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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

¨  Yes     x  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

¨  Yes     x  No

Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.  Yes  x      No   o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. (See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act).  (Check one):

Indicate by check mark wither the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o    No  x

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price ($.05) at which the common equity was last sold on August 23, 2013 was $2,444,923.

The number of shares of common stock outstanding as of the latest practicable date, August 23, 2013, was 48,898,474 .

(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.

ARKADOS GROUP, INC.

FISCAL 2011/12 FORM 10-K

INDEX

As used in this Annual Report on Form 10-K, the terms “we”, “our” or “us” mean Arkados Group, Inc., a Delaware corporation and its consolidated subsidiaries, unless the context indicates otherwise.

NOTE RE: FILING OF COMPREHENSIVE 10-K

The Company underwent a significant restructuring between December 23, 2010 and continuing beyond May 31, 2012 (the period ending for this report) during which substantially all of its assets were acquired by STMicroelectronics as disclosed in the 8-K filed December 29, 2010 and further described (as to the closing) in the 8-K filed July 12, 2011. Since then, the Company has been delinquent on its reporting. During the period of restructuring following the asset sale, the Company had minimal operations, but has plans to pursue a different course of operations. The Company is filing this comprehensive 10-K for the Fiscal Year ended May 31, 2012 that will include information covering the Fiscal Year ended May 31, 2011.

NOTE RE: FORWARD LOOKING INFORMATION

All statements in this annual report on Form 10-K 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 1A “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-K. 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.

NOTE RE: CERTAIN MARKS

This Annual Report on Form 10-K contains registered and unregistered trademarks of Arkados Group, Inc and its subsidiaries and other companies, as indicated.  Unless otherwise clear from the context or noted in this Annual Report, marks identified by “ ^® ” and “™” are registered marks and trademarks of Arkados Group, Inc. or its subsidiaries.  All other trademarks and service marks are the property of their respective owners.   HomePlug ^® is a registered trademark of the HomePlug Powerline Alliance.

PART I

ITEM 1. BUSINESS

General

The registrant, Arkados Group, Inc., was incorporated in the State of Delaware in 1998. We conduct our business activities principally through Arkados, Inc., which is a wholly owned subsidiary. In September 2006, we changed our corporate name from CDKnet.com, Inc., to its current form to align our corporate identity with the “Arkados” brand developed by our subsidiary.

We were an early adopter in the powerline communication space, and experienced in home automation. Our Arkados, Inc. subsidiary was a member of the HomePlug Powerline Alliance, an independent trade organization which has developed global specifications for high-speed powerline communications, the world's leading professional association for the advancement of technology.

The Company underwent a significant restructuring between December 23, 2010 and continuing beyond May 31, 2012 (the period ending for this report) during which substantially all of its assets were acquired by STMicroelectronics (sometimes referred to hereinafter as the “Asset Sale”), as disclosed in the 8-K filed December 29, 2010 and further described (as to the closing) in the 8-K filed July 12, 2011. Following December 23, 2010, the Company had minimal operations but also attempted to develop a plan to pursue a different course of operations.

During the period covered by this report through December 23, 2010 (i.e. the date of the Asset Sale), we were principally engaged in developing and marketing technology and solutions enabling broadband communication, multimedia, and networking over standard household electrical lines. Most recently (i.e. following January, 2013), Arkados has shifted its focus towards development of a universal platform that provides software solutions for smart grid and smart home applications primarily in the areas of energy management, home health care, smart appliances and home security and entertainment.

Our executive offices are currently located at 211 Warren Street, Suite 320, Newark, New Jersey 07103. We can be reached at our principal offices by telephone at (862) 373-1988. Our website is www.arkadosgroup.com .

Except for the documents on our website that are expressly incorporated by reference into this report, the information contained on our website is not incorporated by reference into this report and should not be considered to be a part of this report. This includes the website 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.

Available Information

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and all other reports, and amendments to these reports, required of public companies with the SEC. The public may read and copy the materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Copies of our fiscal 2012/2011 (comprehensive) Form 10-K may also be obtained without charge by mailing a request to us at 211 Warren Street, Suite 320, Newark, New Jersey 07103 or by calling us at (862) 373-1988.

Overview

Business

Pre-Asset Sale

Prior to December 23, 2010, Arkados provided both hardware and software engines for a wide variety of products that enable high-speed digital transmission of music, movies, video, voice, smart grid applications, and broadband data over the existing infrastructure of electrical power lines. By combining our system-on-chip (SoC) semiconductors with software and hardware platform designs, our solutions addressed diverse target markets in a number of growing market categories. Our turnkey solutions were designed to be used inside products for both consumers and industry. For example, consumer products can use Arkados solutions as part of a connected home entertainment and computing network, while industry can implement Arkados solutions as a part of a utility company’s “smart grid” and “green energy” solutions. Arkados operated primarily as a “fabless” semiconductor company, meaning we designed semiconductors without the capital requirements of owning and operating a fabrication facility; Arkados semiconductors were made from our designs by independent fabricators.  We offered our customers complete hardware and software design solutions that allow them to build devices that will distribute audio, video, voice, and data content throughout the whole house, building, or “smart-grid” infrastructure.

Arkados had a rich history in the home networking and broadband networking markets since its inception. In 1999, Arkados developed a prototype of the first-ever 10Mbps powerline technology, delivered the first industry powerline communication testing tool in 2001 and was among the pioneers of powerline communications (PLC) and a founding member of the HomePlug Alliance, an leading industry-wide alliance for the development and adoption of standards for powerline communications. In addition, Arkados has achieved several distinguishing awards, including having products being named “Best of the Best” at the International Computer Electronics Show in 2008 and 2009.

Due to capital constraints during the economic downturn, Arkados made a strategic decision to sell its semiconductor business and on December 23, 2010, entered into an asset purchase agreement with STMicroelectronics (“STM”), as disclosed in the 8-K filed December 29, 2010 and further described (as to the closing) in the 8-K filed July 12, 2011. This resulted in the sale of a substantial portion of our intellectual property assets for cash as well as a license back from STM for that technology. The plan was to make the product design and software development segments of the business the primary focus.

Post-Asset Sale

Following the December 23, 2010 Asset Sale, the Company engaged in the process of finalizing settlement and release agreements with its secured creditors, other noteholders, former employees and its other unsecured creditors. As a result of the Asset Sale and our restructuring, we reached settlement on approximately $11,817,481 of our pre-existing debt, which has been either released or converted to a right to receive common stock of the Company.

During this period, the Company was focused on negotiating and finalizing the settlements and releases with its creditors and did not materially pursue plans to shift its primary business operation focus to product design. Arkados had no employees and did not produce any products or services during the period following December 23, 2010 through May 31, 2012, the end of the period described in this report.

Recent Announcements

There have been no public announcements within the two-year period preceding the date of this report.

Dependence on Financing Activities

While we did generate revenue during fiscal year 2011 ending with the asset sale on December 23, 2010, we were dependent on outside sources of financing to continue the development of our semiconductors and software, and to further support sales. For the remainder of fiscal year 2011 (December 24, 2010 through May 31, 2011) and the entirety of fiscal year 2012 (ending May 31, 2012), we did not generate any revenue and were completely dependent on financing by former officers, directors, investors and related parties.

In December 2010, the Company satisfied certain conditions precedent to the signing of the Asset Purchase Agreement by agreeing to pay an aggregate of $53,132.89 to 11 holders of unsecured debt in the amount of $2,395,432 and obtained such holders’ acknowledgements that ST and its affiliates had no potential liability to such holders on account of any prior dealings of such creditor with the Company. On June 24, 2011, eight (8) of the holders party to such agreements subscribed to an aggregate of 5,158,164 shares of the Company’s common stock and directed ST to deliver the proceeds due to them pursuant to the agreements executed in December, 2010 in connection with the Asset Sale from the Company’s proceeds from the transactions contemplated by the Asset Purchase Agreement to the Company in satisfaction of their subscriptions. The issuance of shares of common stock pursuant to the subscription agreements is claimed to be exempt from registration pursuant to Section 4(2) of the Securities Act.

On June 24, 2011 the Company effective at the closing of the transactions contemplated by the Asset Purchase Agreement memorializing the Asset Sale, settled approximately $1,103,000 of unsecured debt in the form of 6% Convertible Subordinated Notes Due June 30 And July 7, 2007 (the “Convertible Notes”) for a combination of cash and warrants or in exchange for the Company’s agreement to issue shares of its common stock at the rate of one share for each $0.04 of principal and interest exchanged. The Company agreed to exchange 11,706,692 shares of common stock for Convertible Notes representing principal and interest of approximately $444,000 and settled the balance for cash payments of $78,500 and 853,915 warrants expiring May 31, 2014 to purchase shares of the Company’s common stock for $0.0659 per share. The exercise price and number of warrants was determined by dividing the amount of unpaid principal remaining due to the holders of convertible debentures settling for cash by the average of the reporting closing prices of the Company’s common stock for the 10 trading days ending three trading days after the closing of the APA. The issuance of shares of the Company’s common stock is claimed to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) pursuant to Section 3(a)(9) for exchanges of securities of the same issuer without payment of solicitation fees and Section 4(2) for sales not involving a public offering. The issuance of the warrants is claimed to be exempt from registration pursuant to Section 4(2) of the Securities Act.

After June 24, 2011 and through May 31, 2012, any additional financing of operating expenses occurred through short-term loans and no securities (either debt or equity) were issued for such financing.

Industry Background

Pre-Asset Sale

Arkados’ business focused on being a fabless semiconductor company that developed comprehensive platform solutions, including system-on-chip (SoC) semiconductors, and firmware and software for manufacturers of networked multimedia appliances and feature-rich networking devices. Our platform solutions were designed to enable a systems-based approach to networking and would allow our customers to build products that are simple and intuitive to install, and easy to operate with intuitive and customizable user interfaces.

Music, movies, the electrical “smart grid”, and a wide range of communication services were experiencing a fundamental shift. The distribution of content to products, and in some cases the products themselves, began to transition from traditional methods. Digital content required a new digital distribution model. Arkados’ solutions were designed to directly address this opportunity by enabling electrical power sockets to be turned into high-speed network ports, thereby providing a high-speed pathway through which digital information can travel inside a home, to the home, and on the smart grid. This shift is the basis of the belief that demand for new products would be created, and new products will require new types of semiconductors that incorporate digital technologies, supporting such functions as communication, application processing, and media rendering.

Our ArkTIC ^® family of turnkey hardware and software solutions was designed to address these requirements. In particular, Arkados implemented a method that uses power lines as a pathway for digital information, allowing end users to truly achieve “plug-and-play” simplicity without the hassles of custom-installed networks, or the problems associated with wireless solutions such as dropouts, unreliable coverage, and security issues.

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. In 2008, the technology of the HomePlug 1.0 specification was adopted by the Telecommunication Industry Association as TIA-1113 standard. In 2005, the Alliance ratified HomePlug AV specification that enables 200Mbps class communication over power lines.

Arkados worked in significant ways to develop the HomePlug specifications including in-home technologies (HomePlug 1.0, HomePlug AV, and HomePlug AV2), to-the-home technologies ( HomePlug BPL for broadband over powerline), and HomePlug Command &Control (C&C) and HomePlug GP (“Green PHY”) for low-speed command and control and Smart Grid applications.

Members of the Arkados team held leadership positions in the Alliance and in several HomePlug working groups.

Post-Asset Sale

While endeavoring to restructure the Company following the Asset Sale and settle obligations as a result of the Asset Sale, we retained the ability to pursue key elements of our software and platform solutions.

Electric meters with enhanced communication capabilities—an essential component of the smart grid—are becoming more prevalent. In 2011, more than 23% of all U.S. electrical customers had smart meters. These meters use two-way communication to connect utilities and their customers. They support demand response and distributed generation, can improve reliability, and also provide information that consumers can use to save money by managing their use of electricity.

According to research firm Zpryme, the smart grid core and enabled technology market will reach $220 billion in size by 2020. The explosive growth in this market is driven primarily by the first wave of smart grid implementation: advanced metering infrastructure (the “AMI”). Utilities throughout the world have aggressively implemented smart meters to residential and industrial customers mainly because it is the required first step to achieve a true smart grid and, secondarily, in response to significant government incentives to do so. AMI lays the foundation as a hub for networking and communication and is the gateway to the HAN. From the perspective of the end user (residential or industrial), in-home (or in-building) devices are not only capable of communicating with the other devices within the local network, but are also capable of communicating outward to the WAN and implementing demand response protocols.

Our Products and Services

Pre-Asset Sale

Solutions from our ArkTIC family of converged multimedia and networking solutions targeted data-, audio-, photo-, and video-enabled networked multimedia appliances and networking devices.

The ArkTIC family was a portfolio of turnkey hardware and software solutions that enable OEMs and ODMs to quickly develop digitally networked consumer electronic products with a competitive cost structure to address this rapidly developing market. Among other networking interfaces, the first member of the ArkTIC family supports a powerline communication interface based on the HomePlug Powerline Specification 1.0.1, and our next chip will support HomePlug AV.

Post-Asset Sale

During the period covered by this report, our focus was primarily upon achieving settlement and restructuring of our existing debt and therefore, we did not pursue, in any material way, the plans to pursue key elements of our software and platform solutions.

Strategic Relationships

We continue to foster our relationships with STMicroelectronics and Tatung. Each of these relationships will allow Arkados to engage in our devised strategy of developing software and platform solutions for home automation services.

Manufacturing

As a result of the Asset Sale to ST Microelectronics in 2010, we are no longer involved in manufacturing.

Research and Development

Research and development activities were important to our manufacturing operations prior to the Asset Sale. While we may engage in certain activities in pursuit of home automation services plans, no such activity existed post-Asset Sale through the end of the period covered by this report.

Patents, Licenses and Trademarks

All of our prior patents were sold to ST Microelectronics as part of the Asset Sale in December, 2010. We entered into a License Agreement for the patents that were sold to ST Microelectronics.

License of Patents from STMicroelectronics

On June 24, 2011, in connection with the Asset Sale, we entered into a worldwide, non-exclusive, non-sublicensable, non-transferable, fully paid up license with STMicroelectronics (the “License”) to make, have made, use, sell, offer to sell, import, export, and distribute products or services with respect to patents for the networking and multimedia adapter for power outlets and method and system for audio distribution in installations where wiring is preferred, as more fully described in Schedule A to the License (the “Scheduled Intellectual Property”), solely within the field of the Systems Business. The “Systems Business” is defined in the License as services relating to the system design and the integration of semiconductor products into integrated products of other manufacturers, including providing consulting services relating thereto, and specifically excludes design, development or sale of semiconductor products, platforms or services that compete with STMicroelectronics’ business.

The term of the license is indefinite, ending only if STMicroelectronics ceases to own any protectable rights in the Scheduled Intellectual Property, or if there is a breach of the License or, at the option of Arkados (upon giving 60 days’ notice to STMicroelectronics), or in the event of Arkados’ bankruptcy, insolvency, reorganization, liquidation, dissolution, winding-up, or similar events.

As part of our future plans for home automation services, we anticipate continuing to pursue development of patents for our software solutions, many of which will be based, wholly or in part on the License.

Competition

Pre-Asset Sale

Arkados faced intense competition as a solution provider, a technology developer of standards-based powerline technologies, as well as from other technologies also focused on our target markets.   We faced 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 create solutions that are compliant with HomePlug Alliance specifications, while other competitors’ products are based on proprietary technologies. Immediate key competitors in the HomePlug powerline networking portion include Afa Technologies, Coppergate, Gigle Semiconductor, Intellon Corporation (which entered into an Agreement and Plan of Merger with Atheros Communications, Inc. in September, 2009), Maxim Integrated Products Inc., and SPiDCOM .  DS2 and Panasonic build ICs that are incompatible with the HomePlug standard.

As a former provider of powerline home connectivity integrated circuits, we faced additional competition from other home connectivity technologies such as twisted pair cable, coaxial cable and wireless media.

Post-Asset Sale

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 create solutions that are compliant with existing standards and specifications, while other competitors’ products are based on proprietary technologies. Key competitors include companies such as Tendril, Greenbox Technology and Echelon

Sales and Marketing

Pre-Asset Sale

Prior to the Asset Sale, we sold our solutions and products worldwide using the following channels:

Our marketing consisted of various programs that help create awareness and promote the benefits of our various and the value of our technology to our target industries. Much of the marketing was handled through press releases, website, involvement in trade shows and conferences, working through industry organizations, press interview opportunities, placed articles, newsletters, white papers, and through interpersonal relationships developed through numerous methods. We had, at times, hired agencies to assist with specialized functions. Our marketing efforts prior to the Asset Sale, however, were not only challenged by our inability to finance these activities but by the markets awareness of our precarious financial position.

Post-Asset Sale

We expect to develop our sales force to include a network of direct sales regions. As we develop our international relationhips with Tatung and STMicroelectronics, we expect to establish international sales offices and develop relationships with organizations related to our business that will be located worldwide. We anticipate supplementing 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 products are ready for testing.

Regulatory Environment

Pre-Asset Sale

Prior to the Asset Sale, while not directly subject to national and international regulation for our products, it was in the best interest of the company to ensure adherence to such regulations to facilitate sales of those products. For example, our customers’ products, which contained our solutions for powerline communications technology were required to adhere to regulations about transmission power, permissible frequencies of operation and electromagnetic interference (EMI) for both U.S. and foreign governments. In some countries, certification tests must be performed to ensure a vendor’s products comply with the regulations. While it was our customers that were responsible to obtain certifications relating to these products, we needed to ensure adherence to international regulations.

The Federal Communications Commission (FCC) administers regulations in the United States. Our solutions were unlicensed devices in the U.S.A. and received no regulatory protection from interference from other devices and may not cause any harmful interference to licensed devices. Those who operate unlicensed devices must stop using a device when the FCC declares that the device is causing harmful interference. Products that were using our solutions over power lines both inside and outside the home were FCC-regulated and must comply with radiated emission limits and various other technical standards.

Outside of the United States, the International Electrotechnical Commission, International Special Committee on Radio Interference (IEC/CISPR) was the primary authority. IEC member states import IEC/CISPR standards into their own national laws either in whole or in part. Powerline communications regulations are based upon specific country requirements. In some countries, regulations may limit the use of powerline communications in certain circumstances or to certain power levels or frequency bands.

Before products can be sold, most countries require electronic products to comply with safety testing or to be certified. While it was our customers who are responsible to obtain certifications, we need to ensure adherence to international regulations.

Regulations and their enforcement and interpretation varies between countries. Regulatory change or certification methodologies may require a redesign of products containing our solutions. At its most severe, regulatory changes could terminate the use of products already in the marketplace.

Post-Asset Sale

As they are developed, we intend to market our services internationally as well as throughout the United States.

While we do not anticipate being subject to regulation of our services, we will endeavor to make those determinations as part of our strategic plans.

Backlog

Following the Asset Sale and through May 31, 2012, we did not engage in manufacturing and had no backlog of orders.

Employees

Prior to the Asset Sale, the majority (10) of our full time employees were engaged in research, development, engineering with the remainder being divided to marketing and administration.

As of May 31, 2011, we had no full-time employees Likewise, as of May 31, 2012, we had no full-time employees.

During the relevant period, we relied exclusively upon the services of independent contractors, both at the executive and administrative levels.

As of May 31, 2012, we had not reached settlements with respect to $3,621,768 in compensation to our former employees. None of our former employees were parties to collective bargaining agreements.

Following the Asset Sale, our future success depends, in part, on our ability to continue to attract, retain and motivate highly qualified technical, marketing, and management personnel.

ITEM 1A. 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 their 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.

Because we were previously delinquent in our reporting obligations, this report contains certain statements relating to historical events and financial performance of our company. Please note that the risk factors stated below are those that, at the time of the filing of this report we believe are related to our ongoing operations and not necessarily to those operations reflected in the financial statements included in this report.

Risks Related to Our Financial Condition

Dependence on financing.

Since we are not generating significant revenue compared to our operating expenses, we are dependent on outside sources of financing. In the past, we have financed our operations by issuing secured and unsecured convertible debt and equity 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 related parties. We have sought and will continue to seek various sources of financing but there are no commitments from anyone to provide us with financing. 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.

If we lose key employees and consultants, including our Chairman and CEO, or are unable to attract or retain qualified personnel, our business could suffer.

Our future success depends, in part, on our ability to continue to attract, retain and motivate highly qualified technical, marketing, engineering, and management personnel. Currently we have retained the services of a full-time Chief Executive Officer but have not retained other management or other full-time staff and rely almost exclusively on outside independent contractors to meet our operational and development needs. Any inability or postponement in retaining full-time staff could result in delays in development or fulfillment of any current strategic and operational plans.

Our independent registered public accounting firm has expressed doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing

Our consolidated financial statements as of May 31, 2012 have been prepared under the assumption that we will continue as a going concern for the year ending May 31, 2012. Our independent registered public accounting firm has issued a report that included an explanatory paragraph referring to our recurring losses from operations and net capital deficiency and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce expenditures, and, ultimately, to generate revenue. The financial statements do not include any adjustments that might result from the outcome of this uncertainty

If we fail to comply with the rules under the Sarbanes-Oxley Act related to accounting controls and procedures, or if material weaknesses or other deficiencies are discovered in our internal accounting procedures, our stock price could decline significantly and raising capital could be more difficult.

If we fail to comply with the rules under the Sarbanes-Oxley Act related to accounting controls and procedures, or, if material weaknesses or other deficiencies are discovered in our internal accounting procedures, our stock price could decline significantly and raising capital could be more difficult. Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal controls over financial reporting beginning with our financial statements for the year ending May 31, 2010 and a report by our independent auditors addressing these assessments beginning with the financial statements for the year ending May 31, 2011. We are in the process of documenting and testing our internal control procedures, and we may identify material weaknesses in our internal control over financial reporting and other deficiencies, including the lack of sufficient staff. If material weaknesses and deficiencies are detected, it could cause investors to lose confidence in our financial statements and result in a decline in our stock price and consequently affect our financial condition. In addition, if we fail to achieve and maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our Common Stock could drop significantly. In addition, we cannot be certain that additional material weaknesses or significant deficiencies in our internal controls will not be discovered in the future.  Our stock price, ability to obtain financing and the listing of our common stock on the OTCBB would be adversely impacted if we fail to maintain effective disclosure controls and procedures.

We have not generated significant revenue from our principal intended activities and we have been dependent on a small number of customers for substantially all of our revenue.

While our most recent quarters have reflected what we believe is the beginning of regular customer activity, as a development stage company, we have generated limited revenue principally from providing development services and generating data in field test scenarios. We have not sold sufficient quantities of 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 a small number of customers. 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.

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 inception. Losses are likely to continue, and may cause volatility in our stock price.

Risks Related To Our Common Stock and Its Market Value

If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

Companies trading on the OTC Bulletin Board, such as us, must be reporting issuers under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board, and to be timely in such filings.  If we fail to remain current on our reporting requirements or file late three times in 12 calendar months, our stock could be removed from the OTC Bulletin Board.  This report was filed more than 30 days after its due date. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.  There can be no assurance that in the future we will always be current in our reporting requirements.

Our common stock is subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

SEC Rule 15g-9 establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.  For any transaction involving a penny stock, unless exempt, the rules require:

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules.  This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions.  Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

The market price of our common stock may be adversely affected by several factors.

The market price of our common stock could fluctuate significantly in response to various factors and events, including:

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

We have not paid dividends in the past and do not expect to pay dividends in the future.  Any return on investment may be limited to the value of our common stock .

We have never paid cash dividends on our capital stock and do not anticipate paying cash dividends on our capital stock in the foreseeable future.  The payment of dividends on our capital stock will depend on our earnings, financial condition and other business and economic factors affecting us at such time as the board of directors may consider relevant.  If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our common stock price appreciates.

A sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial amounts of our common stock in the public market, including shares issued upon the exercise of outstanding options or warrants, the market price of our common stock could fall.  These sales also may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.  Amendments to Rule 144 effective in February 2008 also substantially reduce holding periods and eliminate burdens such as filing notices sale for non-affiliated holders.  The amendments to the Rule are applicable to the purchasers of securities prior to and following the effective date of the amendments

ITEM 1B. UNRESOLVED SEC STAFF COMMENTS

None.

ITEM 2. DESCRIPTION OF PROPERTY

Our executive offices are located at 211 Warren Street, Suite 320, Newark, New Jersey 07103. The facility is approximately 500 square feet, occupied pursuant to a lease that is on a month-to-month basis.

All leases for other offices used by us in the past have expired and were not renewed.

ITEM 3. LEGAL PROCEEDINGS

None.