCREASE OUR PRODUCT COSTS OR REDUCE SUPPLIES.

         We write specifications and create designs and our third-party
suppliers manufacture chips based on those specifications and designs. We have
not yet entered into volume production of our products, and our specifications
may fall short of producing volumes of semiconductors effectively and
efficiently. This may cause dies on our wafers to function poorly, if at all.
The term "yield" is used to express the proportion of functional die expressed
as a percentage of total die on a wafer. If expected yields are not reached, our
product costs will increase. We may also experience problems when our products
are scaled to smaller geometries. Problems with yield may not be identified
until late in the product development cycle, or even once an end-product is
built and sold. Yield problems are difficult to detect, time consuming and
expensive to correct. These issues could affect our intention to delver products
to customers in a timely manner.

DEFECTS IN OUR PRODUCTS COULD HURT THE BUSINESS BY HARMING OUR REPUTATION,
DECREASING OUR MARKET ACCEPTANCE, LOSING CUSTOMER ACCOUNTS, AND CREATING
LIABILITIES FOR OUR COMPANY.

         Integrated circuits are highly complex products, and may contain
defects or bugs which may not be detected until other products that incorporate
ours are shipped and being used by end-users. Defects may harm our reputation
and make customers reluctant to buy our products. Correcting these defects is an
expensive process. If defects are not discovered until after we have commenced
commercial production of a new product, we might incur substantial additional
development costs. If we fail to solve problems in time, we may incur product
recall, repair or replacement costs. These problems may also result in claims
against us by our customers or consumers. Any such problems could divert our
company resources from other development efforts. Moreover, we would likely
lose, or experience a delay in, the market acceptance of our products. We could
also lose credibility with our current and prospective customers.

REGULATION IN CERTAIN REGIONS OF THE WORLD (JAPAN AS AN EXAMPLE), WHICH LIMITS
OUR INTERNATIONAL MARKET.

         Our powerline communication products are designed to operate on
frequencies that are currently restricted by government regulations in certain
areas of the world, Japan as an example, As a result, our semiconductors cannot
be used in products used in such areas at this time. The international market
will remain limited unless the existing regulations are changed or until we
develop products that can operate within the constrains imposed by the existing
regulations.

FUTURE FEDERAL COMMUNICATIONS COMMISSION, OR FCC, REGULATION MAY RESTRICT SALES
OF OUR PRODUCTS ADVERSELY AFFECTING OUR BUSINESS.

         Our powerline communication products are designed to operate on
frequencies that are not currently restricted by FCC regulations. OEM products
incorporating our ICs are regulated by the FCC. Operation of these products
currently is not restricted by the FCC as long as the products do not interfere
with other radio frequency, or RF, bands licensed by the FCC. We cannot assure
you that this will continue to be the case. Should government regulations change
in the future, making operation of our customers' products at their current
radio frequency bands subject to restrictive regulation, or subjecting the
frequencies on which our products operate to restrictions, our customers' desire
to purchase our products could diminish and our business may suffer.

                                       19
<PAGE>
OUR BUSINESS IS HIGHLY DEPENDENT ON THE EXPANSION OF THE CONSUMER DIGITAL
ENTERTAINMENT ELECTRONICS MARKET.

         We expect that the main growth in our product demand will be driven by
the consumer digital entertainment electronics market. We are focusing on
audio/video transmission and distribution products for the in-home use. We
expect the consumer digital market to expand; however, our strategy may not be
successful. Given current economic conditions in the United States and
internationally, as well as the large installed base of consumer electronics
products, consumer spending on home electronic products may not increase as
expected. In addition, the potential decline in consumer confidence and consumer
spending relating to future terrorist attacks could have a material adverse
effect on our business.

OUR SUCCESS DEPENDS ON OUR ABILITY TO INTRODUCE NEW PRODUCTS ON A TIMELY BASIS.

         Our success depends upon our ability to develop new products for new
and existing markets, to introduce these products in a timely manner, and to
have these products gain market acceptance. The development of new products is
highly complex and we may experience delays in developing and introducing them.
Successful product development and introduction depend on a number of factors,
including:

         o    proper new product definition,
         o    timely completion of design and testing of new products,
         o    assisting our customers with integration of our components into
              their new products, including providing support from the concept
              stage through design, launch and production ramp,
         o    successfully developing and implementing the software necessary to
              integrate our products into our customers' products,
         o    achievement of acceptable manufacturing yields,
         o    availability of wafer, assembly, and test capacity,
         o    market acceptance of our products and the products of our
              customers
         o    obtaining and retaining industry certification requirements.

         Although we seek to design products that have the potential to become
industry standard products, we cannot assure you that the market leaders will
adopt any products introduced by us, or that any products that may be initially
accepted by our customers that are market leaders will become industry standard
products. Both revenues and margins may be materially affected if new product
introductions are delayed, or if our products are not designed into successive
generations of our customers' products. We cannot assure you that we will be
able to meet these challenges, or adjust to changing market conditions as
quickly and cost-effectively as necessary to compete successfully. Our failure
to develop and introduce new products successfully could harm our business and
operating results.

         Successful product design and development is dependent on our ability
to attract, retain, and motivate qualified design engineers, of which there is a
limited number. Due to the complexity and variety of CMOS, precision linear, and
mixed-signal circuits, the limited number of qualified circuit designers and
software engineers, and the limited effectiveness of computer-aided design
systems in the design of such circuits, we cannot assure you that we will be
able to successfully develop and introduce new products on a timely basis.

                                       20
<PAGE>
STRONG COMPETITION IN THE HIGH-PERFORMANCE INTEGRATED CIRCUIT MARKET MAY HARM
OUR BUSINESS.

         The integrated circuit industry is intensely competitive and is
characterized by rapid technological change, price erosion, and design and other
technological obsolescence. Because of shortened product life cycles and even
shorter design-in cycles in a number of the markets that we serve, particularly
consumer entertainment, our competitors have increasingly frequent opportunities
to achieve design wins in next-generation systems. In the event that competitors
succeed in supplanting our products, our desired market share may not be
attainable and/or sustainable and net sales, gross margins, and results of
operations would be adversely affected.

         In powerline communication segment our principal competitors include
Intellon, Conexant, Maxim, DS2, Panasonic, Yitran, and Spidcom. In Network and
Media Processors Conexant, Cirrus Logic, Micrel, Texas Instruments, Atmel, and
Sharp. Many of our competitors have substantially greater financial,
engineering, manufacturing, marketing, technical, distribution and other
resources, broader product lines, greater intellectual property rights, and
longer relationships with customers than we have. We also expect intensified
competition from emerging companies and from customers who develop their own
integrated circuit products. In addition, some of our current and future
competitors maintain their own fabrication facilities, which could benefit them
in connection with cost, capacity and technical issues.

         Increased competition could adversely affect our business. We cannot
assure you that we will be able to compete successfully in the future or that
competitive pressures will not adversely affect our financial condition and
results of operations. Competitive pressures could reduce market acceptance of
our products and result in price reductions and increases in expenses that could
adversely affect our business and our financial condition.

OUR PRODUCTS MAY BE CHARACTERIZED BY AVERAGE SELLING PRICES THAT DECLINE OVER
SHORT TIME PERIODS; IF WE ARE UNABLE TO INTRODUCE NEW PRODUCTS WITH HIGHER
SELLING PRICES OR REDUCE OUR COSTS, OUR BUSINESS AND OPERATING RESULTS COULD BE
HARMED.

         Historically in the integrated circuit industry, average selling prices
of products have decreased over time, while manufacturing costs may remain
fixed. If we are unable to introduce new products with higher margins or to
reduce manufacturing costs to offset anticipated decreases in the prices of our
products, our operating results may be adversely affected. In addition, because
of high fixed costs in our industry, we are limited in our ability to reduce
total costs quickly in response to any revenue shortfalls. Because of these
factors, we may experience material adverse fluctuations in our future operating
results on a quarterly or annual basis.

OUR PRODUCTS ARE COMPLEX AND COULD CONTAIN DEFECTS, WHICH COULD REDUCE SALES OF
THOSE PRODUCTS OR RESULT IN CLAIMS AGAINST US.

         Product development in the markets we serve is becoming more focused on
the integration of multiple functions on individual devices. In addition to that
powerline communication is a relatively new technology. There is a general trend
towards increasingly complex products. The greater integration of functions and
complexity of operations of our products increase the risk that our customers or
end users could discover latent defects or subtle faults after volumes of
product have been shipped. This could result in:

         o    material recall and replacement costs for product warranty and
              support,
         o    adverse impact to our customer relationships by the occurrence of
              significant defects,

                                       21
<PAGE>
         o    delay in recognition or loss of revenues, loss of market share, or
              failure to achieve market acceptance, and
         o    diversion of the attention of our engineering personnel from our
              product development efforts.

         The occurrence of any of these problems could result in the delay or
loss of market acceptance of our products and would likely harm our business,
and may result into our inability to secure a reasonable share of the market, In
addition, any defects or other problems with our products could result in
financial or other damages to our customers who could seek damages from us for
their losses. A product liability claim brought against us, even if
unsuccessful, would likely be time consuming and costly to defend.

WE WILL RELY ON INDEPENDENT FOUNDRIES TO MANUFACTURE OUR PRODUCTS, WHICH WILL
SUBJECT US TO INCREASED RISKS.

         We will rely on independent foundries to manufacture all of our wafers.
In order to produce our silicon we need to secure appropriate manufacturing
services and capacities. Our reliance on outside foundries will involve several
risks and uncertainties, including the:

         o    inability to secure appropriate manufacturing services and
              capacities
         o    possibility of an interruption or loss of manufacturing capacity
         o    lack of control over delivery schedules, quality assurance,
              manufacturing yields and costs
         o    possible misappropriation of our intellectual property
         o    inability to reduce our costs as quickly as competitors who
              manufacture their own products and are not bound by set prices.

         Market conditions could result in wafers being in short supply and
prevent us from having adequate supply to meet our customer requirements. In
addition, any prolonged inability to utilize third-party foundries because of
fire, natural disaster, or otherwise would have a material adverse effect on our
financial condition and results of operations. If we are not able to obtain
additional foundry capacity as required, our relationships with our customers
would be harmed and, consequently, our sales would likely be reduced, and we may
be forced to purchase wafers from higher-cost suppliers or to pay expediting
charges to obtain additional supply, if we are able to acquire wafers at all.

         In order to secure additional foundry capacity, we may enter into
contracts that commit us to purchase specified quantities of silicon wafers over
extended periods. In the future, we may not be able to secure sufficient
capacity with foundries in a timely fashion or at all, and such arrangements, if
any, may not be on terms favorable to us. Moreover, if we are able to secure
foundry capacity, we may be obligated to utilize all of that capacity or incur
penalties. These penalties may be expensive and could harm our financial
results.

WE WILL BE DEPENDENT ON OUR SUBCONTRACTORS TO PERFORM SOME OF THE DESIGN AND KEY
MANUFACTURING FUNCTIONS FOR US.

         We will depend on third-party subcontractors for the elements of the
design, assembly, packaging, and testing of our products. International
operations and sales may be subject to political and economic risks, including
political instability, currency controls, exchange rate fluctuations, and
changes in import/export regulations, tariff, and freight rates, as well as the
risks of natural disaster. Although we will seek to reduce our dependence on a
limited number of subcontractors, as demand for our products merits, the
concentration of subcontractors and manufacturing operations in certain areas of
the World could subject us to the risks of conducting business internationally,
including political and economic conditions in

                                       22
<PAGE>
such regions as Asia, India, etc. Disruption or termination of the assembly,
packaging or testing of our products could occur, and such disruptions could
harm our business and operating results. In addition, we are unable to predict
whether events such as the epidemic of SARS will have a negative effect on the
design, supply, testing, and packaging of our products.

WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS FROM THIRD-PARTY
CLAIMS AND LITIGATION.

         Our success depends on our ability to obtain patents and licenses and
to preserve our other intellectual property rights covering our technology,
applications, products, and development and testing tools. We seek patent
protection for those inventions and technologies for which we believe such
protection is suitable and is likely to provide a competitive advantage to us.
We also rely substantially on trade secrets, proprietary technology,
non-disclosure and other contractual agreements, and technical measures to
protect our technology, application, design, and manufacturing know-how, and
work actively to foster continuing technological innovation to maintain and
protect our competitive position. We cannot assure you that steps taken by us to
protect our intellectual property will be adequate, that our competitors will
not independently develop or patent substantially equivalent or superior
technologies or be able to design around patents that we may receive, or that
our intellectual property will not be misappropriated. Also, the laws of some
foreign countries may not protect our intellectual property as much as the laws
of the United States.

POTENTIAL INTELLECTUAL PROPERTY CLAIMS AND LITIGATION COULD SUBJECT US TO
SIGNIFICANT LIABILITY FOR DAMAGES AND COULD INVALIDATE OUR PROPRIETARY RIGHTS.

         The semiconductor industry is characterized by frequent litigation
regarding patent and other intellectual property rights. Even if we receive a
patent grant we would not be able to offer any assurance that it will not be
invalidated, circumvented, or challenged, that rights granted under the patent
will provide competitive advantages to us, or that any of our pending or future
patent applications will be issued with the scope of the claims sought by us, if
at all. As is typical in the semiconductor industry, we expect that we and our
customers may have received and may receive in the future, communications from
third parties asserting patents, mask work rights, or copyrights on certain of
our products and technologies. In the event third parties were to make a valid
intellectual property claim and a license was not available on commercially
reasonable terms, our operating results could be harmed. Litigation, which could
result in substantial cost to us and diversion of our resources, may also be
necessary to defend us against claimed infringement of the rights of others. An
unfavorable outcome in any such suit could have an adverse effect on our future
operations and/or liquidity.

IF WE ARE UNABLE TO MAKE CONTINUED SUBSTANTIAL INVESTMENTS IN RESEARCH AND
DEVELOPMENT, WE MAY NOT BE ABLE TO SELL OUR PRODUCTS.

         We plan significant expenditures in research and development activities
to develop products and solutions. If we fail to make sufficient expenditures in
research and development programs, new technologies and process improvements
implemented by our competitors could render our current and planned products
obsolete, and our business could be harmed. Substantially all of our operating
expenses are related to research and development.

PENDING LITIGATION.

         We have reported that former officers of Enikia, LLC, the company from
which we indirectly acquired patents and other assets relating to our planned
products, have filed a lawsuit against Andreas Typaldos, our Chairman, Oleg
Logvinov, our CEO, Enikia, Enikia's counsel, Arkados and us. The action is

                                       23
<PAGE>
captioned Robert Dillon, et al. v. Andreas Typaldos et al., and was commenced in
the Superior Court of New Jersey, Chancery Division, Somerset County (Docket No.
C-12102-04). The plaintiffs claim damages and allege, among other things
entitlement to a portion of the Common Shares issued as consideration for
Miletos, Inc. (an affiliate of Mr. Typaldos') merging into our Arkados
subsidiary. We do not believe there is any merit to these claims, but have
approached the plaintiff to open settlement discussions. Whether or not the
discussions lead to a settlement, such matters could require a significant
amount of our management's time and are detrimental to our business.

OBLIGATION TO LICENSE CERTAIN INTELLECTUAL PROPERTY RIGHTS.

         As a member of the HomePlug Alliance and IEEE P1901, we are obligated
to license certain intellectual property rights to our competitors, on a
non-discriminatory basis, which may adversely affect our ability to compete.

AVAILABLE INFORMATION

         We file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission ("SEC"). You may
read and copy any document the Company files at the SEC's public reference room
at Room 1024, 450 Fifth Street, NW, Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 for information on the public reference room. The SEC
maintains a web site (www.sec.gov ) that contains annual, quarterly and current
reports, proxy statements and other information that we and other issuers file
electronically with the SEC.

EXECUTIVE OFFICERS OF THE REGISTRANT

         Our current executive officers are:

         NAME                              POSITION
         ----                              --------
         Oleg Logvinov                     President, CEO and a Director
         Kirk Warshaw                      CFO, Treasurer and Secretary


         Oleg Logvinov was appointed President, CEO and a director on August 12,
2004 and has served as President of Arkados since we merged Miletos into
Arkados. Prior to the merger, from February, 2000 to March, 2004, Mr. Logvinov
served as Vice President of Engineering and later as President of Enikia LLC.
From March, 1998 to February, 2000, he served as Senior Director of Product
Development and System Engineering at OpenCon Systems Inc., a telecommunications
software service provider, and later CyberPath Inc., a venture-funded VoDSL
Gateway company spun off by OpenCon Systems Inc. Prior to that, he held senior
management positions at NITECH, INC from1996 to 1998, and CEM, Inc from 1991 to
1996. Mr. Logvinov holds a masters degree in electrical engineering from the
Technical University of Ukraine (KPI). He has also worked as a senior research
scientist and later research team leader at an R&D laboratory at the Technical
University of Ukraine and the Ukraine Department of Energy.

         Kirk Warshaw, CPA was appointed CFO of Arkados in June 2004 and was
appointed our CFO, Treasurer and Secretary August 12, 2004. Mr. Warshaw started
his career at Deloitte Haskins & Sells (Deloitte & Touch) as a Senior
Accountant. Subsequently, Mr. Warshaw was employed in the banking industry,
including a position as the CFO of Amerifederal Savings Bank from 1987 to 1990
where he supervised the accounting, retail branches, corporate services,
consumer lending, and data processing departments. He was directly responsible
for asset / liability, and interest rate risk management; tax, budget, and
insurance functions; capital planning, regulatory compliance and financing
activities. From 1990 to

                                       24
<PAGE>
1991 he was the bank President and CEO where he resolved numerous non-performing
assets and operating problems, prepared business plans, negotiated loan workout
plans, and participated in the resolution and sale of the bank. For the last 14
years, he has invested in and served in managerial capacity in a variety of
private businesses, including radio stations, an executive recruitment entity,
and a firm which provides personal financial planning services. In addition, he
acts as a financial and business consultant to several small businesses. Mr.
Warshaw, a Certified Public Accountant since 1982, holds a BS in accounting and
marketing from Lehigh University.

         CONSULTING AGREEMENT WITH CHAIRMAN OF THE BOARD

         Andreas Typaldos is a principal stockholder and was appointed Chairman
of our Board in February, 2005. Although our by-laws provide that the Chairman
of the Board's primary responsibilities relate to the conduct of board and
stockholder meetings, Mr. Typaldos also serves as a consultant to us on a
part-time basis and has a significant impact on our strategic planning,
marketing and capital raising activities. He has thirty years of software
experience as an entrepreneur and founder/investor of a number of technology
companies. In 1997, Mr. Typaldos founded Enikia, LLC, whose technology and
assets were subsequently acquired by an entity controlled by Mr. Typaldos and
merged into our Arkados, Inc. subsidiary in May 2004. Mr. Typaldos serves as CEO
of Xandros, Inc., a privately held company engaged in the sale of Linux desktop
applications. From September 1998 until June 2003, as founder and principal
investor, Mr. Typaldos also built a multi-million dollar software consulting
business, e-Vantage Solutions, Inc., until that company's consulting activities
ended shortly after September 11, 2001. In addition, from September 1999 until
December 2001, Mr. Typaldos was active as Interim Chairman and CEO at NetGain
Development, Inc., which was an internet incubator/investment firm that funded
internet and enabling technology companies, including Enikia, Linux Global
Partners, and other internet and technology companies. Prior to that, Mr.
Typaldos founded his first consulting and software company in 1973 and in 1978,
founded a successor company, AxsOne (formerly known as Compuiron), which he took
public in 1995 and of which he as President until 1994 and Chairman/CEO until
1996. AxsOne is an international client/server and internet-based enterprise
applications software company that supplies Fortune 5000 companies with records
and content management and compliance software (i.e., email and Instant
Messaging-IM management), as well as financial applications and workflow
solutions. Mr. Typaldos has a Bachelors of Science Degree from Columbia
University in Mathematical Methods for Engineering and Operations Research. He
also holds a Masters of Science Degree in Computer Science from Pratt Institute.
Mr. Typaldos serves on the Board of Directors and Advisory Boards of a number of
companies and non-profit organizations.

ITEM 2.  DESCRIPTION OF PROPERTY.

         Our executive offices and Arkados' offices are located at 948 US
Highway 22, North Plainfield, NJ 07060. The facility is approximately 1,630 sq.
feet, occupied on a month-to-month basis and is adequate for our current
activities. We may add to the space or seek larger facilities as our operations
expand.


ITEM 3.  LEGAL PROCEEDINGS.

         In December 2004, Robert Dillon, William Simons and Stephen Schuster
(the "Plaintiffs") named us, our Arkados, Inc. subsidiary, Enikia, LLC, Oleg
Logvinov, our CEO, Andreas Typaldos, our Chairman, and others in a lawsuit. The
action is captioned Robert Dillon, et al. v. Andreas Typaldos et al., and was
commenced in the Superior Court of New Jersey, Chancery Division, Somerset
County (Docket No. C-12102-04). The plaintiffs claim damages and allege, among
other things entitlement to a portion of the Common Shares issued as
consideration for Miletos, Inc. (an affiliate of Mr. Typaldos') merging into our

                                       25
<PAGE>
Arkados subsidiary. We do not believe there is any merit to these claims, but
have approached the plaintiff to open settlement discussions. Whether or not the
discussions lead to a settlement, such matters could require a significant
amount of our management's time and are detrimental to our business. The
Plaintiffs allege, among other things, that they are entitled to an equity
position in Enikia LLC (the plaintiffs are seeking various forms of equitable
relief and unspecified damages. We believe claims against the Company are wholly
without merit and intend to vigorously defend against the claims against us
unless the claims can be settled for nuisance value.

         The outcome of any litigation is inherently uncertain and we are
required under our certificate of incorporation, bylaws and employment
agreements to indemnify our officers and directors for certain liabilities,
including the cost of defending litigation brought against them in their
capacity as such. Nevertheless, a portion of our indemnification liability is
insured and shares of our common stock were escrowed at the time of the merger
in which Arkados is the surviving corporation, to indemnify us against certain
claims being made in the above actions.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         Not applicable.


















                                       26
<PAGE>
                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         Our common stock is currently quoted on the Over-The-Counter Bulletin
Board under the symbol ("CDKN.OB").


MARKET INFORMATION

         Our shares of common stock were first quoted on the Over-The-Counter
Bulletin Board in 1999. The following table presents the high and low bid prices
per share of our common stock as quoted for the quarter ended August 31, 2005
and each quarter in the years ended May 31, 2005 and May 31, 2004 which
information was provided by NASDAQ Trading and Market Services. All amounts have
been retroactively adjusted to reflect a 1-for-50 reverse stock split that
occurred on November 21, 2003.


Fiscal Year ended May 31, 2006                High Bid               Low Bid
------------------------------                --------               -------
QUARTER ENDED:

August 31, 2005                                 $0.83                 $0.41



Fiscal Year ended May 31, 2005                High Bid               Low Bid
------------------------------                --------               -------
QUARTER ENDED:

May 31, 2005                                    $0.21                 $0.42
February 29, 2005                               $0.80                 $0.50
November 30, 2004                               $1.20                 $0.53
August 31, 2004                                 $3.00                 $0.56



Fiscal Year ended May 31, 2004                High Bid               Low Bid
------------------------------                --------               -------
QUARTER ENDED:

May 31, 2004                                    $2.40                 $0.800
February 29, 2004                               $3.00                 $0.850
November 30, 2003                               $3.50                 $0.035
August 31, 2003                                 $0.06                 $0.031

         The above prices represent inter-dealer quotations, without markup,
markdown or commissions, and may not represent actual transactions. The trading
volume of our common stock fluctuates and may be limited or nonexistent from
time to time. As a result, the above prices should not be considered to
represent a liquid trading market.

                                       27
<PAGE>
HOLDERS
         As of August 31, 2005 we had 162 stockholders of record of our common
stock.

DIVIDEND POLICY

         We have paid no dividends on our common stock and we do not expect to
pay cash dividends in the foreseeable future. We are not under any contractual
restriction as to our present or future ability to pay dividends. We currently
intend to retain any future earnings to finance the growth and development of
our business.

RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED
SECURITIES

         The following table sets forth information regarding sales or issuances
of our securities without registration under the Securities Act of 1933, as
amended.

FISCAL YEARS ENDED MAY 31, 2003 AND 2004

         During the two years ended May 31, 2004 we issued securities without
registration under the Securities Act as set forth in the following table
(unless otherwise indicated, such sales were solely to accredited investors,
without a broker and were made in reliance on Section 4(2) or 4(6) of the
Securities Act, and Rule 506 under Regulation D):

==============================================================================
                                                 CONSIDERATION
                                          ============================
                                                         CONVERSION
DATE          TITLE            NUMBER     CASH PRICE   PRICE TO COMMON   NOTES
=====   ==================   ==========   ==========   ===============   =====
10/04   Series A Preferred      139,959       N/A           $.45          (1)
-----   ------------------   ----------   ----------   ---------------   -----
1/03    Series A Preferred       17,500       N/A           $.45          (2)
-----   ------------------   ----------   ----------   ---------------   -----
1/03    Series A Preferred       72,000       N/A           $.45          (3)
-----   ------------------   ----------   ----------   ---------------   -----
1/03    Series A Preferred       17,500       N/A           $.45          (4)
-----   ------------------   ----------   ----------   ---------------   -----
11/03   Common                3,711,860       N/A            N/A          (5)
-----   ------------------   ----------   ----------   ---------------   -----
5/04    Series A Preferred       10,000       N/A           $.45          (6)
-----   ------------------   ----------   ----------   ---------------   -----
5/04    Common                  150,000       N/A            N/A          (7)
-----   ------------------   ----------   ----------   ---------------   -----
5/04    Common                  549,866       N/A            N/A          (8)
-----   ------------------   ----------   ----------   ---------------   -----
5/04    Common               16,090,577       N/A            N/A          (9)
-----   ------------------   ----------   ----------   ---------------   -----
5/04    Common                  883,334     $1.20            N/A          (10)
==============================================================================
(1)  Issued in lieu of accrued and unpaid dividends on the Series A Preferred
     Stock.
(2)  Issued to accredited investors to settle cash compensation claims under
     consulting agreements.
(3)  Issued to accredited investors in settlement of claims related to the sale
     of ValueFlash assets.
(4)  Issued to an officer and director in lieu of salary.
(5)  Issued to an unaffiliated law firm for legal services.
(6)  Issued in reliance upon Section 3(a)(9) upon mandatory conversion of Series
     A Preferred Stock.
(7)  Issued to a law firm in which Steven Horowitz is a partner to settle loan
     payable to Mr. Horowitz of $38,000 and $112,534 of legal fees.
(8)  Issued to accredited investors in satisfaction of $1654,000 principal
     amount of convertible notes and related claims.
(9)  Issued to the shareholders of Miletos in the Merger.
(10) Issued in a private placement to 10 accredited investors. Of the 883,334
     shares issued, 766,833 were issued for cash, 41,667 were issued in
     satisfaction of outstanding debt and 24,834 were issued in satisfaction of
     consulting fees.
                                       28
<PAGE>
FISCAL YEAR ENDED MAY 31, 2005

         During the period from March 18, 2005 to May 12, 2005 we sold $750,000
principal 10% convertible, extendable notes due June 8, 2005 (the "10%
Convertible Notes") to 15 accredited investors, of which 2 were not U.S.
residents. We exercised our option to extend the due date of the 10% Convertible
Notes by paying an extension fee aggregating $20,000 for the entire issue and
paying interest due on the Notes to June 8, 2005. We were able to obtain a
further extension of the due date of $712,500 of the principal due on the 10%
Convertible Notes to December 8, 2005 by agreeing to pay accrued interest and an
extension fee of $22,667 and agreeing to issue 85,000 shares of our common stock
to the holders that agreed to the extension. The remaining principal balance of
$37,500 was due with interest on September 8, 2005 was paid prior to the
expiration of the grace period. We must redeem the 10% Convertible Notes without
premium to the extent of 33% of the proceeds from the sales of securities
exceeding $1,000,000. Principal and accrued interest on the 10% Convertible
Notes is convertible at the holders' option into shares of our common stock only
after an event of default, as defined in the 10% Convertible Notes at the lower
of $0.67 or the average closing bid price of the Company's common stock on the
ten trading days preceding conversion. The conversion right is limited in that
it may not be exercised by a holder to the extent it would result in such holder
becoming the beneficial owner of more than 4.99% of the our common stock. The
10% Convertible Notes were issued with three year common stock warrants
exercisable for $0.67 per share in the basis of one warrant for each $1 of
principal. We paid a 10% commission, $11,000 of expenses, issued warrants
identical to those issued to investors and shares of our common stock (on the
basis of one warrant and one half share for each $10 of principal sold) to a
foreign investment bank and an NASD registered broker-dealer as compensation for
the offering. There was no public solicitation in connection with the offering.
The offering was made only to accredited and investors and is claimed to be
exempt under Section 4(2) and 4(6) of the Securities Act of 1933, as amended,
and, as to certain investors Regulation D and for transactions not involving a
public offering and Regulation S for offerings not to U.S. Persons.

         During the period from June 1, 2005 to May 31, 2005, we issued
securities without registration under the Securities Act as set forth in the
following table (unless otherwise indicated, such issuances were solely to
accredited investors and were made in reliance on Section 4(2) or 4(6) of the
Securities Act, and Rule 506 thereunder):

==============================================================================
                                                 CONSIDERATION
                                          ============================
                                                         CONVERSION
DATE          TITLE            NUMBER     CASH PRICE   PRICE TO COMMON   NOTES
=====   ==================   ==========   ==========   ===============   =====
8/04         Common            550,000        N/A            N/A          (1)
-----   ------------------   ----------   ----------   ---------------   -----
10/04        Common              5,000        N/A            N/A          (2)
-----   ------------------   ----------   ----------   ---------------   -----
11/04        Common              5,000        N/A            N/A          (2)
-----   ------------------   ----------   ----------   ---------------   -----
12/04        Common             15,000        N/A            N/A          (3)
-----   ------------------   ----------   ----------   ---------------   -----
12/04        Common              5,000        N/A            N/A          (2)
-----   ------------------   ----------   ----------   ---------------   -----
1/05         Common              5,000        N/A            N/A          (2)
-----   ------------------   ----------   ----------   ---------------   -----
2/05         Common              5,000        N/A            N/A          (2)
-----   ------------------   ----------   ----------   ---------------   -----
3/05         Common              5,000        N/A            N/A          (2)
-----   ------------------   ----------   ----------   ---------------   -----
4/05         Common              5,000        N/A            N/A          (2)
==============================================================================

(1)  Issued to non-affiliates for various consulting activities, past office
     rent and engineering services.
(2)  Issued to a marketing consultant at the rate of 5,000 shares per month.
(3)  Issued to the placement agent in connection with the placement of $750,000
     principal amount of 10% Convertible Extendable Notes, described below.

                                       29
<PAGE>
         In March 2004, we issued 1,150,000 shares to an accredited investor to
finance investor relations services and in January 2005, we terminated the
agreement and cancelled all but 100,000 of the shares issued.

         We sold 9.865 units, consisting of notes and warrants (the "Units") to
eight accredited investors in a private placement and received gross proceeds of
$986,500 during the period from June 7, 2005 to August 31, 2005. Each Unit
consists of $100,000 principal amount of a total authorized $2.4 million of our
6% convertible subordinated promissory notes due July 7, 2007 (the "6% Notes")
and 14,286 detached warrants to purchase a like number of our common stock for
$0.35 per share. We have agreed to extend the offering until September 22, 2005
but may terminate the offering at any time. The offering of 6% Notes, warrants
and shares of our common stock issuable upon the possible conversion and
exercise, respectively, have not been registered under the Securities Act of
1933, as amended (the "Securities Act") and may not be offered or sold by the
investors without an effective registration of such offers and sales under the
Securities Act or the availability of an applicable exemption from such
registration requirements. We sold he Units through a registered broker-dealer
acting as placement agent. Sales were made to accredited investors for $100,000
per Unit in reliance on and Section 4(2) and 4(6) of the Securities Act and Rule
506 of Regulation D, thereunder. The placement agent received a 10% commission,
reimbursement of a portion of its expenses and was issued five year warrants to
purchase shares of our common stock for $0.65 per share on the basis of 21,428
such warrants for each Unit sold, or an aggregate of 211,280 warrants.

         Each of the investors entered into a securities purchase agreement with
the Company substantially in the form incorporated by reference into this report
as an exhibit. In addition to routine representations, warranties and covenants,
contained in the several securities purchase agreements, the agreements require
that we include the Common Stock issuable upon the possible conversion of the
Notes and exercise of the Warrants in any registration statement under the
Securities Act of 1933, as amended (the "Securities Act") that we file, with the
exception of filings on Form S-8 for compensation plans or Form S-4 relating to
certain mergers or acquisitions. These registration provisions require us to pay
the investors' expenses relating to such registrations and indemnify the
investors from certain damages and liabilities, including legal fees, arising
from any untrue or allegedly untrue statement or omission of material fact in
such registration statement. In the opinion of the Securities and Exchange
Commission, to the extent that such liabilities arise under the Securities Act,
these indemnification provisions are against public policy and are therefore
unenforceable.

         The following are only summaries of the terms of the Notes and Warrants
and are qualified by reference to the form of such documents, which are filed as
exhibits to this report.

         6% Notes
         --------

         The 6% Notes are part of an aggregate of $2.4 million principal amount
of such notes authorized for sale to accredited investors and:

         o   are due July 7, 2007 with interest at the annual rate of 6% from
             the date of original issuance increasing to 12% per annum from an
             event of default (as defined in the 6% Notes);

         o   are our unsecured obligations and will be subordinated to senior
             secured loans we receive (if any) from banks, finance companies and
             similar institutions that extend credit in the regular cause of
             such institution's business;

         o   are convertible (subject to certain conditions described below)
             into shares of our common stock; and

                                       30
<PAGE>
         o   may be redeemed by us in certain limited circumstances described
             below prior to maturity.

         During a period or periods of twenty trading days following a five
consecutive trading day period in which the closing bid price of shares of our
common stock equal or exceeds a Trigger Price (defined in the 6% Notes), subject
to the holder tendering a minimum percentage (the "Minimum Percentage") of the
principal amount of the 6% Notes held by him, the principal and interest due on
6% Notes is convertible into the number of shares of our common stock, at the
option of the holder, determined by dividing the principal amount being
converted (plus all accrued and unpaid interest) by a conversion price
corresponding to the Trigger Prices and Minimum Percentages, as follows:

         Trigger     Trigger Price      Minimum Percentage      Conversion Price
         -------     -------------      ------------------      ----------------
            A           $1.50                   50%                   $1.125
            B           $2.25                  100%                   $1.575

         When the closing bid price of shares of our common stock equals or
exceeds the B Trigger price for five consecutive trading days, the right to
convert at the A Conversion Price and the Minimum Percentage will be suspended
until such time as the closing bid price for shares of our common stock is less
than the B Trigger Price.

         If the closing bid price of shares of our common stock equal or exceeds
the B Trigger for 20 consecutive trading days with trading volume exceeding
20,000 shares per day, we may for a period of 10 trading days and subject to the
additional conditions set forth in the next paragraph, force conversion of the
outstanding 6% Notes into shares of our common stock at the B Trigger Price.

         We may call the 6% Notes for redemption, in whole or in part, by lot or
pro rata, subject to the conditions set forth in the Notes, upon not less than
20 or more than 45 days written notice for 120% of the principal amount, plus
accrued interest. Such conditions include:

         o   the market price of shares of our common stock equaling or
             exceeding the A Trigger for 20 consecutive trading days preceding a
             call with trading volume exceeding 20,000 shares per day; and

         o   the holders' having the right to convert the principal and interest
             on the 6% Notes into shares of our common stock which are then the
             subject of an effective registration statement and there being set
             aside funds to pay the redemption price.

         Our obligation to pay principal and interest on the 6% Notes, as well
the additional obligation to pay the 6% Notes holders' expenses of collection,
may be accelerated in the event of default as defined in the 6% Notes, including
failing to make payments of principal and interest on the 6% Notes when due,
certain events of insolvency and related proceedings, an unremedied breach of a
material representation, warranty or covenant contained in the Securities
Purchase Agreements and the entry of a judgment against us or our property in an
amount of $200,000 or more which is not paid, vacated or bonded within 60 days
of entry.

         Warrants
         --------

         The Warrants issued as part of the Units permit the holder to purchase
one of our Common Shares for $0.35 until July 7, 2010. The Warrants have a "net
exercise" provision that permits the holder to convert

                                       31
<PAGE>
the Warrants into Common Shares, but such feature may only be used if the
Company fails to include the shares underlying the Warrants in a registration
statement prior to July 7, 2006.

         Price Adjustments
         -----------------

         Each of the relevant prices relating to the conversion and redemption
of the 6% Notes and the exercise of the Warrants are the subject of adjustments
to prevent dilution in the event of one or more common stock splits, stock
dividends and similar events.

RECENT ISSUANCES

         The requisite holders of more than half of 883,334 shares of our common
stock issued in a private placement in May 2004, agreed to settle an aggregate
of $190,800 of accrued and unpaid penalties for the failure to register such
shares in exchange for the issuance of up to 381,600 shares of our common stock
(i.e at the rate of $0.50 of penalty waived per share). Under the terms of the
Purchase Agreements entered into with the holders in 2004, a majority of the
holder may consent to the amendment of the registration provisions of such
agreements. The holder will represented that they are accredited investors and
that they are acquiring the penalty shares as an investment and not for resale.
The offering was made only to accredited and investors and is claimed to be
exempt under Section 4(2) and 4(6) of the Securities Act of 1933, as amended,
and, as to certain investors Regulation D and for transactions not involving a
public offering and Regulation S for offerings not to U.S. Persons.




















                                       32
<PAGE>
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

         Readers are urged to carefully review and consider the various
disclosures made by us in this Form 10-KSB for the period ended May 31, 2005,
and our other filings with the U.S. Securities and Exchange Commission. These
reports and filings attempt to advise interested parties of the risks and
factors that may affect our business, financial condition and results of
operations and prospects. The forward-looking statements made in this Form
10-KSB speak only as of the date hereof and we disclaim any obligation to
provide updates, revisions or amendments to any forward-looking statements to
reflect changes in our expectations or future events.

PLAN OF OPERATION

         We are a semiconductor company engaged in research and development
activities focused on the segment of the industry that provides the technology
and solutions enabling broadband communications over standard electricity lines.
Arkados is member of an alliance of several companies referred to as the
HomePlug Powerline Alliance, "HomePlug." HomePlug's mission is to enable and
promote rapid availability, adoption and implementation of cost effective,
interoperable and standards-based home powerline networks and products. Arkados
is also a member of newly created IEEE P1901 group that is focused on the
standardization of the powerline communication technology.

         Miletos, Inc. was organized to acquire the assets and business of
Enikia, LLC through a public foreclosure sale on March 23, 2004. The assets and
certain liabilities acquired at the sale have been recorded at historical cost
basis. The new entity, Miletos, Inc. was predominately owned by a control group,
which was the group controlling Enikia, LLC and ultimately the same group which
group which now controls a majority of the voting stock of CDKNET.com, Inc.
following the merger ("Merger") of Miletos with our subsidiary. Our subsidiary
changed its name to "Arkados, Inc." immediately subsequent to the Merger.

         The accompanying financials have been presented on a development stage
basis using March 24, 2004 as the date of inception. The two years of historical
financials that have been presented for reporting purposes include Enikia, LLC,
since the control group of shareholders are predominately the same as they were
prior to the aforementioned public foreclosure sale (June 1, 2002 to May 31,
2003 and June 1, 2003 to March 23, 2004 of Enikia, LLC) as they were after the
foreclosure sale (March 24, 2004 to May 31, 2004 of Miletos, Inc.) and such
controlling shareholders became our majority shareholders as a result of the
Merger. The statement of operations presented for the periods following the
public foreclosure sale on March 23, 2004, have been double barred analogous to
fresh start accounting.

         The consideration for the Merger was 16,090,577 restricted shares of
our common stock and the assumption of certain liabilities of Miletos'
predecessor and former controlling equity holders. The Merger was completed
according to the terms of the Agreement and Plan of Merger dated as of May 7,
2004 by and among CDKNet.Com, Inc., CDK Merger Corp., Miletos, and certain
majority shareholders of Miletos. Under the Merger Agreement, we also issued an
additional 250,000 shares of common stock to certain former holders of Miletos
stock which are placed in escrow. Since we have not received claims for a breach
of representation or warranties under the Merger Agreement, the shares will be
returned and cancelled. The same former Miletos shareholders also placed
1,155,000 of the 16,090,577 shares issued in the Merger in escrow to cover any
indemnification liabilities they may have. In addition 3,734,642 stock options
were issued to former employees of Enikia and consultants at prices ranging from
$.01 to $1.20 per share. We also raised $1,000,200 through the sale of equity
for working capital.

                                       33
<PAGE>
CRITICAL ACCOUNTING POLICIES

         Financial Reporting Release No. 60 requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Our accounting policies are described in Note 2 of the
notes to our consolidated financial statements included in this report. Our
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, which requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and 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. The following is a brief discussion of the more significant
accounting policies and methods used by us. In addition, Financial Reporting
Release No. 67 was recently released by the SEC to require all companies to
include a discussion to address, among other things, liquidity, off-balance
sheet arrangements, contractual obligations and commercial commitments.

         Basis of Presentation
         ---------------------

         Our consolidated financial statements have been prepared assuming we
will continue as a going concern despite substantial doubt as to our ability to
do so. Management anticipates losses in the foreseeable future and plans to
finance losses by raising additional capital. If we are unable to continue as a
going concern, adjustments would have to be made to the carrying value of
assets.

         Revenue Recognition
         -------------------

         We recognize revenue in accordance with SEC Staff Accounting Bulletin
No. 101, Revenue Recognition in Financial Statements, as amended ("SAB 101").
SAB 101 requires that four basic criteria must be met before revenue can be
recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has
occurred or services rendered; (3) the fee is fixed or determinable; and (4)
collectibility is reasonably assured. Under the provisions of SAB 101, we
recognize revenue when products are shipped, and the collection of the resulting
receivable is probable. If revenues are from a long term arrangement, revenue
are recognized when pre-determined milestones, which generally are related to
substantial scientific or technical achievement, are accomplished.

         Accounting for Stock Based Compensation
         ---------------------------------------

         We have adopted Statement of Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation"("SFAS 123"). As provided for by SFAS
123, we have also elected to account for our stock-based compensation programs
according to the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees"("APB 25")." Accordingly, compensation
expense has been recognized based on the intrinsic value of stock issued or
options granted to employees and directors for services rendered.


THE 10 MONTH 3 WEEK PERIOD ("THE STUB PERIOD") ENDED MARCH 23, 2004

         Because we currently do not have nor have we ever had since inception
any business operations as a development stage company, we have not had any
recurring revenues. No revenue or income of any nature was recognized during the
Stub Period.

                                       34
<PAGE>
         General and administrative expenses during the Stub Period were $2.625
million. The expenses incurred consisted largely of personnel related expenses,
professional fees, depreciation, amortization, and penalties and late charges.
Research and development expenses for the Stub Period were $37,000. Interest
expense for the Stub Period was $1.091 million.

THE PERIOD BEGINNING ON MARCH 24, 2004 AND ENDED MAY 31, 2004 (THE "REMAINING
PERIOD OF FISCAL YEAR 2004")

         Because we currently do not have nor have we ever had since inception
any business operations as a development stage company, we did not have any
recurring revenues or income of any nature during the Remaining Period of Fiscal
Year 2004.

         Operating expenses for this period were $.678 million of which almost
all of it was personnel related. In addition to payroll expense, compensation
related to the issuance of stock options was incurred during this period of
time. Research and development expenses of $15,000 were incurred during this
period.

THE YEAR ENDED MAY 31, 2005

         Because we currently do not have nor have we ever had since inception
any business operations as a development stage company, we did not have any
recurring revenues for the 2005 Fiscal Year.

         During the Year ended May 31, 2005, we had revenues of $832,910 which
were realized as the result of achieving certain benchmarks in a long term
arrangement for product development and supply with one client. We recorded
$599,620 of labor, material and supplies, and outside fabrication cost as Cost
of Goods Sold relying on estimates determined by management. Total operating
expenses for the twelve month period were $6,878,000, of which $4,540,661 were
non-cash expenses. The most significant expenses were personnel, professional
fees and related expenses. Research and development expenses during the year
were $436,224 for the year, however, a substantial portion of our administrative
expenses relate to product development. Of total operating expenses, $4.85
million was related to the issuance of stock and stock options for services
rendered by both our employees and outside consultants. Given our reliance on
outside sources of capital, we expect significant additional charges relating to
stock compensation.

LIQUIDITY AND CAPITAL RESOURCES

         Our principal source of operating capital during the Stub Period, the
Remaining Period of Fiscal Year 2004 and the Year ended May 31, 2005 has been
provided in the form of loans and from the issuance of stock to investors in a
private placement. Our revenue from operations has been pursuant to the
Development Agreement between Arkados and Leviton Manufacturing Co. Inc. Leviton
agreed to pay Arkados $1.194 million based on the achievement of certain
milestones. Of this amount, we had realized $830,000 by May 31, 2005. Based upon
our anticipated expenses, future payments from Leviton will not exceed our
projected operating expenses and planned capital expenditures.

         Accordingly, we are dependent upon future loans from our present
stockholders or management and the issuance of additional equity or debt
securities. There can be no assurances that our present stockholders or
management will make any loans to finance our operations and capital
expenditures or that any placement efforts will be successful. At May 31, 2005,
we had cash of $9,681 and negative working capital of $3.8 million.

                                       35
<PAGE>
         Our present material commitments are to employees, professional and
administrative fees, a portion of the past due payroll tax obligations of Enikia
which were assumed pursuant to the Merger Agreement, and expenses associated
with the preparation of its filings with the Securities and Exchange Commission
and other regulatory requirements.

COMMITMENTS

         We do not have any commitments which are required to be disclosed in
tabular form as of May 31, 2005.

OFF BALANCE SHEET ARRANGEMENTS

         We do not have any off balance sheet arrangements.



ITEM 7.  FINANCIAL STATEMENTS.

         Our financial statements are filed under this Item 7, beginning on page
38 of this report.


























                                       36
<PAGE>
                        CDKNET.COM, INC. AND SUBSIDIARIES
                          DEVELOPMENT STAGE ENTERPRISE



                                    CONTENTS
================================================================================


                                                                           Page
                                                                          ------


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                   38, 39


CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheet                                                40

Consolidated Statement of Operations                                      41

Consolidated Statement of Changes in Stockholders' Deficit                42

Consolidated Statement of Cash Flows                                      43



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                            44-55














                                       37
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholders
CDKNET.COM, Inc. and Subsidiaries

         We have audited the accompanying consolidated balance sheet of
CDKNET.COM, Inc. (A Development Stage Enterprise) as of May 31, 2004, and the
related consolidated statements of operations, stockholders' deficit, and cash
flows for the period June 1, 2003 to March 23, 2004 and for the period March 24,
2004 (inception) to May 31, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

         We conducted our 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. 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 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 consolidated financial position of
CDKNET.COM, Inc. as of May 31, 2004, and the results of its operations and cash
flows for the period June 1, 2003 to March 23, 2004 and for the period March 24,
2004 (inception) to May 31, 2004 in conformity with generally accepted
accounting principles in the United States.

         The accompanying financial statements have been prepared assuming that
CDKNET.COM, Inc. will continue as a going concern. As more fully described in
Note 2, the Company has incurred recurring operating losses and will have to
obtain additional capital to sustain operations. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments to reflect the possible
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.




                                                    RADIN, GLASS & CO, LLP

                                                    /s/ Radin, Glass & Co., LLP

                                                    Certified Public Accountants

New York, New York
August 26, 2004


                                       38
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
CDKNET.COM, Inc. and Subsidiaries

         We have audited the accompanying consolidated balance sheet of
CDKNET.COM, Inc. (A Development Stage Enterprise) as of May 31, 2005, and the
related consolidated statements of operations, stockholders' deficit, and cash
flows for the year ended May 31, 2005 and for the period March 24, 2004
(inception) to May 31, 2005. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit. The financial statements for the
period March 24, 2004 (inception) to May 31, 2004 reflect total revenues and a
net loss $ 0 and $693,833, respectively of the cumulative totals. The other
auditors' report has been furnished to us and our opinion, insofar as it relates
to amounts included for such period, is based solely on the report of such other
auditors.

         We conducted our audit 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. 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 principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of May 31, 2005, and the results of its operations and cash flows for
the year then ended May 31, 2005 and for the period March 24, 2004 (inception)
to May 31, 2005 in conformity with generally accepted accounting principles in
the United States.

         The accompanying financial statements have been prepared assuming that
CDKNET.COM, Inc. will continue as a going concern. As more fully described in
Note 2, the Company has incurred recurring operating losses and will have to
obtain additional capital to sustain operations. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments to reflect the possible
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.

                                                  SHERB & CO, LLP

                                                  /s/ Sherb & Co, LLP

                                                  Certified Public Accountants

New York, New York
September 16, 2005


                                       39
<PAGE>
                                CDKNET.COM, INC.
                           CONSOLIDATED BALANCE SHEET
                        (A DEVELOPMENT STAGE ENTERPRISE)



<TABLE><CAPTION>
                                                                      MAY 31,
                                                                       2005
                                                                   ------------
<S>                                                                <C>
                                     ASSETS

CURRENT ASSETS:
     Cash                                                          $      9,681
     Accounts receivable                                                 24,420
     Earned revenue not yet billed                                      177,840
     Prepaid assets                                                      37,967
                                                                   ------------
         Total Current Assets                                           249,908

DEFERRED FINANCING COSTS                                                  8,778

EQUIPMENT, NET                                                            5,147

INTANGIBLE ASSETS, NET                                                  228,330


                                                                   ------------
                                                                   $    492,163
                                                                   ============



                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
     Accrued expenses and other liabilities                        $    823,101
     Payroll taxes and related penalties and interest payable         1,815,544
     Related party note                                                 668,021
     Convertible Debentures                                             750,000
                                                                   ------------
         Total Current Liabilities                                    4,056,666


COMMITMENTS & CONTINGENCIES                                                  --

STOCKHOLDERS' DEFICIENCY
     Convertible Preferred Stock - $.0001 par value; 5,000,000
        shares authorized, zero shares outstanding
     Common stock, $.0001 par value; 100,000,000 shares
        authorized, 23,201,667 issued and outstanding                     2,320

     Additional paid-in capital                                      13,232,879
     Treasury Stock                                                     (16,000)
     Unearned compensation                                             (811,237)
     Accumulated Deficit                                            (15,972,465)
                                                                   ------------
         Total Stockholder's deficiency                              (3,564,503)
                                                                   ------------
                                                                   $    492,163
                                                                   ============
</TABLE>



                 See notes to consolidated financial statements.

                                       40
<PAGE>
                                CDKNET.COM, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        (A Development Stage Enterprise)



<TABLE><CAPTION>
                                                                                   CUMULATIVE DURING
                                    FOR THE PERIOD  FOR THE PERIOD                  THE DEVELOPMENT
                                     JUNE 1, 2003   MARCH 24, 2004    YEAR ENDED   STAGE (MARCH 24,
                                     TO MARCH 23,   (INCEPTION) TO      MAY 31,     2004 TO MAY 31,
                                         2004        MAY 31, 2004        2005            2005)
                                     ------------    ------------    ------------    ------------
<S>                                  <C>             <C>             <C>             <C>
NET SALES                            $         --    $         --    $    832,910    $    832,910

COST OF GOODS SOLD                             --              --         599,620         599,620
                                     ------------    ------------    ------------    ------------

GROSS PROFIT                                   --              --         233,290         233,290

Research and Development Expenses              --              --         436,224         436,224
General and Adminstrative Expenses      2,625,957         693,833       6,442,164       7,135,997
                                     ------------    ------------    ------------    ------------

NET LOSS FROM OPERATIONS               (2,625,957)       (693,833)     (6,645,098)     (7,338,931)

OTHER INCOME (EXPENSES):

INTEREST INCOME (EXPENSE)              (1,091,269)             --        (356,267)       (356,267)
                                     ------------    ------------    ------------    ------------

NET LOSS BEFORE INCOME TAXES           (3,717,226)       (693,833)     (7,001,365)     (7,695,198)

PROVISION FOR INCOME TAXES                     --              --              --              --
                                     ------------    ------------    ------------    ------------

NET LOSS                             $ (3,717,226)   $   (693,833)   $ (7,001,365)   $ (7,695,198)
                                     ============    ============    ============    ============

NET LOSS PER SHARE                   $    (667.49)   $      (0.28)   $      (0.30)
                                     ============    ============    ============

WEIGHTED AVERAGE OF COMMON SHARES
OUTSTANDING - BASIC and DILUTED             5,569       2,504,517      23,174,359
                                     ============    ============    ============
</TABLE>



                 See notes to consolidated financial statements.

                                       41
<PAGE>
                                 CDKNET.COM, INC
               CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIENCY
                        (A DEVELOPMENT STAGE ENTERPRISE)



<TABLE><CAPTION>
                              PREFERRED STOCK      COMMON STOCK      ADDITIONAL                                           TOTAL
                              ---------------  -------------------    PAID IN     ACCUMULATED  TREASURY    UNEARNED    STOCKHOLDERS
                              SHARES   AMOUNT    SHARES     AMOUNT    CAPITAL       DEFICIT      STOCK   COMPENSATION    DEFICIT
                              ------  -------  ----------  -------  -----------  ------------  --------  ------------  ------------
<S>                           <C>     <C>      <C>         <C>      <C>          <C>           <C>       <C>           <C>
Balance as of May 31, 2003        --  $    --       5,569  $ 5,569  $13,880,369  $(31,153,872) $     --  $         --  $(17,267,934)

Net income (June 1, 2003 to
March 23, 2004)                                        --                          (3,717,226)                           (3,717,226)
                              ------  -------  ----------  -------  -----------  ------------  --------  ------------  ------------

Balance as of March 23, 2004      --       --       5,569    5,569   13,880,369   (34,871,098)       --            --   (20,985,160)
                              =====================================================================================================

Balance as of March 24, 2004
- post foreclosure sale           --       --       5,569    5,569    1,988,185    (8,277,267)                           (6,283,513)

Effect of Reorganization and
Merger - May 24, 2004                          21,473,364   (3,422)   4,105,180                 (16,000)                  4,085,758

Sale of shares pursuant to
PPM                                               841,666       84      950,116                                             950,200

Issuance of shares for
settlement of debts                               181,068       18      168,185                                             168,203

Issuance of options for
services                                                              4,086,164                            (4,086,164)            0

Amortization of unearned
compensation                                                                                                  359,537       359,537

Net loss (March 24, 2004 to
May 31, 2004)                                                                        (693,833)                             (693,833)
                              ------  -------  ----------  -------  -----------  ------------  --------  ------------  ------------

Balance as of May 31, 2004        --       --  22,501,667    2,250   11,297,829    (8,971,100)  (16,000)   (3,726,627)   (1,413,647)
                              ------  -------  ----------  -------  -----------  ------------  --------  ------------  ------------

  Shares issued for services                      575,000       58      724,753            --        --            --       724,811

  Debt converted to equity                        125,000       13       75,483            --        --            --        75,496

  Issuance of options for
  services                                             --       --      900,461            --        --      (702,292)      198,169

  Valuation of equity rights
  and beneficial conversion
  features of debt raise                               --       --      234,353            --        --            --       234,353

  Amortization of unearned
  compensation                                         --       --           --            --        --     3,617,681     3,617,681

  Net loss                                                                         (7,001,365)                           (7,001,365)
                              ------  -------  ----------  -------  -----------  ------------  --------  ------------  ------------
Balance as of May 31, 2005        --  $    --  23,201,667  $ 2,320  $13,232,879  $(15,972,465) $(16,000) $   (811,238) $ (3,564,503)
                              ======  =======  ==========  =======  ===========  ============  ========  ============  ============
</TABLE>
                 See notes to consolidated financial statements.

                                       42
<PAGE>
                                CDKNET.COM, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                        (A Development Stage Enterprise)



<TABLE><CAPTION>
                                                                                                                 CUMULATIVE DURING
                                                                   FOR THE PERIOD  FOR THE PERIOD                 THE DEVELOPMENT
                                                                    JUNE 1, 2003      MARCH 24,      YEAR ENDED   STAGE (MARCH 24,
                                                                    TO MARCH 23,  2004 (INCEPTION)     MAY 31,     2004 TO MAY 31,
                                                                        2004       TO MAY 31, 2004      2005           2005)
                                                                    ------------    ------------    ------------    ------------
<S>                                                                 <C>             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                         $ (3,717,226)   $   (693,833)   $ (7,001,365)   $ (7,695,198)
   Adjustments to reconcile net loss to net cash provided
      by (used) in operating activites:
        Depreciation and Amortization                                    146,778          21,558         110,579         132,137
        Common stock and warrants issued for services                                    359,537       4,540,661       4,900,198
        Warrants and Beneficial Conversion Rights with Debt                                   --         234,353         234,353
        Accounts receivable                                               20,000              --         (24,420)        (24,420)
        Prepaid and Deferred expenses                                    (45,833)          8,333          (8,778)           (446)
        Other current assets                                                                  --        (178,306)       (178,306)
        Accounts payable and accrued expenses                          1,610,699         184,869         (42,595)        142,274
                                                                    ------------    ------------    ------------    ------------
NET CASH PROVIDED BY (USED) IN OPERATING ACTIVITIES                   (1,985,582)       (119,536)     (2,369,871)     (2,489,408)
                                                                    ------------    ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
        Purchases of capital expenditures and Patents                   (140,499)             --        (101,863)       (101,863)
                                                                    ------------    ------------    ------------    ------------
NET CASH USED IN INVESTING ACTIVITIES                                   (140,499)             --        (101,863)       (101,863)
                                                                    ------------    ------------    ------------    ------------

CASH PROVIDED BY FINANCING ACTIVITIES:
        Proceeds from notes payable                                       50,000              --              --              --
        Issuance of Debentures                                            53,523              --         750,000         750,000
        Repayment of related party debt                                       --         (50,000)             --         (50,000)
        Loan payable - related party                                   2,021,746              --         668,021         668,021
        Conrtribution of capital                                              --       1,232,646              --       1,232,646
                                                                    ------------    ------------    ------------    ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                              2,125,269       1,182,646       1,418,021       2,600,667
                                                                    ------------    ------------    ------------    ------------

NET DECREASE IN CASH                                                        (812)      1,063,110      (1,053,713)          9,396

CASH, beginning of the period                                              1,097             285       1,063,394             285
                                                                    ------------    ------------    ------------    ------------

CASH, end of the period                                             $        285    $  1,063,395    $      9,681    $      9,681
                                                                    ============    ============    ============    ============


Supplemental disclosures of cash flow information:
        Cash paid during the year for interest                      $         --    $         --    $         --
        Cash paid for taxes                                                   --              --              --
Non cash financing activities:
        Common stock & warrants issued for services                 $         --    $  4,086,164    $  1,625,214
        Warrants issued with debt & beneficial conversion
          feature rights                                            $         --              --         234,353
        Conversion of debt for equity                                         --    $     50,000    $     75,496
</TABLE>


                 See notes to consolidated financial statements.

                                       43
<PAGE>
                         CDKNET.COM, INC. & SUBSIDIARIES
                        (A Development Stage Enterprise)
                          NOTES TO FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2005 AND 2004

1.       DESCRIPTION OF BUSINESS
         -----------------------

         CDKNET.com, Inc. and subsidiaries (the "Company"), pursuant to an
         "Agreement and Plan of Merger", ("the Merger Agreement") dated May 7,
         2004 and consummated on May 24, 2004, merged a wholly owned subsidiary,
         CDK Merger Corp., with Miletos, Inc. CDK Merger Corp. was renamed
         "Arkados, Inc." Since CDKNET.com, Inc. and subsidiaries prior to May 7,
         2004 had no meaningful operations, this merger has been recorded as a
         reorganization of Arkados, Inc. via a reverse merger with CDKNET.com,
         Inc. Currently the Company is a development stage enterprise, which is
         a fabless semiconductor manufacturer that designs, develops, markets,
         and sells technology and solutions enabling broadband communications
         over standard electricity lines. The Company is a member of an alliance
         of several companies referred to as the HomePlug Powerline Alliance,
         "HomePlug" for developing the standard of such technologies.

         Miletos, Inc. was a newly established entity, which acquired the assets
         and business of Enikia, LLC in a public foreclosure sale on March 23,
         2004 in exchange for the forgiveness of $4,000,000 of secured debt and
         the assumption of certain outstanding liabilities. The assets and
         certain liabilities acquired at the foreclosure sale have been recorded
         at historical cost basis. The new entity, Miletos, Inc. was
         predominately owned by a controlled group, which was the same
         controlled group of Enikia, LLC and the same group became majority
         holders.

         The accompanying financials have been presented on a development stage
         basis using March 24, 2004 as the date of inception. The historical
         financials that have been presented for reporting purposes to the
         Securities and Exchange Commission include Enikia, LLC, since the
         controlled group of shareholders are predominately the same as they
         were both prior (June 1, 2003 to March 23, 2004 of Enikia, LLC) and
         subsequent to the aforementioned foreclosure sale (March 24, 2004 to
         May 31, 2004 of Miletos, Inc.), in addition to the period after the
         merger with CDKNET.com, Inc. The statement of operations presented for
         the period after the foreclosure sale on March 23, 2004, have been
         double barred analogous to fresh start accounting.

         Pursuant to the Merger Agreement, the consideration for the merger
         consisted of 16,340,577 shares of the Company's restricted common stock
         (250,000 of such common shares are contingent shares and will be
         returned for cancellation unless called upon as a result of a breach of
         a warranty or representation) and 3,634,642 stock options at prices
         ranging from $.01 to $1.20 per share. In addition $950,200 was raised
         through the sale of equity for working capital of the Company.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         ------------------------------------------

         a.     Basis of Presentation - The accompanying consolidated financial
                statements have been prepared assuming that the Company will
                continue as a going concern. The Company has incurred net losses
                of $3,717,226, $693,833, and $7,001,365 for the stub period June
                1, 2003 to March 23, 2004, for the stub period March 24 to May
                31, 2004, and the year ended May 31, 2005 respectively.
                Additionally, the Company had a net working capital deficiency
                and shareholders' deficiencies at May 31, 2004 and 2005, and
                negative cash flow from operations

                                       44
<PAGE>
                for the years ended May 31, 2005, 2004 and 2003. The Company is
                also in arrears in the payment of payroll taxes for periods
                dating back to 2002. Payment schedules and agreements are
                currently being negotiated with the IRS and various local and
                state taxing authorities. These conditions raise substantial
                doubt about the Company's ability to continue as a going
                concern. Management expects to incur additional losses in the
                foreseeable future and recognizes the need to raise capital to
                remain viable. The accompanying consolidated financial
                statements do not include any adjustments that might be
                necessary should the Company be unable to continue as a going
                concern.

         b.     Principles of consolidation - The consolidated financial
                statements include the accounts of CDKNET.com, Inc., and it's
                wholly owned subsidiaries. Intercompany accounts and
                transactions have been eliminated in consolidation.

         c.     Equipment - Equipment is recorded at cost. Depreciation is
                provided on the straight-line method based upon the estimated
                useful lives of the respective assets. Equipment is being
                depreciated over a period of five years. Maintenance, repairs
                and minor renewals are charged to operations as incurred,
                whereas the cost of significant betterments is capitalized. Upon
                the sale or retirement of property and equipment, the related
                costs and accumulated depreciation are eliminated from the
                accounts and gains or losses are reflected in operations.

         d.     Impairment of Long-Lived Assets - The Company reviews long-lived
                assets, certain identifiable assets and goodwill related to
                those assets on a quarterly basis for impairment whenever
                circumstances and situations change such that there is an
                indication that the carrying amounts may not be recovered. To
                the extent there has been an impairment such impairment has been
                record in the statement of operations.

         e.     Fair Value of Financial Instruments - The carrying value of
                cash, accounts receivable, other receivables, accounts payable
                and accrued expenses approximate their fair values based on the
                short-term maturity of these instruments. The carrying amounts
                of debt were also estimated to approximate fair value.

         f.     Revenue Recognition - The Company records revenues pursuant to
                one long term development contract. The revenues are earned and
                recorded are based on pre-determined milestones. When revenues
                within a pre-determined milestone has been partially earned, the
                Company records such progress billings as "Revenues earned not
                yet billed". Such revenues are billable under the terms of the
                arrangement once the milestone been fully completed. The Company
                also monitors their estimated costs to complete such long term
                contract to the revenues to be earned to ensure that if there is
                an estimated loss to record to complete their obligation to
                fulfill the terms of such development contract, such loss
                existed. An allowance for doubtful accounts would be recorded
                when the Company estimates such provision is warranted.
                Currently, management believes all of such receivables are
                collectible.

         g.     Advertising Costs - All advertising costs, are expensed as
                incurred.

         h.     Loss Per Share - Basic net loss per common share is computed by
                dividing net loss by the weighted average number of shares of
                common stock outstanding. For the years ended May 31, 2005 and
                2004, diluted loss per share is the same as basic loss per share
                since the inclusion of approximately 4.7 million vested stock
                options and warrants would be antidilutive.

                                       45
<PAGE>
         i.     Stock Options - We account for our stock-based compensation
                plans under Accounting Principles Board Opinion 25, (APB 25)
                Accounting for Stock Issued to Employees and the related
                interpretation, for which no compensation cost is recognized as
                of the grant when the estimated fair value of stock options
                issued with an exercise price equal to or greater than the fair
                value of the common stock on the date of grant. The Company uses
                the "intrinsic" method for determining compensation expense for
                new options whereby expense is recorded for the quoted market
                price of the stock issued, or in the case of options, for the
                difference between the stock's quoted market price on the date
                of the grant and the option exercise price. When the market
                price at the date of the grant exceeds the exercise price of the
                underlying shares, compensation expense is recorded. Statement
                of Financial Accounting Standards No. 123 (SFAS 123) Accounting
                for Stock-Based Compensation, as amended by Statement of
                Financial Accounting Standards No. 148 (SFAS 148) Accounting for
                Stock-Based Compensation - Transition and Disclosure, requires
                that companies, which do not elect to account for stock-based
                compensation as prescribed by this statement, disclose the
                pro-forma effects on earnings and earnings per share as if SFAS
                123 has been adopted.

                If we applied the recognition provisions of SFAS 123 using the
                Black-Scholes option pricing model, the resulting pro-forma net
                income (loss) available to common shareholders, and pro-forma
                net income (loss) available to common shareholders per share
                would be as follows:

<TABLE><CAPTION>
                                                            For the period    For the period        For the
                                                            ended March 23,    March 24, to       year ended
                                                                 2004          May 31, 2004      May 31, 2005
                                                             ------------      ------------      ------------
<S>                                                          <C>               <C>               <C>
                Net loss available to common
                shareholders, as reported                    $ (3,717,226)     $   (693,833)     $ (7,001,365)

                Add: Stock-based compensation expense
                included in the reported net income, net
                of related tax effects

                Deduct: Stock-based compensation, net of
                tax                                                     0                 0          (605,059)
                                                             ------------      ------------      ------------
                Net loss available to common
                shareholders, pro-forma                      $ (3,717,226)     $   (693,833)     $ (7,606,424)
                                                             ============      ============      ============

                Basic earnings per share:
                As reported -                                $    (667.49)     $       (.28)     $       (.30)
                Pro-forma -                                  $    (667.49)     $       (.28)     $       (.33)
</TABLE>

                The above stock-based employee compensation expense has been
                determined utilizing a fair value method, the Black-Scholes
                option-pricing model.

                In accordance with SFAS 123, the fair value of each option grant
                has been estimated as of the date of the grant using the
                Black-Scholes option pricing model with the following weighted
                average assumptions:

                                       46
<PAGE>
                                                      For Years Ended May 31,
                                                      2005               2004
                                                      ----               ----
                Risk free interest rate              5.125%              3.75%
                Expected life                       4 years             5 years
                Dividend rate                         0.00%              0.00%
                Expected volatility                  64.74%              50.0%


         k.     Use of Estimates - 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 and
                disclosure of contingent assets and liabilities at the date of
                the financial statements and revenues and expenses during the
                reporting period. Actual results could differ from those
                estimates.

         l.     Comprehensive Income - SFAS No. 130, "Reporting Comprehensive
                Income", establishes standards for reporting and displaying
                comprehensive income, comprising net income and other non-owner
                changes in equity, in the financial statements. For all periods
                presented, comprehensive income was the same as net income.

         m.     Recent Accounting Pronouncements -

         FASB 151 - Inventory Costs

         In November 2004, the FASB issued FASB Statement No. 151, which revised
         ARB No.43, relating to inventory costs. This revision is to clarify the
         accounting for abnormal amounts of idle facility expense, freight,
         handling costs and wasted material (spoilage). This Statement requires
         that these items be recognized as a current period charge regardless of
         whether they meet the criterion specified in ARB 43. In addition, this
         Statement requires the allocation of fixed production overheads to the
         costs of conversion be based on normal capacity of the production
         facilities. This Statement is effective for financial statements for
         fiscal years beginning after June 15, 2005. Earlier application is
         permitted for inventory costs incurred during fiscal years beginning
         after the date of this Statement is issued. Management believes this
         Statement will have no impact on the financial statements of the
         Company once adopted.

         FASB 152 - Accounting for Real Estate Time-Sharing Transactions

         In December 2004, the FASB issued FASB Statement No. 152, which amends
         FASB Statement No. 66, Accounting for Sales of Real Estate, to
         reference the financial accounting and reporting guidance for real
         estate time-sharing transactions that is provided in AICPA Statement of
         Position (SOP) 04-2, Accounting for Real Estate Time-Sharing
         Transactions. This Statement also amends FASB Statement No. 67,
         Accounting for Costs and Initial Rental Operations of Real Estate
         Projects, to state that the guidance for (a) incidental operations and
         (b) costs incurred to sell real estate projects does not apply to
         real-estate time-sharing transactions. The accounting for those
         operations and costs is subject to the guidance in SOP 04-2. This
         Statement is effective for financial statements for fiscal years
         beginning after June 15, 2005. Management believes this Statement will
         have no impact on the financial statements of the Company once adopted.

                                       47
<PAGE>
         FASB 153 - Exchanges of Nonmonetary Assets

         In December 2004, the FASB issued FASB Statement No. 153. This
         Statement addresses the measurement of exchanges of nonmonetary asstes.
         The guidance in APB Opinion No. 29, Accounting for Nonmonetary
         Transactions, is based on the principle that exchanges of nonmonetary
         assets should be measured based on the fair value of the assets
         exchanged. The guidance in that Opinion, however, included certain
         exceptions to that principle. This Statement amends Opinion 29 to
         eliminate the exception for nonmonetary exchanges of similiar
         productive assets and replaces it with a general exception for
         exchanges of nonmonetary assets that do not have commercial substance.
         A nonmonetary exchange has commercial substance if the future cash
         flows of the entity are expected to change significantly as a result of
         the exchange. This Statement is effective for financial statements for
         fiscal years beginning after June 15, 2005. Earlier application is
         permitted for nonmonetary asset exchanges incurred during fiscal years
         beginning after the date of this Statement is issued. Management
         believes this Statement will have no impact on the financial statements
         of the Company once adopted.

         FASB 123 (revised 2004) - Share-Based Payments

         In December 2004, the FASB issued a revision to FASB Statement No. 123,
         Accounting for Stock Based Compensation. This Statement supercedes APB
         Opinion No. 25, Accounting for Stock Issued to Employees, and its
         related implementation guidance. This Statement establishes standards
         for the accounting for transactions in which an entity exchanges its
         equity instruments for goods or services. It also addresses
         transactions in which an entity incurs liabilities in exchange for
         goods or services that are based on the fair value of the entity's
         equity instruments or that may be settled by the issuance of those
         equity instruments. This Statement focuses primarily on accounting for
         transactions in which an entity obtains employee services in
         share-based payment transactions. This Statement does not change the
         accounting guidance for share-based payment transactions with parties
         other than employees provided in Statement 123 as originally issued and
         EITF Issue No. 96-18, "Accounting for Equity Instruments That Are
         Issued to Other Than Employees for Acquiring, or in Conjunction with
         Selling, Goods or Services." This Statement does not address the
         accounting for employee share ownership plans, which are subject to
         AICPA Statement of Position 93-6, Employers' Accounting for Employee
         Stock Ownership Plans.

         A nonpublic entity will measure the cost of employee services received
         in exchange for an award of equity instruments based on the grant-date
         fair value of those instruments, except in certain circumstances.

         A public entity will initially measure the cost of employee services
         received in exchange for an award of liability instruments based on its
         current fair value; the fair value of that award will be re-measured
         subsequently at each reporting date through the settlement date.
         Changes in fair value during the requisite service period will be
         recognized as compensation cost over that period. A nonpublic entity
         may elect to measure its liability awards at their intrinsic value
         through the date of settlement.

         The grant-date fair value of employee share options and similar
         instruments will be estimated using the option-pricing models adjusted
         for the unique characteristics of those instruments (unless observable
         market prices for the same or similar instruments are available).

                                       48
<PAGE>
         Excess tax benefits, as defined by this Statement, will be recognized
         as an addition to paid-in-capital. Cash retained as a result of those
         excess tax benefits will be presented in the statement of cash flows as
         financing cash inflows. The write-off of deferred tax assets relating
         to unrealized tax benefits associated with recognized compensation cost
         will be recognized as income tax expense unless there are excess tax
         benefits from previous awards remaining in paid-in capital to which it
         can be offset.

         The notes to the financial statements of both public and nonpublic
         entities will disclose information to assist users of financial
         information to understand the nature of share-based payment
         transactions and the effects of those transactions on the financial
         statements.

         The effective date for public entities that do not file as small
         business issuers will be as of the beginning of the first interim or
         annual reporting period that begins after June 15, 2005. For public
         entities that file as small business issuers and nonpublic entities the
         effective date will be as of the beginning of the first annual
         reporting period that begins after December 15, 2005. Management
         intends to comply with this Statement at the scheduled effective date
         for the relevant financial statements of the Company. Management
         believes the effects of adopting this revision to FASB 123, will
         approximate recording those amounts currently reported as compensation
         herein on a pro-forma basis as allowed under FASB 123.

         FASB 154 -  Accounting Changes and Error Corrections

         In May 2005, the FASB issued FASB Statement No. 154, which replaces APB
         Opinion No.20 and FASB No. 3. This Statement provides guidance on the
         reporting of accounting changes and error corrections. It established,
         unless impracticable retrospective application as the required method
         for reporting a change in accounting principle in the absence of
         explicit transition requirements to a newly adopted accounting
         principle. The Statement also provides guidance when the retrospective
         application for reporting of a change in accounting principle is
         impracticable. The reporting of a correction of an error by restating
         previously issued financial statements is also addressed by this
         Statement. This Statement is effective for financial statements for
         fiscal years beginning after December 15, 2005. Earlier application is
         permitted for accounting changes and corrections of errors made in
         fiscal years beginning after the date of this Statement is issued.
         Management believes this Statement will have no impact on the financial
         statements of the Company once adopted.

         FIN 47 - Accounting for Conditional Asset Retirement Obligations

         In March 2005, the Financial Accounting Standards Board ("FASB") issued
         interpretation No. 47, "Accounting for Conditional Asset Retirement
         Obligations" ("FIN No. 47"). FIN No. 47 clarifies that the term
         conditional obligation as used in FASB Statement No. 143, "Accounting
         for Assets Retirement Obligations", refers to a legal obligation to
         perform an asset retirement activity in which the timing and/or method
         of settlement are conditional on a future event that may or may not be
         within the control of the entity. FIN No. 47 requires that the
         uncertainty about the timing and/or method of settlement of a
         conditional asset retirement obligation be factored into the
         measurement of the liability when sufficient information exists. FIN
         No. 47 also clarifies when an entity would have sufficient information
         to reasonably estimate the fair value of an asset retirement
         obligation. FIN No. 47 is effective for fiscal years ending after
         December 15, 2005. Management believes this Statement will have no
         impact on the financial statements of the Company once adopted .

                                       49
<PAGE>
3.       CONCENTRATION OF CREDIT RISK
         ----------------------------

         The Company's accounts receivable were concentrated 100% with one
         customer.

         The Company, periodically may have cash in excess of $100,000, the
         Federal Deposit Insurance Corp. "FDIC" insurable limit. As of May 31,
         2005 there were no funds in any uninsured bank account.

4.       EQUIPMENT
         ---------

         At May 31, 2005 equipment consists of the following:


                Equipment                             $    6,869
                                                      ----------

                Total                                      6,869

                Less: Accumulated depreciation
                and amortization                          (1,723)
                                                      ----------

                Net                                   $    5,146
                                                      ==========

         Depreciation expense for the year ended May 31, 2005 was $4,508.

5.       INTANGIBLE ASSETS - PATENTS
         ---------------------------

         The Company owns 45 patents and patents pending, which are currently,
         being used in the development of the Company's products. As of May 31,
         2005, the Company had recorded $233,596 of accumulated amortization.
         The annual amortization of such intangible assets approximates $106,000
         per year for the next two years.

6.       PAYROLL TAX LIABILITIES
         -----------------------

         Enikia was in arrears for several years in its payment of federal and
         state payroll taxes. Pursuant to the Merger Agreement, the Company
         assumed up to $1.2 million of the delinquent payroll taxes due and
         outstanding with the remaining difference assumed by the major
         shareholder of the Company. Currently, there is $1,815,544 due and
         outstanding to both the federal and state tax authorities for
         delinquent payroll taxes, penalties and interest. Both federal and
         state regulatory authorities are seeking such payments in arrears plus
         penalties and interest from either the majority shareholder / member of
         the former Enikia or the entity Enikia. The Internal Revenue Service
         and The State of New Jersey are currently negotiating with the majority
         shareholder for a payment plan of an agreed upon amount to be paid for
         such delinquent federal and state withholding taxes due and
         outstanding.

7.       ACCRUED EXPENSES AND OTHER LIABILITIES
         --------------------------------------

         As of May 31, 2005, accrued expenses and other liabilities consist of
         the following:

                                       50
<PAGE>
         Accrued Penalties - stock registration             $  190,800
         Accrued professional fees                              96,062
         Accrued technical and engineering fees                 99,966
         Association Dues                                       50,000
         Liabilities assumed per merger agreement              343,444
         Other accrued expenses                                 42,829
                                                            ----------
                                                            $  823,101
                                                            ==========

8.       RELATED PARTY NOTE AND CONVERTIBLE DEBENTURES
         ---------------------------------------------

         a.     Prior to the Merger, amounts included in Loans payable to
                member/shareholder bear interest at 12% per annum and the
                principal plus accrued interest is due on demand. These loans
                were made by two individuals with informal financing
                arrangements. One individual loaned Enikia $550,000. A second
                individual, who was a majority shareholder, loaned $11,116,803
                to Enikia in irregular increments on an "as needed" basis. This
                second individual formed Miletos, Inc. and contributed the right
                to collect $11,116,803 from Enikia to Miletos as a capital
                contribution. Miletos purchased the assets and business of
                Enikia at the foreclosure sale on March 23, 2004 for $4,000,000
                of such indebtedness outstanding.

                The $4,000,000 of debt and liabilities assumed were recorded as
                liabilities of Miletos, Inc. The accounting of the assets and
                liabilities were recorded at carryover basis, since the majority
                owner and debt holder of Enikia LLC continued to be the major
                shareholder of Miletos, Inc.

                The summarized balance sheet of Miletos, Inc. on March 24, 2004
                was as follows:

                Cash                                   $        285
                Prepaid assets                               45,833
                                                       ------------
                Total current assets                         46,118
                Fixed Assets                                  8,889
                Intangible Assets                           254,861
                                                       ------------
                                                       $    309,868

                Accrued liabilities                       $ 690,622
                Payroll taxes                             1,858,598
                Due to shareholder                        4,000,000
                                                       ------------
                Total current liabilities                 6,549,220
                Stockholders deficit
                Common stock                              1,988,185
                Accumulated deficit                     (8,227,537)
                                                       ------------
                                                       $    309,868
                                                       ============

                The $4,000,000 of shareholder debt was recorded as a capital
                contribution to consummate the merger on May 24, 2004.

         b.     During fiscal 2005, the Company borrowed $500,000 from certain
                of its existing shareholders for working capital needs. The
                Company executed a note with these

                                       51
<PAGE>
                shareholders evidencing its obligation to them. The notes,
                recorded as Related Party Debt, bears interest at 6% per annum
                and contain an option to convert the principal and accrued
                interest thereon into Common Stock, or warrants to obtain Common
                Stock, of the Company at a $1.25 per share. If certain future
                events occur, the conversion price may decrease. No expense has
                been recorded for the beneficial conversion feature, since such
                conversion price is always at or above market. The notes'
                maturity date is the earlier of October 15, 2005, when the
                Borrower has raised gross proceeds of $500,000 (not including
                securities of Borrower purchased by Lender, additional advances
                pursuant to this Note or other loans from Lender to Borrower),
                or the date that the entire principal amount and interest on
                this Note shall become due and payable by reason of acceleration
                due to the occurrence of an event of default, as defined in the
                Note.

         c.     During the fiscal 2005, the Company borrowed another $147,500
                from certain of its existing shareholders for working capital
                needs. The Company executed a note with these shareholders
                evidencing its obligation to them. The notes, recorded as
                Related Party Debt, bear interest at 6% per annum. The notes'
                maturity date is the earlier of October 15, 2005, when the
                Borrower has raised gross proceeds of $500,000 (not including
                securities of Borrower purchased by Lender, additional advances
                pursuant to the notes or other loans from such shareholders to
                the Company), or the date that the entire principal amount and
                interest becomes due and payable by reason of acceleration due
                to the occurrence of an event of default.

         d.     A total of $20,521 of accrued interest on these related party
                notes has been included with these obligations on the balance
                sheet.

         e.     During the period from March 18, 2005 to May 12, 2005, the
                Company obtained $750,000 of 10% convertible extendable debt due
                June 8, 2005 (the "10% Notes"). The due date of the 10% Notes
                may be extended at the Company's option by payment of an
                extension fee aggregating $20,000 for the entire issue and
                paying interest due on the 10% Notes to June 8, 2005. The
                Company may redeem the 10% Notes prior to maturity for 120% of
                the principal, plus accrued interest and must redeem the 10%
                Notes without premium to the extent of 33% of the proceeds from
                the sales of securities exceeding $1,000,000. Principal and
                accrued interest on the 10% Note is convertible at the holders'
                option into shares of the Company's common stock only after an
                event of default, as defined in the Notes at the lower of $0.67
                or the average closing bid price of the Company's common stock
                on the ten trading days preceding conversion. The conversion
                right is limited in that it may not be exercised by a holder to
                the extent it would result in such holder becoming the
                beneficial owner of more than 4.99% of the Company's common
                stock. The 10% Notes were issued with 750,000 of three year
                common stock warrant exercisable for $0.67 per share in the
                basis of one warrant for each $1 of principal purchased. In
                addition the Company issued one tenth warrant and one half share
                of common stock for each $10 of principal was issued to the
                placement agents as part of the placement compensation.. The
                warrants and beneficial conversion features were valued at
                $234,143 and expensed in fiscal 2005, since such debt matured on
                June 8, 2005. The 10% Notes were extended to September 8, 2005
                for a $20,000 fee. Most of such 10% Notes were extended a second
                time. See Subsequent Event footnote.

                                       52
<PAGE>
9.       INCOME TAXES
         ------------

         At May 31, 2005, the Company has available unused net operating loss
         carryovers approximately $14,000,000 that may be applied against future
         taxable income and expire at various dates through 2025. The Company
         has a deferred tax asset arising from such net operating loss
         deductions and has recorded a valuation allowance for the full amount
         of such deferred tax asset since the likelihood of realization of the
         tax benefits cannot be determined.


                                                       2005
                                                   ------------
         Deferred tax asset:

               Net operating loss carryforward     $  4,900,000

               Valuation allowance                   (4,900,000)
                                                   ------------
         Net deferred tax asset                    $       --
                                                   ============

         A reconciliation of the statutory federal income tax benefit to actual
         tax benefit is as follows:

<TABLE><CAPTION>
                                                                            Period
                                                         Year Ended        March 24,          Period
                                                           May 31,          2004 to       June 1, 2003 to
                                                            2004          May 31, 2004     March 23, 2004
                                                        ------------      ------------      ------------
<S>                                                     <C>               <C>               <C>
    Statutory federal income tax benefit                    35%                35%                35%
    Permanent timing differences - equity rights
                                                           (25%)
    Income tax benefit not utilized                        (10%)              (35%)              (35%)
    Actual tax benefit                                      --                 --                 --
</TABLE>

         The Company has had greater than 50% change in ownership of certain
         stock holdings by shareholders of the Company pursuant to Section 382
         of the Internal Revenue Code, the net operating losses may be limited
         as to its utilization on an annual basis. Currently no such evaluation
         has been performed.

10.      SHAREHOLDERS' DEFICIENCY
         ------------------------

         a.     On May 7, 2004, CDKNET.com, Inc and Miletos entered into an
                "Agreement and Plan of Merger" ("the Merger Agreement"). On May
                24, 2004, the merger was consummated between a wholly owned
                subsidiary of CDKNET.com, Inc (CDK Merger Corp) and Miletos,
                Inc. The successor subsidiary was renamed Arkados, Inc. Because
                CDKNET.com, Inc and its subsidiaries had no meaningful
                operations prior to May 7, 2004 and equity ownership in
                CDKNET.com, Inc. in an amount greater than 50% was issued to the
                shareholders of Miletos, Inc., this transaction has been
                recorded as a reorganization of Arkados, Inc. via a reverse
                merger with CDKNET.com, Inc.

         b.     In May 2004, prior to the consummation of the aforementioned
                reverse merger, the Company; (a) issued 200,000 common shares
                for services rendered by several individuals valued at $1.50 a
                share and were expensed prior to the consummation of the
                aforementioned reverse merger, (b) converted $150,834 of
                indebtedness owed to a law firm affiliated with the

                                       53
<PAGE>
                former CEO for 150,000 shares of common stock, (c) converted
                $165,000 of convertible debentures and related accrued of
                $51,539 for 549,866 shares of common stock.

         c.     Pursuant to the Merger Agreement, as amended, the consideration
                for the merger consisted of 16,340,577 shares of the Company's
                restricted common stock (250,000 of such common shares are
                contingent shares and will be returned for cancellation unless
                called upon as a result of a breach of warranty), 39,401 shares
                of common stock to the former employees of Enikia, 100,000
                shares were issued to the major shareholder to assume the
                satisfaction of certain outstanding 401K liabilities due to the
                employees of the predecessor entity, 2,484,644 stock options
                exercisable at $.01 per share, 1,149,998 stock options
                exercisable at $1.20 per share. In addition $950,200 was raised
                through the sale of 791,833 shares of common stock of the
                Company, 41,667 shares of common stock were issued to satisfy
                $50,000 of indebtedness, and 49,833 shares of common stock for
                $59,800 of services rendered related to the equity raise. The
                $59,800 of services rendered was recorded as a cost of raising
                such equity.

         d.     The 883,334 shares issued, pursuant to the terms of the Purchase
                Agreement relating to the aforementioned equity raise, have
                certain registration rights. In addition such shareholders are
                entitled to liquidated damages, if a registration statement,
                registering such shares, is not filed within 90 days of June 1,
                2004 or if the registration statement is not declared effective
                until 120 days after June 1, 2004, or 180 days if such
                registration statement is subject to review by the Securities
                and Exchange Commission. Such liquidated damages are calculated
                monthly based on the delayed days of such registration not being
                effective. Such calculation is 2% per month of the purchase
                price paid by such shareholders for the 883,334 shares purchased
                limited to an aggregate of 18% of the aggregate purchase price
                paid for the 883,334 shares purchased. The Company accrued
                $190,800 in penalties for the failure to register such shares
                issued.

         e.     The major shareholder of the Company allocated 2,345,410 shares
                of his shares in the Company to satisfy assumed obligations of
                Enikia for services previously rendered to the predecessor
                entities. Pursuant to Topic 5T of the Staff Accounting
                Bulletins, such contribution of the common shares of the Company
                have been recorded as a contribution by the shareholder to the
                Company in satisfaction of such liabilities recorded of
                $1,288,185. The major shareholder continues to negotiate for the
                allocation of additional shares to satisfy a separate assumed
                liability for services previously rendered to Enikia for capital
                transaction services. The recorded estimated value of such
                services yet to be negotiated is $700,000.

         f.     During fiscal 2005, the Company issued 575,000 shares of common
                stock net of another 1,050,000, which was returned for non
                performance. These shares were valued at the fair market value
                of such stock upon issuance at prices ranging from $.50 to $2.15
                per share. The aggregate compensation expense recorded in this
                fiscal year for these shares issued was $724,811

         g.     During fiscal 2005, the Company issued 610,000 options at an
                exercise price of $1.20 per share which was above fair market
                value to its employees and directors and 1,725,000 options to
                third parties for services rendered at exercise prices ranging
                from $.01 to $1.20 per share. No compensation has been recorded
                for the options issued to employees and directors. The options
                to third parties have been valued at $900,461, which $582,292
                has yet to be expensed due to the term of such services being
                performed.

                                       54
<PAGE>
         h.     The Company recorded $234,143 of interest expense related to the
                valuation of the detachable warrants and the beneficial
                conversion feature of $750,000 in debt raised from March to May
                2005. This debt matured on June 8, 2005, hence predominately all
                of such interest expense was recorded in fiscal 2005.

         i.     In August 2004, a vendor converted $75,496 of payables for
                125,000 shares of common stock.

11.      STOCK-BASED COMPENSATION
         ------------------------

         The Company accounts for its stock option plans under APB No. 25,
         "Accounting for Sock Issued to Employees," ("APB 25"), under which no
         compensation cost is recognized. The Company adopted SFAS no. 123
         "Accounting for Stock-Based Compensation" ("SFAS 123") for disclosure
         purposes; accordingly, no compensation has been recognized in the
         results of operations for its stock option plan as required by APB 25.

         Stock option and warrant activity for the year ended May 31, 2004 for
         warrants and qualified and unqualified stock options are summarized as
         follows:

<TABLE><CAPTION>
                                                                   Weighted
                                                                    Average
                                                   Shares        Exercise Price
                                                ------------      ------------
<S>                                             <C>               <C>
                Outstanding at May 31, 2003          168,270      $       1.14
                     Granted                       3,734,642              --
                     Exercised                          --
                     Expired or cancelled             (8,770)              .20
                                                ------------      ------------
                Outstanding at May 31, 2004        3,894,142      $        .79
                     Granted                       3,155,000              1.39
                     Exercised
                     Expired or cancelled           (131,500)            57.19
                                                ------------      ------------
                Outstanding at May 31, 2005        6,092,642      $        .75
                                                ============      ============
</TABLE>

                Information, at date of issuance, regarding stock option grants
                during the year ended May 31, 2005.

<TABLE><CAPTION>
                                                                    Weighted-       Weighted-
                                                                     Average         Average
                                                                     Exercise         Fair
                                                        Shares         Price          Value
                                                       ---------------------------------------
<S>                                                    <C>           <C>            <C>
         Year ended May 31, 2005
         Exercise price exceeds market price           2,480,000     $      .98     $      .61
         Exercise price equals market price                 --             --             --
         Exercise price is less than market price        675,000     $      .65     $      .63
</TABLE>
                                       55
<PAGE>
         The following table summarizes information about warrants and options
         outstanding and exercisable at May 31, 2005:

<TABLE><CAPTION>
                                                       Outstanding and exercisable
                                    ---------------------------------------------------------------
                                                          Weighted-
                                                           average    Weighted-
                                                          remaining    Average
                                       Number                life      Exercise          Number
                                     Outstanding           in years     Price          Exercisable
                                    ---------------------------------------------------------------
<S>                                 <C>                     <C>        <C>            <C>
           Range of exercise prices:
           $.01 to $1.00                3,709,644           8.02       $   .27            2,659,645
           $1.01 - $5.00                2,354,998           7,52          1.20            1,971,665
           $5.01 - $40.00                  28,000           1.36         26.70               28,000

                                    --------------                                    --------------
                                        6,092,642                                         4,659,310
                                    ==============                                    ==============
</TABLE>

         The compensation expense attributed to the issuance of the non-employee
         stock options and warrants will be recognized as they are earned. These
         stock options and warrants are exercisable for three to ten years from
         the grant date.

         The employee stock option plan stock options are exercisable for ten
         years from the grant date and vest over various terms from the grant
         date to three years.

12.      COMMITMENTS AND CONTINGENCY
         ---------------------------

         a.     The Company leases office space on a month to month basis. There
                are no material rental or lease commitment arrangements as of
                May 31, 2005.

                Total rental expenses for the years ended May 31, 2005 and 2004
                was approximately $40,600 and $40,000, respectively.

         b.     The Company and its' subsidiary, Arkados, have entered into
                employment agreements with all of the employees of Arkados and
                the CEO of the Company. The general terms of the combined
                employment agreements are; (a) each employment agreement
                provides for a base salary up to $225,000 depending on the
                employment position of such employee, (b) the employment
                agreements provide for a weekly salary deferral of 10% to 24.5%
                until additional capital or financing is obtained, the weekly
                deferral will be paid within seven business days of obtaining
                funding of at least $3 million, if such deferral has not been
                paid by May 24, 2005 then such deferral will be paid pro-rata
                based on the monies raised to May 24, 2005, with the balance
                being waived in full, (c) an aggregate of $188,384 has been paid
                as signing bonuses, (d) each employee will receive standard
                employment benefits comparable to those previously provided, (e)
                the Company will issue 39,401 shares of common stock, as
                amended, as a partial settlement of the unfunded 401K account as
                of May 24, 2005, which has been recorded as an outstanding
                liability of Miletos prior to the Plan, (f) an aggregate of
                184,646 "nonqualified" options have been issued at an exercise
                price of $.01 for a term of ten years, exercisable immediately,
                which such recorded value was $275,123 with $241,168 being
                expensed as a result of such options being issued, an aggregate
                of 2,299,988 "nonqualified" options have been issued at an
                exercise price of $.01 for a term of ten years

                                       56
<PAGE>
                and 1,149,988 "nonqualified" options have been issued at fair
                market value or $3,794,996 for a term of one to three years and
                will be expensed as ratably over the term after considering the
                vesting terms, (h) release Enikia, Miletos and Andreas Typaldos
                or any other third parties of any claims or agreements whether
                written or oral as a condition of receiving the above.

         c.     On May 27, 2005, the Company extended its May 21, 2004, one year
                employment agreement "Employment Agreement" with its CFO for
                another year. Material terms of the Employment Agreement are as
                follows; the Company and the CFO may terminate the Employment
                Agreement with 30 days prior written notice, the CFO is to
                receive $5,000 per month as cash compensation, 25,000 shares as
                a signing bonus, which was valued at $37,500 and expensed prior
                to the effective date of the reverse merger May 24, 2004 and
                100,000 fully vested stock options exercisable at $1.00 each.

         d.     The Company may be subject to future lawsuits relating to
                unresolved claims against Enikia LLC as a result of the
                contribution of debt owed to a control group of Enikia being
                contributed to Miletos, Inc. and Miletos purchasing the assets
                of Enikia at a public foreclosure sale in partial satisfaction
                of the $11,116,803 obligation of Enikia to such control group.
                Some of these claims have alleged fraud, several claims have
                been settled and others continue to be unresolved. The Company
                maintains that such claims are without basis because of the
                statutory provision of New Jersey law governing creditors rights
                following a public foreclosure sale and in that it had no
                privatey of contract with the claimants.

13.      SUBSEQUENT EVENTS
         -----------------

         a.     In June 2005 the Company extended the consulting agreement with
                its CFO for one year. The agreement was extended on the same
                terms and conditions of the expiring agreement, except the
                Company's Board of Directors granted 100,000 stock options to
                the CFO in conjunction with the extension. The options vested
                immediately and have an exercise price of $.45 per share.

         b.     In June 2005 the Board of Directors issued the non-executive
                employees of the Company 750,000 stock options. The options vest
                ratably over a one year period and have an exercise price of
                $.45 per share.

         c.     On June 8, 2005 the Company exercised an option to extend the
                maturity of $750,000 of convertible extendable notes by paying
                an extension fee aggregating $20,000 for the entire issue and
                paying interest due on the 10% Notes to June 8, 2005. The
                extension was until September 8, 2005.

         d.     As of September 16, 2005 the holders of $712,500 of $750,000
                principal amount outstanding of 10% convertible extendable notes
                agreed to extend the due date of the notes to December 8, 2005
                in exchange for the Company paying extension fees aggregating
                $22,667, paying interest due to September 8, 2005 and agreeing
                to issue 85,000 shares of the Company's stock to the holders of
                the notes that granted the extension. The balance of $37,500 was
                due on September 8, 2005 and was paid prior to the expiration of
                the grace period ending September 19, 2005.

         e.     The Company is obligated to pay the purchasers ("Purchasers") of
                an aggregate of 883,334 shares of the Corporation's common stock
                pursuant to several Purchase Agreements dated as of May 24, 2004
                (the "Purchase Agreements") penalties in the aggregate amount of
                $190,800 under Section 7.7 of the Purchase Agreements. In
                September, the Company agreed to issue a maximum aggregate of
                384,600 shares of common stock to the Purchasers in full
                satisfaction of the penalty payable.

                                       57
<PAGE>
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         On March 18, 2005, our Board of Directors voted to dismiss, Radin,
Glass & Co., LLP ("Radin, Glass") and appointed Sherb & Co., LLP ("Sherb") as
our independent public accountant for our year ending May 31, 2005. We notified
Radin, Glass of its dismissal on March 24, 2005.

         The reports issued by Radin, Glass on our consolidated financial
statements of as of and for the fiscal years ended May 31, 2004 and May 31, 2003
and the period from March 24, 2004 (date of inception) to May 31, 2004 did not
contain any adverse opinion or disclaimer of opinion, nor were they qualified or
modified as to uncertainty, audit scope or accounting principles, except that
Radin, Glass' report with respect to these periods contained an explanatory
paragraph indicating that there was substantial doubt as to our ability to
continue as a going concern.

         During the fiscal years ended May 31, 2004 and May 31, 2003 and the
period from March 24, 2004 (date of inception) to May 31, 2004 and through the
date of our filing the Form Form 8-K reporting the change of auditors, there
were no disagreements between Radin, Glass and our management on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which, if not resolved to the satisfaction of Radin, Glass,
would have caused Radin, Glass to make reference to the subject matter of the
disagreements in connection with its reports on our consolidated financial
statements for such periods, nor have there been any reportable events as listed
in Item 304 (a)(1)(iv) of Regulation S-B.

         Prior to engaging Sherb as its independent accountant, neither we nor
anyone acting on our behalf consulted with Sherb regarding any of the matters or
events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-B. We provided
Radin, Glass with a copy of the foregoing disclosures, and a letter from Radin,
Glass confirming its agreement with these disclosures was filed as Exhibit 16.1
to our Form 8-K Report dated March 18, 2005.


ITEM 8A. CONTROLS AND PROCEDURES

         Our management, including the Chief Executive Officer and Chief
Financial Officer, have conducted an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to Rule
13a-15 under the Securities Exchange Act of 1934, as amended, (the "1934 Act"),
as of the end of the period covered by this Annual Report on Form 10-KSB. Based
on that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective in ensuring
that information required to be disclosed by us in the reports we file or submit
under the 1934 Act is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms.

         There have been no changes in internal control over financial reporting
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting during the period covered by this
report.


ITEM 8B. OTHER INFORMATION

         None.

                                       58
<PAGE>
                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

         In accordance with Instruction E.3. of Form 10-KSB, we plan to
incorporate the information required in response to this Item 9 by reference to
our definitive information statement or proxy or file an amendment to this
report to provide such information before 120 days after May 31, 2005.

         Information concerning executive officers is set forth in Item 1 above.


ITEM 10. EXECUTIVE COMPENSATION

         In accordance with Instruction E.3. of Form 10-KSB, we plan to
incorporate the information required in response to this Item 10 by reference to
our definitive information statement or proxy or file an amendment to this
report to provide such information before 120 days after May 31, 2005.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         In accordance with Instruction E.3. of Form 10-KSB, we plan to
incorporate the information required in response to this Item 10 by reference to
our definitive information statement or proxy or file an amendment to this
report to provide such information before 120 days after May 31, 2005.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In accordance with Instruction E.3. of Form 10-KSB, we plan to
incorporate the information required in response to this Item 12 by reference to
our definitive information statement or proxy or file an amendment to this
report to provide such information before 120 days after May 31, 2005.


















                                       59
<PAGE>
ITEM 13. EXHIBITS

EXHIBIT INDEX

<TABLE><CAPTION>
                                                                                         INCORPORATED BY REFERENCE
                                                                                  ----------------------------------------
EXHIBIT                                                                                       FILE                  FILING   FILED
NUMBER     EXHIBIT DESCRIPTION                                                    FORM       NUMBER        EXHIBIT   DATE   HEREWITH
------     -------------------                                                    ----       ------        -------   ----   --------
<S>        <C>                                                                    <C>        <C>           <C>       <C>    <C>
    3.1    Articles of Incorporation of the Registrant.                           10-SB      0-27587       3.1     10/7/99

    3.2    Amendment to the Articles of Incorporation.                            10-SB      0-27587       3.2     10/7/99

    3.3    By-Laws of the Registrant.                                             10-SB      0-27587       3.3     10/7/99

    3.4    Certificate of Merger of the Registrant.                               10-SB      0-27587       3.4     10/7/99

    3.5    Amendment to the Articles of Incorporation.                            10-SB      0-27587       3.5     10/7/99

    3.6    Amended and Restated Series A Designation                              10-QSB     0-27587       3.1     2/14/03

    3.7    Amendment to Certificate of Incorporation (Reverse Split) filed
           November 31, 2003.                                                     10-QSB     0-27587       3.1     2/17/04

    3.8    Certificate of Amendment to Certificate of Incorporation               10-QSB     0-27587       3.2     2/17/04

    4.1    Specimen of Common Stock Certificate.                                  10-SB      0-27587       4.1     10/7/99

    4.2*   Form of Stock Option Grant Agreement under the CDKnet.com, Inc.
           2004 Stock Option and Restricted Stock Plan.                           10-KSB     0-27587       4.7     9/17/04

    9.1    Shareholders and Voting Agreement dated as of May 21, 2004 by and
           among CDKnet.com, Inc. and several stockholders.                       10-KSB     0-27587       9.1     9/17/04

   10.1*   Technology Horizons Corp. 1998 Equity Incentive Plan.                  10-SB      0-27587       10.1    10/7/99

   10.2*   Consulting Agreement dated as of May 21, 2004 between CDKnet.Com,
           Inc. and Kirk M. Warshaw.                                              10-KSB     0-27587       10.16   9/17/04

   10.3    Registration Rights Agreements dated as of May 21, 2004 between
           CDKnet.Com, Inc. and several stockholders.                             10-KSB     0-27587       10.17.1 9/17/04
                                                                                                           10.17.2
</TABLE>
                                       60
<PAGE>
<TABLE><CAPTION>
                                                                                         INCORPORATED BY REFERENCE
                                                                                  ----------------------------------------
EXHIBIT                                                                                       FILE                  FILING   FILED
NUMBER     EXHIBIT DESCRIPTION                                                    FORM       NUMBER        EXHIBIT   DATE   HEREWITH
------     -------------------                                                    ----       ------        -------   ----   --------
<S>        <C>                                                                    <C>        <C>           <C>       <C>    <C>
   10.4*   Consulting Agreement dated as of May 21, 2004 between CDKnet.Com,
           Inc. and Andreas Typaldos.                                             10-KSB     0-27587       10.18   9/17/04

   10.5*   Employment Agreement dated as of May 23, 2004 between CDKnet.Com,
           Inc. and Oleg Logvinov.                                                10-KSB     0-27587       10.19   9/17/04

   10.6    Letter Agreement dated November 19, 2003 between CDKnet.Com, Inc.
           and certain holders of Series A Preferred Stock                        10-QSB     0-27587       10.1    2/17/04

   10.7    Development Agreement between Enikia LLC and Leviton Manufacturing
           Co., Inc. dated July 14, 2003                                          10-KSB     0-27587       10.21   9/17/04

   10.8    Agreement made June 28, 2004 between Arkados, Inc. and Leviton
           Manufacturing Co., Inc.                                                10-KSB     0-27587       10.22   9/17/04

   10.9    Silicon Product Development Production Collaboration Agreement
           dated August ___, 2004 between GDA Technologies, Inc. and Arkados,
           Inc.                                                                   10-KSB     0-27587       10.23   9/17/04

   10.10   Consulting Agreement dated October 20, 2004 between CDKnet.com
           Inc. and Investor Relations Services, Inc., a Delaware corporation     10-QSB     0-27587       10.1    10/22/04

   10.11   Payment Agreement dated October 20, 2004 between CDKnet.com, Inc.
           and Summit Trading Limited, a Bermuda company                          10-QSB     0-27587       10.2    10/22/04

   10.12   Grid Promissory Note due December 15, 2004 to Steven Horowitz          10-QSB     0-27587       10.3    10/22/04

   10.13   Settlement Agreement dated January 25, 2005 between CDKnet.com,
           Inc. and Summit Trading Limited                                        10-QSB     0-27587       10.1    1/25/05

   10.14   Settlement Agreement dated January 25, 2005 between CDKnet.com,
           Inc. and Investor Relations Services, Inc.                             10-QSB     0-27587       10.2    1/25/05

   10.15   Form of 10% convertible extendible note due June 8, 2005 in the
           aggregate authorized principal amount of $750,000                      10-QSB     0-27587       10.1    4/19/05

   10.16   Form of three year warrant exercisable at $0.67                        10-QSB     0-27587       10.2    4/19/05

   10.17   Form of registration rights agreement relating to the 10%
           convertible extendible notes and three year warrants                   10-QSB     0-27587       10.3    4/19/05

   10.18   Amendment dated April 15, 2005 to 10% grid note payable to the
           Andreas Typaldos Family Limited Partnership                            10-QSB     0-27587       10.4    4/19/05
</TABLE>
                                       61
<PAGE>
<TABLE><CAPTION>
                                                                                         INCORPORATED BY REFERENCE
                                                                                  ----------------------------------------
EXHIBIT                                                                                       FILE                  FILING   FILED
NUMBER     EXHIBIT DESCRIPTION                                                    FORM       NUMBER        EXHIBIT   DATE   HEREWITH
------     -------------------                                                    ----       ------        -------   ----   --------
<S>        <C>                                                                    <C>        <C>           <C>       <C>    <C>
   10.19*  Stock Option Grant Agreement dated June 21, 2005                       8-K        0-27587       10.1    6/24/05

   10.20   Form of Securities Purchase Agreement                                  8-K        0-27587       10.1    7/14/05

   10.21   Form of 6% Convertible Subordinated Note due July 7, 2007 in the
           aggregate authorized principal amount of $2.4 million                  8-K        0-27587       10.2    7/14/05

   10.22   Form of three year warrant exercisable at $0.35                        8-K        0-27587       10.3    7/14/05

   14.1    Code of Business Conduct and Ethics                                    10-KSB     0-27587       14.1    9/17/04

   14.2    Code of Ethics for Financial Executives                                10-KSB     0-27587       14.2    9/17/04

   16.1    Letter dated March 24, 2005 from Radin, Glass & Co., LLP               8-K        0-27587       16.1    3/24/05

   21      Subsidiaris of the Registrant.                                                                                       X

   31.1    Certification of Chief Executive Officer of Periodic Report
           pursuant to Rule 13a-14a and Rule 15d-14(a).                                                                         X

   31.2    Certification of Chief Financial Officer of Periodic Report
           pursuant to Rule 13a-14a and Rule 15d-14(a).                                                                         X

   32.1    Certification of Chief Executive Officer of pursuant to 18 U.S.C.
           - Section X350.                                                                                                      X

   32.2    Certification of Chief Financial Officer of pursuant to 18 U.S.C.
           - Section 350.                                                                                                       X
</TABLE>

*Compensation plans or arrangements in which directors or executive officers are
eligible to participate.


                                       62
<PAGE>
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

         The aggregate fees billed and unbilled for the fiscal years ended May
31, 2004 and 2005 for professional services rendered by our principal
accountants for the audits of our annual financial statements, and the review of
our financial statements included in our quarterly reports on Form 10-QSB were
approximately $39,500 and $35,150, respectively.

AUDIT-RELATED FEES

         There were no audit-related fees for the fiscal years ended May 31,
2004 and 2005 for assurance and related services rendered by our principal
accountants related to the performance of the audit or review of our financial
statements.

TAX AND OTHER FEES

         There aggregate fees billed for the fiscal years ended May 31, 2004 and
2005 for tax related or other services rendered by our principal accountants in
connection with the preparation of our federal and state tax returns was
$7,500 and $ -0-, respectively.

APPROVAL OF NON-AUDIT SERVICES AND FEES

         We did not have an audit committee during fiscal 2005 or 2004 and did
not have any independent directors until fiscal 2005. Wee plan to form an Audit
Committee consisting solely of independent directors and, consistent with SEC
policies and guidelines regarding audit independence, the Audit Committee will
responsible for the pre-approval of all audit and permissible non-audit services
provided by our principal accountants on a case-by-case basis.






                                       63
<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report on to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                       CDKnet.com, Inc. (Registrant)


                                       By: /s/ Oleg Logvinov
                                           -------------------------------------
                                           Oleg Logvinov
                                           President and Chief Executive Officer


                                       By: /s/ Kirk Warshaw
                                           -------------------------------------
                                           Kirk Warshaw
                                           Chief Financial Officer (Principal
                                           Financial and Accounting Officer

Date: September 21, 2005


         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.


Date: September 21, 2005               By: /s/ Oleg Logvinov
                                           -------------------------------------
                                           Oleg Logvinov, President, Chief
                                           Executive Officer


Date: September 21, 2005               By: /s/ Kirk Warshaw
                                           -------------------------------------
                                           Kirk Warshaw, Chief Financial Officer


Date: September 21, 2005               By: /s/ Gennaro Vendome
                                           -------------------------------------
                                           Gennaro Vendome, Director


Date: September 21, 2005               By: /s/ William H. Carson
                                           -------------------------------------
                                           William H. Carson, Director


Date: September 21, 2005               By: /s/ Andrew Prince
                                           -------------------------------------
                                           Andrew Prince, Director


Date: September 21, 2005               By: /s/ Andreas Typaldos
                                           -------------------------------------
                                           Andreas Typaldos, Chairman



                                       64