ARKADOS GROUP, INC. (Form: 10-Q, Received: 04/21/2017 13:38:21)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED: FEBRUARY 28, 2017

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

ARKADOS GROUP, INC.

(Exact name of registrant as specified in its charter)

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

211 Warren Street, Suite 320, Newark, New Jersey		07103
(Address of principal executive offices)		Zip code

Issuer's telephone number: (862) 373-1988

Indicate by 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 ☒ No ☐

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

Large accelerated
filer ¨

Accelerated
filer ¨

Non-accelerated filer ¨
(Do not check if a smaller reporting
company)

Smaller reporting
company x

Emerging growth
company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ¨ No x

The number of the registrant’s shares of common stock outstanding as of April 19, 2017 was 14,136,763.

ARKADOS GROUP, INC.

Quarterly Report on Form 10-Q

Quarter Ended February 28, 2017

TABLE OF CONTENTS

	Page
PART I. UNAUDITED CONDENSED FINANCIAL INFORMATION	F - 1

Item 1. Financial Statements	F - 1 to F - 16

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	4

Item 3. Quantitative and Qualitative Disclosures About Market Risk	8

Item 4. Controls and Procedures	8

PART II - OTHER INFORMATION	8

Item 1. Legal Proceedings	8

Item 1A. Risk Factors	8

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	8

Item 4. Mine Safety Disclosures	9

Item 5. Other Information	9

Item 6. Exhibits	9

SIGNATURES	11

INTRODUCTORY NOTES

This Report on Form 10-Q for Arkados Group, Inc. (“Arkados” or the “Company”) may contain forward-looking statements. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate” and “continue” or similar words. Forward-looking statements include information concerning possible or assumed future business success or financial results. You should read statements that contain these words carefully because they discuss future expectations and plans, which contain projections of future results of operations or financial condition or state other forward-looking information. We believe that it is important to communicate future expectations to investors. However, there may be events in the future that we are not able to accurately predict or control. Accordingly, we do not undertake any obligation to update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

The forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties set forth under “Risk Factors” in our Annual Reports on Form 10-K for the years ended May 31, 2016 and May 31, 2015 and other periodic reports filed with the SEC. Accordingly, to the extent that this Report contains forward-looking statements regarding the financial condition, operating results, business prospects or any other aspect of the Company, please be advised that Arkados’ actual financial condition, operating results and business performance may differ materially from that projected or estimated in such forward-looking statements.

The information contained in this report, except as specifically dated, is as of February 28, 2017.

PART I. FINANCIAL INFORMATION

	Page

Item 1. Financial Statements

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of February 28, 2017 (unaudited) and May 31, 2016	F - 2

Condensed Consolidated Statements of Operations for the Three and Nine Months ended February 28, 2017 and February 29, 2016 (unaudited)	F - 3

Condensed Consolidated Statements of Cash Flows for the Nine Months ended February 28, 2017 and February 29, 2016 (unaudited)	F - 4

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	F - 5 to F - 16

F - 1

ARKADOS GROUP, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	February 28, 2017			May 31, 2016
	(Unaudited)
ASSETS

Current Assets:
Cash	$	10,426		$	56,172
Accounts receivable		12,001			192,100
Inventory		61,811			120,410
Prepaid expenses and other current assets		122,662			187,935
Total Current Assets		206,900			556,617

Property and equipment, net		6,851			7,642
Intangible assets, net		10,000			-
Security deposit		20,384			20,384

Total Assets	$	244,135		$	584,643

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current Liabilities:
Accounts payable and accrued expenses	$	906,479		$	1,022,382
Deferred revenue		-			260,637
Accrued income tax		63,082			63,082
Debt subject to equity being issued		456,930			456,930
Convertible debentures, net of debt discount		124,907			40,000
Notes payable		445,832			295,832
Total Current Liabilities		1,997,230			2,138,863

Long-term convertible debt, net of debt discount		29,458			-

Total Liabilities		2,026,688			2,138,863

Stockholders' Deficiency:
Convertible preferred stock, $.0001 par value; 5,000,000 shares authorized, zero shares outstanding		-			-
Common stock, $.0001 par value; 600,000,000 shares authorized; 14,136,763 and 13,373,167 shares issued and outstanding, respectively		1,414			1,337
Additional paid-in capital		42,484,648			41,645,382
Accumulated deficit		(44,268,615	)		(43,200,939	)
Total Stockholders' Deficiency		(1,782,553	)		(1,554,220	)

Total Liabilities and Stockholders' Deficiency	$	244,135		$	584,643

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

F - 2

ARKADOS GROUP, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the three months ended						For the nine months ended
	February 28, 2017			February 29, 2016			February 28, 2017			February 29, 2016

Sales	$	263,800		$	749,083		$	1,077,963		$	1,671,138

Cost of sales		51,360			372,021			690,125			907,010

Gross Profit		212,440			377,062			387,838			764,128

Operating Expenses:
Selling and general and administrative		305,254			282,292			1,211,642			1,592,547
Research and development		14,462			26,510			64,732			310,717
Total Operating Expenses		319,716			308,802			1,276,374			1,903,264

Income (loss) From Operations		(107,276	)		68,260			(888,536	)		(1,139,136	)

Other Income (Expenses):
Interest expense		(25,474	)		(7,013	)		(46,197	)		(22,471	)
Gain (Loss) on settlement of liability		(138,228	)		-			(120,580	)		-
Loss on translation adjustments		-			-			-			(1,131	)
Total Other Expense		(163,702	)		(7,013	)		(166,777	)		(23,602	)

Loss Before Provision for Income Taxes		(270,978	)		61,247			(1,055,313	)		(1,162,738	)

Provision for income taxes		(572	)		-			(12,363	)		-

Net Income (Loss)	$	(271,550	)	$	61,247		$	(1,067,676	)	$	(1,162,738	)

Income (Loss) per Common Share - Basic and Diluted	$	(0.02	)	$	0.01		$	(0.08	)	$	(0.10	)

Weighted Average Shares Outstanding - Basic and Diluted		13,998,191			12,106,225			12,034,512			11,996,792

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

F - 3

ARKADOS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the nine months ended
	February 28, 2017			February 29, 2016
Cash Flows From Operating Activities:
Net loss	$	(1,067,675	)	$	(1,162,738	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation		-			293,122
Gain on settlement of liability		120,580			-
Issuance of warrants for services		-			158,399
Depreciation		791			527
Amortization of debt discount		51,308			-
Issuance of common stock for inducement		14,398			-
Issuance of common stock for services		323,000			-
Changes in operating assets and liabilities:
Accounts receivable		180,099			(76,298	)
Inventory		58,599			59,835
Prepaid expenses and other current assets		65,272			1,882
Security deposits		-			(18,510	)
Accounts payable and accrued expenses		16,519			233,967
Deferred revenue		(260,637	)		(181,022	)
Accrued income tax benefits		-			-
Net Cash Used In Operating Activities		(497,746	)		(690,836	)

Cash Flows From Investing Activities:
Purchases of property and equipment		-			(8,432	)
Purchases of software		(10,000	)		-
Net Cash Used In Investing Activities		(10,000	)		(8,432	)

Cash Flows From Financing Activities:
Proceeds from sales of common stock		-			503,000
Proceeds from related party advance		-			-
Proceeds from short-term note		150,000			-
Payment of debt		-			(60,000	)
Proceeds from convertible debt issuance		312,000			60,000
Net Cash Provided By Financing Activities		462,000			503,000

Net Decrease In Cash		(45,746	)		(196,268	)

Cash - Beginning of Period		56,172			234,994

Cash - End of Period	$	10,426		$	38,726

Supplemental Cash Flow Information:
Non Cash Investing and Financing Activities
Common stock issued for accrued stock based compensation	$	-		$	250,833
Stock options issued for accrued stock based compensation	$	-		$	1,622,778
Common stock issued for debt exchange	$	-		$	41,332
Original issue discount in connection with convertible debt issued	$	31,000		$	-
Deferred finance costs in connection with convertible debt issued	$	9,000		$	-
Debt discount in connection with restricted shares issued with convertible debt	$	64,529		$	-
Beneficial conversion feature in connection with convertible debt issued	$	184,416		$	-

Cash paid for:
Interest paid	$	-		$	-
Income taxes paid	$	-		$	-

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

F - 4

ARKADOS GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED FEBRUARY 28, 2017 and 2016

DESCRIPTION OF BUSINESS

Arkados Group, Inc. (the “Parent”) conducts business activities principally through its two wholly-owned subsidiaries, Arkados, Inc. (“Arkados”) and Arkados Energy Solutions, LLC (“AES”) (collectively, the “Company”).

The Company underwent a significant restructuring following December 23, 2010, during which substantially all of its assets were acquired by STMicroelectronics, Inc. (sometimes referred to hereinafter as the “Asset Sale”). Settlements reached in connection with the Asset Sale and the fulfillment of obligations in connection therewith, have been substantially completed.

Following the Asset Sale, the Company shifted its focus towards the following businesses:

Arkados - Software and hardware design and development of solutions that enable machine to machine communications for the Internet of Things (“IoT”). Arkados’ solutions are primarily focused on industrial and commercial applications such as building automation, energy management and predictive maintenance and are uniquely designed to drive a wide variety of full-featured, cutting edge solutions.

AES - Energy conservation services for commercial and industrial facilities owners and managers. AES’ services include implementing energy conservation measures such as LED lighting retrofits, oil to natural gas boiler conversions, co-generation system installation and solar PV system installations. In addition, AES sells technology solutions designed by Arkados, Inc. and others that serve to improve the effectiveness of the measures and increases return on investment for the customer.

Effective March 18, 2015, the Company implemented a reverse stock split of its outstanding common stock at a ratio of 1-for-30 shares. All share figures and results are reflected on a post-split basis.

The accompanying condensed consolidated financial statements as of February 28, 2017 (unaudited) and May 31, 2016 and for the three and nine months ended February 28, 2017 and February 29, 2016 (unaudited) have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission including Form 10-Q and Regulation S-X. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These financial statements and the information included under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the audited financial statements and explanatory notes for the year ended May 31, 2016 as disclosed in our annual report on Form 10-K for that year. The results of the three and nine months ended February 28, 2017 (unaudited) are not necessarily indicative of the results to be expected for the pending full year ending May 31, 2017.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred net losses of approximately $44 million since inception, including a net loss of $1,067,675 for the nine months ended February 28, 2017. Additionally, the Company still had both working capital and stockholders’ deficiencies at February 28, 2017 and May 31, 2016 and negative cash flow from operations since inception. 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 unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

The Company’s plan, through potential acquisitions and the continued promotion of its services to existing and potential customers, is to generate sufficient revenues to cover our anticipated expenses. The Company is currently exploring several options to meet its short-term cash requirements, including an equity raise or loan funding from third parties. Although no assurances can be given as to the Company’s ability to deliver on its revenue plans, or that unforeseen expenses may arise, the management of the Company believes that the revenue to be generated from operations together with potential bridge note funding, additional issuances of equity or other potential financing will provide the necessary funding for the Company to continue as a going concern.

Principles of Consolidation - The consolidated financial statements include the accounts of the Parent, and its wholly-owned subsidiaries, which include AES and Arkados. Intercompany accounts and transactions have been eliminated in consolidation.

F - 5

Revenue Recognition -

Arkados

The Company enters into arrangements with end users for items which may include software license fees, services, maintenance and royalties or various combinations thereof. For each arrangement, revenues will be recognized when evidence of an agreement has been documented, the fees are fixed or determinable, collection of fees is probable, delivery of the product has occurred and no other significant obligations remain.

Revenues from software licensing are recognized in accordance with Accounting Standards Codification (“ASC”) 985-605, “Software Revenue Recognition.” Accordingly, revenue from software licensing is recognized when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable.

License revenues are recognized at the time of delivery of the software and all other revenue recognition criteria discussed above have been met. Deferred revenue represents license revenues billed but not yet earned. Sales of products are recognized when the products are shipped and the customer takes risk of ownership and assumes the risk of loss. Royalty income is recognized as it is earned and recorded when reported by the customer.

AES

Sales of products are recognized when the products are shipped and the customer takes risk of ownership and assumes the risk of loss. Service revenue is recognized when the service is completed. Deferred revenue represents revenues billed but not yet earned.

Cash and Cash Equivalents - The Company considers investments in highly liquid instruments with a maturity of three months or less to be cash equivalents. The Company did not have any cash equivalents at both February 28, 2017 and May 31, 2016.

Accounts Receivable - Accounts receivable are reported at their outstanding unpaid principal balances net of allowances for uncollectible accounts. The Company provides for allowances for uncollectible receivables based on management’s estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate. The Company writes off accounts receivable against the allowance for doubtful accounts when a balance is determined to be uncollectible. At February 28, 2017 and May 31, 2016, the Company determined that an allowance for doubtful accounts was not needed.

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. As defined in ASC 820, "Fair Value Measurements and Disclosures," fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.

The three levels of the fair value hierarchy defined by ASC 820 are as follows:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.

F - 6

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

Earnings (Loss) Per Share (“EPS”) - Basic EPS is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted EPS includes the effect from potential issuance of common stock, such as stock issuable pursuant to the exercise of stock options and warrants and the assumed conversion of convertible notes.

The following table summarizes the securities that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive even though the exercise price could be less than the average market price of the common shares.

	Three and nine months ended
	February 28,/29
	2017		2016

Convertible notes		470,319		84,059
Stock options		5,112,500		3,012,500
Warrants		5,125,987		5,059,320

Potentially dilutive securities		10,708,806		8,155,879

Stock Based Compensation - In computing the impact, the fair value of each option and/or warrant is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk-free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what we have recorded in the current period. During the three months ended February 28, 2017, 208,596 shares of the Company’s common stock were issued to satisfy accounts payable obligations amounting to $253,003 in stock compensation. For the nine months ended February 28, 2017, 514,775 shares of the Company’s common stock were issued for accounts payable as mentioned above and 450,000 shares issued for consulting services amounting to $323,000 in stock based compensation. There were no additional issuances of warrants or options during the three and nine months ended February 28, 2017.

Stock based compensation expense was $0 for the three months ended February 29, 2016, and $451,521 for the nine months ended February 29, 2016.

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, liabilities, equity based transactions and disclosure of contingent liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial statements. Significant estimates include the allowance for doubtful accounts, the useful life of plant and equipment and intangible assets, deferred tax asset and valuation allowance, and assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate.

Inventory - Inventory, which consists of finished goods and work-in-process (“WIP”) of AES, is valued at the lower of cost on a first-in, first-out basis or market. Inventory consists of the following at February 28, 2017 and May 31, 2016.

F - 7

	February 28,		May 31,
	2017		2016
	(unaudited)

Finished goods	$	60,011	$	60,011
Work-in-process (unbilled labor and consulting)		1,800		60,399
	$	61,811	$	120,410

Property and Equipment – Property and equipment is recorded at cost. Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the related assets. Expenditures that enhance the useful lives of the assets are capitalized and depreciated. Maintenance and repairs are expensed as incurred. When properties are retired or otherwise disposed of, related costs and related accumulated depreciation are removed from the accounts.

Research and Development –All research and development costs are expensed as incurred.

Foreign Currency Transactions – The Company accounts for foreign currency translation pursuant to ASC 830. The functional currency of the Company is the United States dollar. Under ASC 830, all assets and liabilities denominated in foreign currencies are translated into United States dollars using the current exchange rate at the end of each fiscal period. Revenues and expenses are translated using the average exchange rates prevailing throughout the respective periods. All transaction gains and losses from the measurement of monetary balance sheet items denominated in foreign currencies are reflected in the statement of operations as gain (loss) on foreign currency transactions.

Deferred Financing Costs-Costs incurred in connection with obtaining financing are deferred and amortized on a straight-line basis over the term of the related loan.

Convertible Instruments- The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with accounting standards for “Accounting for Derivative Instruments and Hedging Activities.”

Accounting standards generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of Conventional Convertible Debt Instrument.”

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Original issue discounts (“OID”) under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

ASC 815-40 provides that, among other things, generally, if an event is not within the entity’s control could or require net cash settlement, then the contract shall be classified as an asset or a liability.

Reclassifications - Certain reclassifications have been made to conform the prior period data to the current presentations. The Company has reclassified a $40,000 note payable to convertible debt. This reclassification had no impact on reported results of operations.

F - 8

Recent Accounting Pronouncements -

In January 2017, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) 2017-01, “Business Combinations (Topic 805) Clarifying the Definition of a Business”. The amendments in this Update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company is currently evaluating the impact of adopting this guidance.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230) Restricted Cash”. The new guidance requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include restricted cash and restricted cash equivalents. If restricted cash is presented separately from cash and cash equivalents on the balance sheet, companies will be required to reconcile the amounts presented on the statement of cash flows to the amounts on the balance sheet. Companies will also need to disclose information about the nature of the restrictions. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting this guidance.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments”. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for the Company beginning in the first quarter of fiscal 2019. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The Company is currently evaluating the impact of adopting this guidance.

In April 2016, the FASB issued ASU 2016 – 10 “Revenue from Contract with Customers: identifying Performance Obligations and Licensing”. The amendments in this Update clarify the two following aspects (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended to reduce the degree of judgement necessary to comply with Topic 606. This guidance has no effective date as yet. The Company is currently evaluating the impact of adopting this guidance.

In March 2016, the FASB issued authoritative guidance regarding the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance is to be applied for annual periods beginning after December 15, 2016 and interim periods within those annual periods, and early adoption is permitted. The guidance requires companies to apply the requirements retrospectively, modified retrospectively, or prospectively depending on the amendment(s) applied. The Company is currently evaluating the impact of adopting this guidance.

In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842). This guidance will be effective for public entities for fiscal years beginning after December 15, 2018 including the interim periods within those fiscal years. Early application is permitted. Under the new provisions, all lessees will report a right-of-use asset and a liability for the obligation to make payments for all leases with the exception of those leases with a term of 12 months or less. All other leases will fall into one of two categories: (i) Financing leases, similar to capital leases, which will require the recognition of an asset and liability, measured at the present value of the lease payments and (ii) Operating leases which will require the recognition of an asset and liability measured at the present value of the lease payments. Lessor accounting remains substantially unchanged with the exception that no leases entered into after the effective date will be classified as leveraged leases. For sale leaseback transactions, the sale will only be recognized if the criteria in the new revenue recognition standard are met. The Company is currently evaluating the impact of adopting this guidance.

In January 2016, the FASB issued ASU 2016-01, which amends the guidance relating to the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance.

F - 9

In August 2015, the FASB issued ASU 2015-14, “Revenue From Contracts With Customers (Topic 606)”. The amendments in this ASU defer the effective date of ASU 2014-09 “Revenue From Contracts With Customers (Topic 606)”. Public business entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is still evaluating the impact of adopting this guidance.

All newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company.

ASSET SALE AND DEBT SUBJECT TO EQUITY BEING ISSUED

In December 2010, the Company entered into an agreement to sell substantially all of the assets (the “Asset Sale”) to STMicroelectronics, Inc. (“ST US”), a subsidiary of STMicroelectronics N.V. (“ST”). The Asset Sale was predicated on the Company settling its secured debt and a significant part of its unsecured debt and closed in June, 2011. The Company is negotiating with its remaining unsecured debt holders to compromise, extend the due date or convert outstanding debt into equity. Debt holders who have agreed to settle through receipt of the Company’s equity are labeled as “Debt Subject to Equity Being Issued” on the balance sheet. Except as set forth above, there is no binding commitment on anyone’s part to complete the transactions.

Debt Subject to Equity Being Issued

As a direct result of the Sale of the License and IP Agreements to ST US and the mandate to obtain debt releases, the Company has been able to reach settlements with its secured creditors and employees, with cash payments to the secured creditors made as of the December 2010 and June 2011 closings. Nothing further is owed to the Company’s secured creditors. There remains, however, approximately $179,000 of payments due the former employees as of February 28, 2017 and May 31, 2016.

As of February 28, 2017 and May 31, 2016, there remained $456,930 of debts that have been settled with debt holders who have agreed to accept equity for their remaining debt.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

As of February 28, 2017 and May 31, 2016, accounts payable and accrued expenses consist of the following amounts:

	February 28,		May 31,
	2017		2016
	(Unaudited)

Accounts payable	$	647,694	$	782,654
Accrued interest payable		144,743		116,035
Accrued payroll		16,805		28,320
Accrued other		97,237		95,373
	$	906,479	$	1,022,382

NOTES PAYABLE

Notes Payable

Notes payable transactions include the following:

FY 2016 (Year Ended May 31, 2016) Transactions:

In January 2016, the Company executed a promissory note for a loan in the principal amount of $60,000. The promissory note bears interest at 6% per year, compounded quarterly, and matures on January 15, 2017 (the “January Note“). The proceeds from the January Note were used to partially repay two convertible notes as discussed below. In January 2017, the Company and holder amended this promissory note to extend the maturity date to March 31, 2017. Effective March 31, 2017, the Company and holder amended this promissory note further to extend the maturity date to June 15, 2017.

F - 10

On January 8, 2016, the Company entered into an Exchange Agreement with the noteholders of two 6% convertible notes in the aggregate principle amount of $130,000 (collectively the “Convertible Notes”) that were in default. On January 15, 2016, the Company applied the proceeds of the 2016 Notes together with the issuance of 50,000 shares of the Company’s common stock, to the payment of the Convertible Notes. In exchange for the payment and the shares, the holders of the Convertible Notes surrendered their notes, and the Company issued a new 6% Convertible Note to them in the original principal amount of $40,000 (“Reissued Note”). The holders further agreed that their extension of the maturity of the Convertible Notes had been effective from October 31, 2015 until January 15, 2016. The Reissued Note bears interest at the rate of 6% per year, compounded quarterly, and matured on December 31, 2016. In January 2017, the Company and holder agreed to extend the maturity date of the Reissued Note to March 31, 2017. Effective March 31, 2017, the Company and holder amended this promissory note further to extend the maturity date to May 15, 2017. At any time during the term of the Reissued Note, the holders have the right to convert any unpaid portion of the Reissued Note and accrued interest into shares of common stock at an original conversion price of $1.20 per share. The Company has evaluated the conversion terms and determined that a beneficial conversion feature is not applicable for this exchange transaction.

On March 31, 2016 and May 6, 2016, the Company executed promissory notes for loans, each in the amount of $10,000 (collectively with the January Note, the “2016 Notes”). The promissory notes bear interest at 6% per year, compounded quarterly. Both notes matured on June 30, 2016. The proceeds from the promissory notes were used to partially repay the Convertible Notes as discussed above. The holders further agreed that their extension of the maturity of the outstanding promissory notes had been effective from June 30, 2016 until January 15, 2017. In January 2017, the Company executed an amendment to the promissory notes to extend the maturity date to March 31, 2017. Effective March 31, 2017, the Company and holder amended this promissory note further to extend the maturity date to May 15, 2017.

FY 2017 (Year Ended May 31, 2017):

In August 2016, the Company issued a promissory note in the amount of $150,000 with a maturity date in January 15, 2017. The loan bears interest at 10% per annum compounded quarterly. In January 2017, the Company and holder amended this promissory note to extend the maturity date to March 31, 2017. Effective March 31, 2017, the Company and holder amended this promissory note further to extend the maturity date to May 15, 2017.

On October 28, 2016, the Company issued a convertible promissory note for an aggregate principal amount of $38,500 (which includes an Original Issue Discount (“OID”) of $3,500) with a maturity date of January 30, 2017. The debenture is convertible only upon default after January 30, 2017 at a conversion price of 65% of the average of the three lowest traded prices occurring during the 25 consecutive trading days immediately preceding the applicable conversion date. As additional consideration, the Company issued 20,000 shares of common stock upon execution of this agreement. Accordingly, the Company recorded debt discount of $11,793 related to the restricted shares issued, and an original issue discount of $3,500. The debt discount and OID is amortized on a straight line basis over the term of the loan and amounted to $15,293 as of February 28, 2017. Net discount and net loan balance amounted to $0 and $38,500 respectively, as of February 28, 2017 and is recorded in convertible debentures. On January 27, 2017, the Company and holder amended this promissory note to extend maturity date to March 31, 2017. On March 31, 2017, the Company and holder amended this promissory note to extend the maturity date to April 21, 2017.

On January 27, 2017, the Company issued a convertible promissory note for an aggregate principal amount of $38,500 (which includes an OID of $3,500) with a maturity date of March 31, 2017. The debenture is convertible only upon default after March 31, 2017 at a conversion price of 65% of the average of the three lowest traded prices occurring during the 25 consecutive trading days immediately preceding the applicable conversion date. As additional consideration, the Company issued 20,000 shares of common stock upon execution of this agreement. Accordingly, the Company recorded debt discount of $14,398 related to the restricted shares issued, and an original issue discount of $3,500. The debt discount and OID is amortized on a straight-line basis over the term of the loan and amounted to $9,091 as of February 28, 2017. Net discount and net loan balance amounted to $8,807 and $29,693 respectively, as of February 28, 2017 and is recorded in convertible debentures. On March 31, 2017, the Company and holder amended this promissory note to extend the maturity date to April 21, 2017.

On February 1, 2017, the Company issued a convertible promissory note for an aggregate principal amount of $125,000 (which includes an OID of $12,000) with a maturity date of October 1, 2017. The debenture is convertible only upon default after October 1, 2017 at a conversion price of 60% of the of the lowest traded price occurring during the 20 consecutive trading days immediately preceding the applicable conversion date. Accordingly the Company recorded a debt discount of $121,886 related to the beneficial conversion feature, and OID. The debt discount and OID is amortized on a straight-line basis over the term of the loan and amounted to $13,598 as of February 28, 2017. Net discount and net loan balance amounted to $108,286.81 and $16,713 respectively, as of February 28, 2017 and is recorded in convertible debentures.

Long term convertible debenture:

On November 11, 2016, the Company entered into a Securities Purchase Agreement whereas, the buyer wishes to purchase from the Company securities consisting of the Company’s convertible debentures due three years from issuance for an aggregate principal amount of up to $500,000 (which includes an aggregate purchase price of $450,000 and 10% OID of $50,000) (the “Debentures“). The Debentures are to be issued in three tranches. On November 11, 2016, the Company issued the first of the three Debentures amounting to $150,000 of principal, consisting of $135,000 in proceeds and $15,000 OID. The debenture is convertible at a conversion price of $0.65 up to 150 days after the issuance date and if no event of default. If an Event of Default, as such term is defined in the Debentures, has occurred, or 150 days after the Issuance Date, as such term is defined in the Debentures, the conversion price is the lesser of (a) $0.65 or (b) sixty five percent (65%) of the lowest closing bid price of the common stock for the twenty (20) trading days immediately preceding the date of the date of conversion of the Debentures. Accounting for derivatives will be evaluated after 150 days of issuance or upon default, if applicable where at that point the conversion price becomes variable. As additional consideration, the Company issued 50,000 shares of common stock upon execution of this agreement. In relation to this transaction the Company also incurred deferred financed costs totaling $6,000 for legal fees and commitment fees. Accordingly, the Company recorded debt discount of $38,337 related to the restricted shares issued, a debt discount of $74,530 related to the beneficial conversion feature, an OID of $15,000 and deferred finance cost of $6,000. As of February 28, 2017, total straight line amortization for these transactions amounted to $13,326 which resulted in a net discount of $120,542 and a net loan balance of $29,458 classified as long term debt.

F - 11

STOCKHOLDERS’ DEFICIENCY

FY 2016 (Year Ended May 31, 2016):

On June 25, 2015, the Company issued 108,333 shares of common stock to its chairman/chief executive officer and 35,000 shares of common stock to an officer/former director for services rendered to the Company’s board of directors in fiscal 2015. The shares were valued at $1.75 per share. The value of the shares totaling $250,833 was charged as stock compensation in fiscal 2015.

For the period June 1, 2015 through May 31, 2016, 838,334 shares of common stock have been subscribed for under the PPO and the Company received proceeds of $503,000. These shares were issued in July and August 2015.

On January 8, 2016, the Company issued 50,000 shares as part of a debt conversion and refinance whereby $130,000 of note principle and accrued interest of $11,332 were extinguished and a new note of $100,000 was issued.

On February 23, 2016, we entered into a consulting agreement with LPF Communications under which LPF Communications is to provide certain investor relations services for a period of up to six months. We have agreed to pay for the services by issuing two tranches of 150,000 shares of our Common Stock each, with the second tranche becoming issuable only if we do not terminate the consulting agreement on or prior to June 8, 2016. Pursuant to the agreement, we issued the first tranche of 150,000 shares to the consultant on April 8, 2016.

On April 22, 2016, the Company issued 675,000 shares of common stock to its key employees, including 500,000 shares to its chairman/chief executive officer, for services rendered to the Company in fiscal 2016. The shares were valued at $0.51 per share. The value of the shares totaling $344,250 was charged as stock compensation in fiscal 2016.

On April 28, 2016, the Company entered into an asset purchase agreement pursuant to which the Company purchased intangible assets valued at $249,113 in exchange for 166,667 shares of the Company's common stock and a warrant to purchase 166,667 shares of the Company's common stock at $2.00 per share. As a result of management's evaluation, the intangible asset was deemed impaired and thus fully written off to selling, general and administrative expense of the income statement.

FY 2017 (Year Ended May 31, 2017):

On October 13, 2016, the Company issued 400,000 shares of its common stock for consulting services to two consulting firms. The shares were valued at $0.67 at the time resulting in $268,000 in stock based compensation.

On October 28, 2016, the Company issued 20,000 shares of its common stock as part of a promissory note entered into with an investor (see Note 5).

On November 11, 2016, the Company issued 50,000 shares of its common stock as part of a promissory note entered into with an investor (see Note 5).

In December 2016, the Company issued 50,000 shares of common stock for consulting services valued at $55,000.

In January 2017, the Company issued 15,000 valued at shares of common stock $14,398 to a noteholder as consideration for an inducement to amend the maturity date of a loan.

In January 2017, the Company issued 20,000 shares of common stock as part of a promissory note entered into with an investor.

g .

On February 15, 2017, the Company issued 208,596 shares of its common stock as payment to satisfy accounts payable balances of two vendors totaling $253,003.

STOCK-BASED COMPENSATION

The Company accounted for its stock based compensation in accordance with the fair value recognition provisions of FASB ASC Topic 718, “Compensation – Stock Compensation”.

A. Options

The Company issued options to purchase an aggregate of 4,100,000 shares of the Company’s common stock in the year ended May 31, 2016, 2,100,000 of which were granted outside of the 2004 Stock Option and Restricted Stock Plan (the “2004 Plan”). There were no options granted during the three or nine months ended February 28, 2017.

F - 12

Compensation based stock option activity for qualified and unqualified stock options are summarized as follows:

			Weighted
			Average
	Shares		Exercise Price
Outstanding at May 31, 2015		1,012,500	$	1.20
Granted		4,100,000		0.94
Exercised		-		-
Expired or cancelled		-		-
Outstanding at May 31, 2016		5,112,500	$	0.99
Granted		-		-
Exercised		-		-
Expired or cancelled		-		-
Outstanding at February 28, 2017		5,112,500	$	0.99

The following table summarizes information about options to purchase shares of the Company’s common stock outstanding and exercisable at February 28, 2017:

				Weighted-		Weighted-
				Average		Average
Range of		Outstanding		Remaining Life		Exercise		Number
exercise prices:		Options		In Years		Price		Exercisable

$	0.60		2,300,000		4.72	$	0.60		2,300,000
$	1.00		700,000		1.63	$	1.00		700,000
$	1.20		1,562,500		7.83	$	1.20		1,562,500
$	2.00		550,000		5.33	$	2.00		550,000
			5,112,500		5.32	$	0.99		5,112,500

The compensation expense attributed to the issuance of the options will be recognized as they vested/earned. These stock options 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.

B. Warrants

The issuance of warrants to purchase shares of the Company's common stock including those attributed to debt issuances are summarized as follows:

				Weighted
				Average
	Shares			Exercise Price
Outstanding at May 31, 2015		3,937,986		$	1.45
Granted		1,288,001			1.78
Exercised		-			-
Expired or cancelled		-			-
Outstanding at May 31, 2016		5,225,987		$	1.53
Granted		-			-
Exercised		-			-
Expired or cancelled		(147,833	)		3.43
Outstanding at February 28, 2017		5,078,153		$	1.57

Issuances of warrants to purchase shares of the Company's common stock were as follows:

		Outstanding and exercisable
				Weighted-		Weighted-
Range of				average		average
exercise		Number		remaining life		exercise		Number
prices		outstanding		in years		price		exercisable

$	1.00		283,000		1.72	$	1.00		283,000
$	1.20		2,956,822		2.44		1.20		2,956,822
$	2.00		1,838,331		1.32		2.00		1,838,331
			5,078,153		1.99	$	1.57		5,078,153

FY 2016 (Year Ended May 31, 2016):

As discussed in Note 8, in addition to common stock, the Company also issued warrants to purchase 833,334 shares of the Company's common stock under the PPO.

In November 2015, a warrant to purchase 250,000 shares of the Company's common stock at $1.00 per share was issued to a vendor as a bonus payment for services rendered in connection with a software development agreement. The warrant issued was valued using the Black Scholes option pricing model under the following assumptions: stock price $1.00; strike price $1.00; expected volatility 87.54%; risk free interest rate 1.21%; dividend rate 0%; and expected term 3 years. The value of the warrant totaling $139,928 was charged as research and development.

In November 2015, a warrant to purchase 33,000 shares of the Company's common stock at $1.00 per share was issued to a consultant for services rendered under a consulting contract. The warrant issued was valued using the Black Scholes option pricing model under the following assumptions: stock price $1.00; strike price $1.00; expected volatility 87.54%; risk free interest rate 1.21%; dividend rate 0%; and expected term 3 years. The value of the warrant totaling $18,471 was charged as consulting fees. See Note 11.

On April 28, 2016, the Company entered into an asset purchase agreement pursuant to which the Company purchased intangible assets in exchange for 166,667 shares of the Company's common stock and a warrant to purchase 166,667 shares of the Company's common stock at $2.00 per share. The warrant issued was valued using the Black Scholes option pricing model under the following assumptions: stock price $0.75; strike price $2.00; expected volatility 293%; risk free interest rate .93%; dividend rate 0%; and expected term 3 years. The value of the warrant totaling $124,000 was included in the cost of the intangible which was fully impaired as of May 31, 2016.

F - 13

FY 2017 (Year Ended May 31, 2017):

There were no warrants granted during the three or nine months ended February 28, 2017.

The expense attributed to the issuances of the warrants was recognized as they vested/earned. These warrants are exercisable for three years from the grant date.

LICENSE AGREEMENTS

Master Agreement – License of (“PEMS-SF”™)

On July 10, 2014, the Company entered into a Master Agreement to license our Process and Event Management System (“PEMS-SF”™) with Tatung Corporation (“Tatung”).

The basic fee generation structure of the Master Agreement allows for (1) a one-time licensing fee for each PEMS-SF-enabled stations or subsystems installed, (2) separate fees of up to 10% of the software fees for software updates, maintenance and technical support, (3) on-going service fees based on units of products manufactured utilizing PEMS-SF; and (4) an annual service fee for cloud-based services and data storage.

The Master Agreement has a year-to-year term but can be terminated by either party upon sixty (60) days’ advance written notice. Upon termination or expiration of this agreement, we are not required to provide any continuing or ongoing processing of data or other services that, pursuant to a sub-agreement, are discontinued upon termination, however, the customer shall retain any perpetual rights granted in a sub-agreement or schedule. The term of any sub-agreements is concomitant and co-terminus with the Master Agreement term.

Revenue recognized under the Master Agreement amounted to $0 and $14,793 for the three and nine months ended February 28, 2017, respectively. Revenue recognized under the Master Agreement amounted to $31,300 for the three months ended February 29, 2016 and $169,300 for the nine months ended February 29, 2016.

Agreement – License of Meter Collar and Bridge Programmable Logic

In October 2014, the Company entered into a year-to-year term agreement with Tatung to license its meter collar and bridge programmable logic controllers. The license is paid on a per copy (ordered) fee, and is on a perpetual, worldwide, non-exclusive, transferable basis.

Revenue recognized under the agreement amounted to $0 for both the three and nine months ended February 28, 2017 and $31,300 and $169,300 for the three and nine months ended February 29, 2016, respectively.

In March 2015, the Company entered into a one-year agreement, with automatic one year renewals until terminated by either party with sixty (60) days’ notice, with Tatung to provide services in the area of business development and as a representative to sell its products. Tatung will pay a monthly retainer fee for this service. Revenue recognized under this agreement was $0 and $60,000 for the three and nine months ended February 28, 2017, respectively.

COMMITMENTS

Leases

Effective October 1, 2014 as amended on January 15, 2015, the Company entered a lease for its office space at a total monthly rental of $1,874. The lease expired on January 15, 2016. The Company renewed this lease until January 15, 2017 at a monthly rental of $2,034. In January 2017, the Company renewed this lease until January 15, 2018, with an option to renew for one additional year upon its expiration.

Our AES subsidiary leases offices in Jericho, New York. The facility is approximately 1,850 square feet, occupied pursuant to a lease that commenced on August 1, 2015 and expires September 30, 2018. The average annual rent over the term of the lease is approximately $57,300. This amount does not include taxes for the premises.

Rent expense for all locations including occupancy costs for the three months ended February 28, 2017 and February 29, 2016 was $20,929 and 31,611, respectively. Rent expense for all locations including occupancy costs for the nine months ended February 28, 2017 and February 29, 2016 was $64,850 and 32,211, respectively.

F - 14

Consulting Agreements

On September 15, 2016, the Company entered into two consulting agreements with two consultants, pursuant to which the Company agreed to issue 200,000 shares of common stock to each consultant in exchange for certain consulting services.

On December 13, 2016, the Company entered into a consulting agreement with a consultant, pursuant to which the Company agreed to issue 50,000 shares of common stock to each consultant in exchange for certain consulting services for twelve months.

10.

CONCENTRATIONS OF CREDIT RISK

Cash

The Company maintains principally all cash balances in two financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation. The exposure to the Company is solely dependent upon daily bank balances and the respective strength of the financial institutions. The Company has not incurred any losses on these accounts.

Net Sales

One customer accounted for 88% of net sales for the three months ended February 28, 2017 and three customers accounted for 90% of net sales for the three months ended February 29, 2016, as set forth below:

	Three months ended February 28 / 29,
	2017			2016

Customer 1		88	%		42	%
Customer 2		-			29	%
Customer 3		-			19	%

Three customers accounted for 87% and 69% of net sales for the nine months ended February 28, 2017 and February 29, 2016 respectively, as set forth below:

	Nine months ended February 28 / 29,
	2017			2016

Customer 1		22	%		36	%
Customer 2		46	%		20	%
Customer 3		19	%		13	%

Accounts Receivable

Two customers accounted for 100% of the accounts receivable as of February 28, 2017, as set forth below:

	February 28, 2017			May 31, 2016
	(Unaudited)
Customer 1		94	%		83	%
Customer 2		6	%		11	%

11.

RELATED PARTY TRANSACTIONS

There were no related party transactions during the three and nine month period ending February 28, 2017.

F - 15

12.

BUSINESS SEGMENT INFORMATION

As of February 28, 2017, the Company had two operating segments, Arkados and AES.

The Company’s reportable segments are distinguished by types of service, customers and methods used to provide their services. The operating results of these business segments are regularly reviewed by the Company’s chief operating decision maker.

The accounting policies of each of the segments are the same as those described in the Summary of Significant Accounting Policies in Note 2. The Company evaluates performance based primarily on income (loss) from operations

Information about segments is as follows:

	Arkados			AES			Consolidated

Three months ended February 28, 2017
Revenues	$	(10,299	)	$	274,099		$	263,800
Income (loss) from operations	$	(209,696	)	$	102,420		$	(107,276	)

Three months ended February 29, 2016
Revenues	$	260,590		$	488,493		$	749,083
Loss from operations	$	91,279		$	(23,019	)	$	68,260

Nine months ended February 28, 2017
Revenues	$	78,648		$	999,315		$	1,077,963
Loss from operations	$	(825,154	)	$	(63,382	)	$	(888,536	)

Nine months ended February 29, 2016
Revenues	$	542,883		$	1,128,255		$	1,671,138
Loss from operations	$	(420,525	)	$	(718,611	)	$	(1,139,136	)


Total assets
February 28, 2017	$	130,661		$	113,474		$	244,135

May 31, 2016	$	236,797		$	347,846		$	584,643

13.

SUBSEQUENT EVENTS

On March 1, 2017 the Company issued a 10% promissory note in the principal amount of $100,000 due March 31, 2017 to an accredited investor. Effectively March 31, 2017, the Company and the accredited investor entered into an amendment to 10% promissory note, pursuant to which the parties agreed to extend the maturity date of the promissory note to May 15, 2017.

On March 3, 2017 the Company issued a 10% convertible promissory note in the principal amount of $103,000 due November 3, 2017 to an accredited investor (the “Convertible Promissory Note“). The Convertible Promissory Note may be converted pursuant to the provisions of the Convertible Promissory Note upon a Prepayment Default or an Event of Default, as such terms are defined in the Convertible Promissory Note, at a 40% discount to the lowest trading price during the previous (20) trading days to the date of a Conversion Notice, as such term is defined in the Convertible Promissory Note.

On March 7, 2017 the Company issued a 10% promissory note in the principal amount of $100,000 due March 31, 2017 to an accredited investor. On April 20, 2017, the Company and the accredited investor entered into an amendment to 10% promissory note, pursuant to which the parties agreed to extend the maturity date of the promissory note to April 21, 2017.

On April 6, 2017 the Company entered into that certain Securities Purchase Agreement with four accredited investors, pursuant to which the Company agreed to issue an aggregate of 325,000 restricted shares of common stock and a warrant to purchase 325,000 shares of common stock at an exercise price of $1.00 per share in exchange for an aggregate of $195,000.

On April 20, 2017 the Company entered into that certain second amendment to convertible promissory note number 2016-1 with the holder, pursuant to which the Reissued Note’s maturity date was extended to May 15, 2017.

F - 16

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the Company’s financial condition and results of operations. The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes thereto.

Arkados Group, Inc., through its subsidiaries (together, the “Company”), is a global provider of scalable and interoperable Internet of Things solutions focused on industrial automation and energy management. We execute our business as a software developer, system integrator and services business focused on developing unique, cutting-edge solutions that enable machine to machine communications with specific applications for Smart Lighting, Smart Factory and Smart Building. Additionally, we work with commercial property owners and managers to optimize energy efficiency in their facilities through various energy conservation measure, such as LED lighting retrofits, oil-to-natural gas boiler conversions, solar PV system installations and co-generation system installation. Ultimately, we utilize our technology solutions to deliver full featured products that help our customers to maximize their return on investment and reduce their energy consumption.

Settlements with certain of our unsecured creditors from the periods prior to the sale of certain of our assets to STMicroelectronics, Inc. in December 2010 (the "Asset Sale"), have been substantially completed.

We have executed several agreements that have enabled us to provide the services contemplated in the industrial automation industry. Although we have begun to generate revenue from operations of our Arkados, Inc. subsidiary, this revenue is not sufficient to meet our monthly operating expenses and we remain dependent on outside sources of financing to fund our operations. There is no assurance that we will be able to secure any amount of investment for this or any other purpose. If we are unable to obtain financing, we may be forced to limit or cease our operations.

Corporate Background

Arkados Group, Inc. was incorporated in 1998 and carries out its activities through its two wholly-owned subsidiaries, Arkados, Inc., a Delaware corporation (“Arkados”) and Arkados Energy Solutions, LLC (“AES”), a Delaware limited liability company. Arkados, Inc. and AES combine to create opportunities to exploit the growth in the Internet of Things across multiple verticals with our software solutions, while simultaneously building a focus in smart facility (building, factory, school, hospital, etc.) applications based on our core advantages in industrial types of environments. We are based in Newark, New Jersey at the Economic Development Corporation in the New Jersey Institute of Technology. The Company’s shares trade on the Over-The-Counter QB market under the ticker symbol AKDS.

Following the Asset Sale, the Company shifted its focus towards development of a universal platform that provides software solutions for Internet of Things applications primarily in the areas of energy management, health care, smart industrial machines and smart factory.

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 28, 2017 AND FEBRUARY 29, 2016.

For the Three Months Ended February 28, 2017

	Arkados			AES			Total
Revenue	$	(10,299	)	$	274,099		$	263,800
Cost of Sales		-			51,360			51,360
Gross Profit		(10,299	)		222,739			212,440
Gross Profit Percentage		100	%		81	%		81	%

Operating Expenses		199,397			120,319			319,716
Operating Income (Loss)		(209,696	)		102,420			(107,276	)
Other income (expenses)		(163,702	)		-			(163,702	)
Income (loss) before benefit from income taxes	$	(373,398	)	$	102,420		$	(270,978	)

For the Three Months Ended February 29, 2016

	Arkados			AES			Total
Revenue	$	260,590		$	488,493		$	749,083
Cost of Sales		-			372,021			372,021
Gross Profit		260,590			116,472			377,062
Gross Profit Percentage		100	%		24	%		50	%

Operating Expenses		169,311			139,491			308,802
Operating Income (Loss)		91,279			(23,019	)		68,260
Other income (expenses)		(7,013	)		-			(7,013	)
Income (loss) before benefit from income taxes	$	84,266		$	(23,019	)	$	61,247

Variance

	Arkados			AES			Total
Revenue	$	(270,889	)	$	(214,394	)	$	(485,283	)
Cost of Sales		-			(320,661	)		(320,661	)
Gross Profit		(270,889	)		106,267			(164,622	)
Gross Profit Percentage		0	%		57	%		30	%

Operating Expenses		30,086			(19,172	)		(10,914	)
Operating Income (Loss)		(300,975	)		125,439			(175,536	)
Other income (expenses)		(156,689	)		-			(156,689	)
Income (loss) before benefit from income taxes	$	(457,664	)	$	125,439		$	(332,225	)

For the Nine Months Ended February 28, 2017

	Arkados			AES			Total
Revenue	$	78,648		$	999,316		$	1,077,964
Cost of Sales		-			690,125			690,125
Gross Profit		78,648			309,191			387,839
Gross Profit Percentage		100	%		31	%		36	%

Operating Expenses		903,802			375,572			1,276,374
Operating Income (Loss)		(825,154	)		(63,382	)		(888,536	)
Other income (expenses)		(166,777	)		-			(166,777	)
Income (loss) before benefit from income taxes	$	(991,931	)	$	(63,382	)	$	(1,055,313	)

For the Nine Months Ended February 29, 2016

	Arkados			AES			Total
Revenue	$	542,883		$	1,128,255		$	1,671,138
Cost of Sales		3,000			904,010			907,010
Gross Profit		539,883			224,245			764,128
Gross Profit Percentage		99	%		20	%		46	%

Operating Expenses		960,408			942,856			1,903,264
Operating Income (Loss)		(420,525	)		(718,611	)		(1,139,136	)
Other income (expenses)		(23,602	)		-			(23,602	)
Income (loss) before benefit from income taxes	$	(444,127	)	$	(718,611	)	$	(1,162,738	)

Variance

	Arkados			AES			Total
Revenue	$	(464,235	)	$	(128,939	)	$	(593,174	)
Cost of Sales		(3,000	)		(213,885	)		(216,885	)
Gross Profit		(461,235	)		84,946			(376,289	)
Gross Profit Percentage		1	%		11	%		-10	%

Operating Expenses		(56,606	)		(570,284	)		(626,890	)
Operating Income (Loss)		(404,629	)		655,229			250,600
Other income (expenses)		(143,175			-			(143,175	)
Income (loss) before benefit from income taxes	$	(547,804	)	$	655,229		$	107,425

Results of Operations

Revenue for the three and nine months ended February 28, 2017 decreased by $485,283 and $593,174, respectively, mainly due to decreased revenue recognized from our AES segment, which typically derives revenue from the installation of LED lighting retrofit services.

Gross profit for the three and nine months ended February 28, 2017 decreased by $164,622 and $376,289, respectively, mainly due to reduced recognized revenue in our AES segment and reduced sales in the Arkados segment.

We are highly dependent on a small number of customers. For the three months ended February 28, 2017, one customer accounted for 88% of our revenue. For the three months ended February 29, 2016, three customers accounted for 90% of our revenue.

For the nine months ended February 28, 2017 and February 29, 2016, three customers accounted for 87% and 69% of our revenue, respectively.

The complete loss of or significant reduction in business from, or a material adverse change in the financial condition of any of our customers could cause a material and adverse change in our revenues and operating results.

As of February 28, 2017, two customers held 100% of our accounts receivable. Two customers held 94% of our accounts receivable as of May 31, 2016.

Loss from operations for the three months ended February 28, 2017 increased by $175,536 over the same period last year, mainly due to reduced revenue for the quarter. Loss from operations decreased $250,600 for the nine months ended February 28, 2017 over the same period last year, mainly due to reduced operating costs.

Interest expense on our existing debt for the three months ended February 28, 2017 and February 29, 2016 was $25,474 and $7,013, respectively.

Interest expense on our existing debt for the nine months ended February 28, 2017 and February 29, 2016 was $46,197 and $22,471, respectively.

Liquidity and Capital Resources

Our principal source of operating capital has been provided in by the private placement of convertible debt securities. We do not have any significant sources of revenue or recurring profits from our operations. We may be unable to raise additional working capital through sales of our equity and debt securities. Through February 28, 2017, we have depended, in substantial part, upon loans from investors evidenced by convertible notes, and there are no assurances that investors will make any additional loans to us, in which case we may not be able to continue as a going concern.

As of February 28, 2017, we had cash of $10,426 as compared to $56,172 as of May 31, 2016.

Operating Activities

Operating activities used $497,746 in cash for the nine months ended February 28, 2017, compared to $690,836 for the nine months ended February 29, 2016. The decrease in cash was primarily attributable to funding our operations for the period.

Investing Activities

For the nine months ended February 28, 2017, $10,000 net cash was used in investing activities for the purchase of software. For the nine months ended February 29, 2016, net cash used in investing activities was $8,432 to purchase office furniture.

Financing Activities

For the nine months ended February 28, 2017, net cash provided by financing activities was $462,000, compared to $503,000 for the nine months ended February 29, 2016. The Company received proceeds of $150,000 for a short-term note due April 21, 2017 and $312,000 from two convertible debt issuances due November 2019 and April 2017.

Going Concern

The accompanying Condensed Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred a cumulative net loss of $44,268,614 since its inception and requires capital for its contemplated operation and marketing activities to take place. The Company's ability to raise additional capital through the future issuances of common stock and convertible debt is unknown. The obtainment of additional financing, the successful development of the Company's contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company's ability to continue as a going concern.

Future issuances of the Company's equity or debt securities will be required in order for the Company to continue to finance its operations and continue as a going concern. The Company's present revenues are insufficient to meet operating expenses. The financial statements do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

Critical Accounting Policies

Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. Our significant accounting policies are described in Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended May 31, 2016. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities. Critical accounting policies are those that require application of management’s most subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Our critical accounting policies are limited to equity based transactions or convertible debt instruments. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. For additional discussion of our critical accounting policies, see our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended May 31, 2016.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

We strive to maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports filed under the Securities Exchange Act of 1934, as amended (“Exchange Act”), is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to our management, including our chief executive officer, as appropriate, to allow timely decisions regarding required disclosure. As a result of this evaluation, we concluded that our disclosure controls and procedures were not effective for the period ended February 28, 2017.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Section 15d-15(f) of the Exchange Act) for our Company. Our sole officer and director, who is chief executive officer and is also acting in the capacity of principal accounting officer, conducted an evaluation of the design and operation of our internal control over financial reporting as of the end of the period covered by this report, based on the criteria set forth in the Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this evaluation, we concluded that our financial reporting controls and procedures were not effective for the period ended February 28, 2017. Due to its small size and limited financial resources, the Company has only one employee involved in accounting and financial reporting and relies on outside contractors for the majority of its accounting. As a result of engaging an outside accounting firm to assist with our books, there is some added segregation of duties within the accounting function and financial control, however, all aspects of physical control of cash remains in the hands of the same employee. Our chief executive officer is currently seeking to retain a full-time chief financial officer and to put in place additional compensating levels of controls to provide for greater segregation of duties. As of the date of this quarterly report, however, we have not employed a separate chief financial officer, and the chief executive officer continues to act as our principal accounting officer.

There has been no significant change in our internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

None.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

There has been no material change in any of the matters set forth in Item 3 of our Annual Report on Form 10-K for the fiscal year ended May 31, 2016 and no new litigation commenced since the filing of our most recent Annual Report on Form 10-K that would be required to be disclosed in response to this Item.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended May 31, 2016 which could materially affect our business, financial condition or future results. There have been no other material changes during the fiscal quarter ended February 28, 2017 to the risk factors discussed in the periodic reports noted above that have not already been disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2016 .

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On December 13, 2016, the Company entered into a one year consulting agreement for financial advice. As compensation for services the Company will issue 50,000 shares of restricted common stock upon execution of the agreement. The issuances of shares of our Common Stock to the consultant was exempt from the registration requirements of the Securities Act under Section 4(a)(2) thereof as a transaction not involving a public offering. The certificate that evidences the shares of our Common Stock that we have issued to the consultants bears a legend restricting its transferability.

On December 31, 2016, the Company entered into a settlement agreement with one of its vendors, pursuant to which the Company agreed to issue the vendor an aggregate of 33,596 shares of its common stock in exchange for the cancellation of its outstanding invoice of $20,158 for services rendered. The issuances of shares of our Common Stock to the its vendor was exempt from the registration requirements of the Securities Act under Section 4(a)(2) thereof as a transaction not involving a public offering. The certificate that evidences the shares of our Common Stock that we have issued to the vendor bears a legend restricting its transferability.

On January 19, 2017, the Company entered into a settlement agreement with one of its former service providers, pursuant to which the Company agreed to issue the service provider an aggregate of 175,000 shares of its common stock in exchange for the cancellation of its outstanding invoice of $94,617.00 for services rendered. The issuances of shares of our Common Stock to the service provider was exempt from the registration requirements of the Securities Act under Section 4(a)(2) thereof as a transaction not involving a public offering. The certificate that evidences the shares of our Common Stock that we have issued to the consultants bears a legend restricting its transferability.

On January 27, 2017, the Company entered into a securities purchase agreement with an accredited investor, pursuant to which the Company agreed to issue the investor an aggregate of 20,000 restricted shares of its common stock and a convertible promissory note in the total principal amount of $38,500 in exchange for the aggregate purchase price of $35,000. The maturity date of the convertible note was March 31, 2017, which was later extended to April 21, 2017. The issuances of shares of our Common Stock and the convertible promissory note to the investor was exempt from the registration requirements of the Securities Act under Section 4(a)(2) thereof as a transaction not involving a public offering. The certificate that evidences the shares of our Common Stock that we have issued to the investor bears a legend restricting its transferability.

On February 1, 2017, the Company issued a 10% convertible promissory note to an accredited investor in the total principal amount of $125,000 in exchange for the purchase price of $116,000, with a maturity date of October 1, 2017. The issuances of the convertible promissory note to the investor was exempt from the registration requirements of the Securities Act under Section 4(a)(2) thereof as a transaction not involving a public offering.

On February 15, 2017, the Company issued 195,000 shares of its common stock as payment to satisfy accounts payable balances of two vendors totaling $114,775. The issuances of shares of our Common Stock to the consultants was exempt from the registration requirements of the Securities Act under Section 4(a)(2) thereof as a transaction not involving a public offering. The certificate that evidences the shares of our Common Stock that we have issued to the consultants bears a legend restricting its transferability.

On March 3, 2017, the Company issued a 10% convertible promissory note in the principal amount of $103,000 due November 3, 2017 to an accredited investor. The Convertible Promissory Note may be converted pursuant to the provisions of the Convertible Promissory Note upon a Prepayment Default or an Event of Default, as such terms are defined in the Convertible Promissory Note, at a 40% discount to the lowest trading price during the previous (20) trading days to the date of a Conversion Notice, as such term is defined in the Convertible Promissory Note. The issuances of the convertible promissory note to the investor was exempt from the registration requirements of the Securities Act under Section 4(a)(2) thereof as a transaction not involving a public offering.

On April 6, 2017, the Company entered into that certain Securities Purchase Agreement with four accredited investors, pursuant to which the Company agreed to issue an aggregate of 325,000 restricted shares of common stock and a warrant to purchase 325,000 shares of common stock at an exercise price of $1.00 per share in exchange for $195,000. The issuances of the convertible promissory note to the investor was exempt from the registration requirements of the Securities Act under Section 4(a)(2) and Rule 506(b) of Regulation D thereof as a transaction not involving a public offering.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

The discussions under Item 2. Unregistered Sales of Equity Securities and Use of Proceed of this Report is hereby incorporated by reference into this Form 10-Q.

On January 15, 2017, the Company entered into that certain Amendment to Convertible Promissory Note Number 2016-1 ("2016-1 Amendment") with certain holders of a 6% convertible promissory note originally issued on January 8, 2016 for a principal amount of $40,000. Pursuant to the 2016-1 Amendment, the parties agreed to extend the maturity date from December 31, 2016 to March 31, 2017. On April 20, 2017 the Company and the holders entered into that certain Second Amendment to Convertible Promissory Note Number 2016-1, pursuant to which the parties agreed to extend the maturity date further to May 15, 2017.

On January 27, 2017, the Company entered into that certain Amendment #1 to the Securities Purchase Agreement and $38,500 Promissory Note Dated October 28, 2016, with that certain holder of a convertible promissory note in the aggregate principal amount of $38,500 (the "Hoppel Note") in order to extend the maturity date from January 30, 2017 to March 31, 2017. On March 31, 2017, the Company entered into that certain Amendment #2 to the Securities Purchase Agreement and $38,500 Promissory Note Dated October 28, 2016 and the Amendment Dated January 27, 2017, with that certain holder of the Hoppel Note in order to extend the maturity date from March 31, 2017 to April 21, 2017.

Item 6. Exhibits.

(a) Exhibits.

	3.1	Articles of Incorporation of the Registrant (incorporated by reference from the Registrant’s Form 10-SB filed on October 7, 1999).

	3.2	Amendment to the Articles of Incorporation of the Registrant (incorporated by reference from the Registrant’s Form 10-SB filed on October 7, 1999).

	3.3	Certificate of Merger of the Registrant (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on October 7, 1999).

	3.4	Certificate of Ownership and Merger of the Registrant (incorporated by reference from the Registrant’s Form 10-SB filed on September 1, 2006).

	3.5	Amendment to the Articles of Incorporation of the Registrant (incorporated by reference from the Registrant’s Form 10-SB filed on October 7, 1999).

	3.6	Amendment to the Certificate of Incorporation (Reverse Split) of the Registrant (incorporated by reference from the Registrant’s Form 10-QSB filed on February 17, 2004).

	3.7	Amendment to the Certificate of Incorporation the Registrant (incorporated by reference from the Registrant’s Form 10-QSB filed on February 17, 2004).

	3.8	Amendment to the Certificate of Incorporation the Registrant (incorporated by reference from the Registrant’s Form 10-K filed on August 27, 2014).

	3.9	Amended and Restated Bylaws of the Registrant (incorporated by reference from the Registrant’s Definitive Statement on Form DEF14C filed on February 24, 2015).

	4.1	Amendment to Convertible Promissory Note Number 2016-1 originally issued on January 8, 2016 dated December 31, 2016.*

	4.2	Form of Convertible Note issued on January 27, 2017.*

	4.3	Amendment #1 to the Securities Purchase Agreement and $38,500 Promissory Note originally issued on January 27, 2017 dated March 31, 2017.*

	4.4	$38,500 Promissory Note originally issued on October 28, 2016 (incorporated by reference from the Registrant’s Quarterly Report on Form 10-Q filed on January 23, 2017).

	4.5	Amendment #1 to the Securities Purchase Agreement and $38,500 Promissory Note originally issued on October 28, 2016 dated January 27, 2017.

	4.6	Amendment #2 to the Securities Purchase Agreement and $38,500 Promissory Note originally issued on October 28, 2016 dated March 31, 2017.*

	4.7	Form of 10% Convertible Promissory Note issued on February 1, 2017.*

	4.8	Form of 10% Convertible Promissory Note issued on March 3, 2017.*

	4.9	Form of Second Amendment to Promissory Note effective on March 31, 2017.*

	4.10	Second Amendment to Convertible Promissory Note Number 2016-1 dated April 20, 2017

	10.1	Exchange Agreement dated January 8, 2016*

	10.2	Securities Purchase Agreement by and between the Company and a certain accredited investor dated January 27, 2017.*

	10.3	Form of Securities Purchase Agreement by and between the Company and certain accredited investors dated April 6, 2017.*

	31.1	Certification of Chief Executive Officer/Principal Accounting Officer of Periodic Report pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Rule 13a-14a and Rule 15d-14a.*

	32.1	Certificate of Chief Executive Officer/Principal Accounting Officer of Periodic Report pursuant to 18 U.S.C. Section 1350.*

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Document

101.DEF XBRL Taxonomy Extension Definition Document

101.LAB XBRL Taxonomy Extension Labeled Document

101.PRE XBRL Taxonomy Extension Presentation Document

* Filed herewith.

(a) Exhibits.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ARKADOS GROUP, INC.
Dated: April 21, 2017

	By:	/s/ Terrence DeFranco
		Terrence DeFranco
		President and Chief Executive Officer,
		Principal Accounting Officer

Exhibit 4.1

ARKADOS, INC.

AMENDMENT TO CONVERTIBLE PROMISSORY NOTE NUMBER 2016-1

THIS AMENDMENT TO CONVERTIBLE PROMISSORY NOTE NUMBER 2016-1 (this “Amendment”) is made and entered into as of December 31, 2016 (the “Effective Date”), by and between Arkados Group, Inc., a Delaware corporation (the “Company”), and William Carson (“Mr. Carson”) and Susan Carson (“Mrs. Carson”, collectively with Mr. Carson, the “Purchasers”).

RECITALS

A. The Company and Mr. Carson are parties to that certain Securities Purchase Amendment dated as of September 10, 2014 (the “Individual SPA”), pursuant to which Mr. Carson purchased, and the Company sold and issued to Mr. Carson its 6% Convertible Note No. 2014-3 dated September 10, 2014 (“Note 2014-3”) in the original principal amount of $65,000.

B. The Purchasers and the Company entered into that certain Securities Purchase Amendment, dated September 10, 2014 (the “Joint SPA,” and, together with the Individual SPA, the “SPAs” each an “SPA”), pursuant to which the Purchasers purchased, and the Company sold and issued to the Purchasers its 6% Convertible Note No. 2014-4 dated September 10, 2014 (“Note 2014-4,” and, together with Note 2014-3, collectively the “2014 Notes”) also in the original principal amount of $65,000.

C. The Purchasers and the Company entered into that certain Exchange Agreement dated as of January 8, 2016, pursuant to which, among other things, the Company and the Purchasers agreed to reduce the amount due under the Notes to $40,000 and to extend the ‘Maturity Date’ of the Notes to December 31, 2016 (the “Exchange Agreement”) by cancelling the 2014 Notes and issuing the Purchasers a 6 % Convertible Note No. 2016-1 dated January 8, 2016 in the original principal amount of $40,000 (“Note 2016-1”).

D. Pursuant to Section 4.3 of Note 2016-1, Note 2016-1 may only be amended by an instrument in writing signed by the Company and the Purchasers.

E. The Company and Purchasers, in connection to their financial interest in the Company as the holder of an aggregate of 63,987 restricted shares of the Company’s common stock held in the name of the Purchasers or by Mr. Carson as an individual, hereby desires to amend certain terms of Note 2016-1 as set forth below.

AGREEMENT

In consideration of the foregoing recitals and the mutual promises and covenants contained herein, the parties, intending to be legally bound, hereby agree as follows:

1. Amendment to the Title of Note 2016-1. The third line of the title of Note 2016-1 shall be amended, restated and replaced in its entirety as follows:

“DUE MARCH 31, 2017”

2. Amendment to the First Sentence of the First Paragraph of Note 2016-1. The first sentence of the first paragraph of Note 2016-1 shall be amended, restated and replaced in its entirety as follows:

“Arkados Group, Inc., a Delaware corporation (the “Company”) with principal offices at 211 Warren Street, Suite 320, Newark, NJ 07103, for value received, hereby promises to pay the registered holder hereof (the “Holder”) the principal sum set forth above on March 31, 2017 (the “Maturity Date”), in such coin or currency of the United States of America as at the time of payment shall be the legal tender for the payment of public and private debts, and to pay interest, less any amounts required by law to be deducted or withheld, computed on the basis of a 365-day year, on the unpaid principal balance hereof from the date hereof (the “Original Issue Date”), at the rate of 6% per year, compounded quarterly, until such principal sum shall have become due and payable, or has been converted pursuant to Section 1.1, below.”

3. Waiver of Event of Default . If applicable, the Purchasers hereby waive any Event of Default (as defined under Note 2016-1) for the Company’s failure to observe or perform any other covenant, obligation, condition or agreement contained in the Purchaser’s Note 2016-1 or that certain SPA, pursuant to which the 2014 Note was originally issued, if such breach occurred prior to the date of this Amendment. For avoidance of doubt, Note 2016-1 shall continue to bear interest at the rate of 6% per year and not the Default Interest rate defined in Note 2016-1.

4. Reaffirmation . Except as expressly provided herein, the undersigned agree that all of the terms, covenants, conditions, restrictions and other provisions contained in Note 2016-1 shall remain in full force and effect.

5. Entire Agreement . This Amendment, together with the SPAs, Exchange Agreement and Note 2016-1, contains the entire agreement of the parties and supersedes any prior or contemporaneous written or oral agreements between them concerning the subject matter of this Amendment.

6. Counterparts . This Amendment may be executed in counterparts, each of which shall be an original and all of which, taken together, shall constitute a single instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the date and year first above written.

	COMPANY

	Arkados Group, Inc.,
	a Delaware corporation

	By:	/s/ Terrence DeFranco
	Name:	Terrence DeFranco
	Title:	CEO

IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the date and year first above written

	PURCHASERS

	William Carson and Susan Carson

	By:	/s/ William Carson
		William Carson

	By:	/s/ Susan Carson
		Susan Carson

	Address:	2703 Cottonwood Lane
		Conexvells TX 76034
	Facsimile:
	Email:	whcenterprises@gmail.com

Exhibit 4.2

NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

Arkados Group, Inc.

Convertible Promissory Note

Issuance Date:	January 27 ^th , 2017	Original Principal Amount:	$38,500
Note No. AKDS-2		Consideration Paid at Close:	$35,000

FOR VALUE RECEIVED, Arkados Group, Inc., a Delaware corporation with a par value of $0.0001 per common share (“Par Value”) (the " Company "), hereby promises to pay to the order of Lucas Hoppel or registered assigns (the " Holder ") the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “ Principal ”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“ Interest ”) on any outstanding Principal at the applicable Interest Rate from the date set out above as the Issuance Date (the “ Issuance Date ”) until the same becomes due and payable, upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof).

The Original Principal Amount is $38,500 (thirty-eight thousand five hundred) plus accrued and unpaid interest and any other fees. The Consideration is $35,000 (thirty-five thousand) payable by wire transfer (there exists a $3,500 original issue discount (the “OID”)). The Holder shall pay $35,000 of Consideration upon closing of this Note.

(1)

GENERAL TERMS

(a) Payment of Principal . The “ Maturity Date ” shall be March 31st, 2017, as may be extended at the option of the Holder in the event that, and for so long as, an Event of Default (as defined below) shall not have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) or any event shall not have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) that with the passage of time and the failure to cure would result in an Event of Default.

(b) Interest . A one-time interest charge of six percent (6%) (“ Interest Rate ”) shall be applied on the Issuance Date to the Original Principal Amount. Interest hereunder shall be paid on the Maturity Date (or sooner as provided herein) to the Holder or its assignee in whose name this Note is registered on the records of the Company regarding registration and transfers of Notes in cash or converted into Common Stock at the Conversion Price provided the Equity Conditions are satisfied.

(2)

EVENTS OF DEFAULT.

(a) An “ Event of Default ”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

(i) The Company's failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under this Note (including, without limitation, the Company's failure to pay any redemption payments or amounts hereunder);

(ii) A Conversion Failure as defined in section 3(b)(ii)

(iii) The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 61 days; or the Company or any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty one (61) days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the Company or any subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary of the Company shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary of the Company for the purpose of effecting any of the foregoing;

(iv) The Company or any subsidiary of the Company shall default in any of its obligations under any other Note or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company or any subsidiary of the Company in an amount exceeding $100,000, whether such indebtedness now exists or shall hereafter be created; and

(v) The Common Stock is suspended or delisted for trading on the Over the Counter OTCQB Venture Marketplace or OTCPink Open Marketplace (the “ Primary Market ”).

(vi) The Company loses its status as “DTC Eligible.”

(vii) The Company shall become late or delinquent in its filing requirements as a fully-reporting issuer registered with the Securities & Exchange Commission.

(viii) The Company shall fail to reserve and keep available out of its authorized Common Stock a number of shares equal to at least 3 (three) times the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Note.

(b) Upon the occurrence of any Event of Default, the Outstanding Balance shall immediately increase to 140% of the Outstanding Balance immediately prior to the occurrence of the Event of Default (the “Default Effect”) and a daily penalty of $500 (five hundred) will accrue until the default is remedied. The Default Effect shall automatically apply upon the occurrence of an Event of Default without the need for any party to give any notice or take any other action.

(3) CONVERSION OF NOTE . This Note shall be convertible into shares of the Company's Common Stock, on the terms and conditions set forth in this Section 3.

(a) Conversion Right . Upon the event of a default, subject to the provisions of Section 3(c), at any time or times on or after the Issuance Date, the Holder shall have the right but not the obligation to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(b), at the Conversion Price (as defined below). The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to this Section 3(a) shall be equal to the quotient of dividing the Conversion Amount by the Conversion Price. The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer agent fees, legal fees, costs and any other fees or costs that may be incurred or charged in connection with the issuance of shares of the Company’s Common Stock to the Holder arising out of or relating to the conversion of this Note.

(i) “ Conversion Amount ” means the portion of the Original Principal Amount and Interest to be converted, plus any penalties, redeemed or otherwise with respect to which this determination is being made.

(ii) “ Conversion Price ” shall equal 65% of the average of the three lowest traded prices occurring during the twenty-five (25) consecutive Trading Days immediately preceding the applicable Conversion Date on which the Holder elects to convert all or part of this Note, subject to adjustment as provided in this Note.

(b)

Mechanics of Conversion .

(i) Optional Conversion . To convert any Conversion Amount into shares of Common Stock on any date (a “ Conversion Date ”), the Holder shall (A) transmit by email, facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York, NY Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit A (the “ Conversion Notice ”) to the Company. On or before the third Business Day following the date of receipt of a Conversion Notice (the “ Share Delivery Date ”), the Company shall (A) if legends are not required to be placed on certificates of Common Stock pursuant to the then existing provisions of Rule 144 of the Securities Act of 1933 (“Rule 144”) and provided that the Transfer Agent is participating in the Depository Trust Company's (“ DTC ”) Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit Withdrawal Agent Commission system or (B) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled which certificates shall not bear any restrictive legends unless required pursuant the Rule 144. If this Note is physically surrendered for conversion and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall, upon request of the Holder, as soon as practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver to the holder a new Note representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock upon the transmission of a Conversion Notice.

(ii) Company's Failure to Timely Convert . If within two (2) Trading Days after the Company's receipt of the facsimile or email copy of a Conversion Notice the Company shall fail to issue and deliver to Holder via “DWAC/FAST” electronic transfer the number of shares of Common Stock to which the Holder is entitled upon such holder's conversion of any Conversion Amount (a “ Conversion Failure ”), the Original Principal Amount of the Note shall increase by $2,000 per day until the Company issues and delivers a certificate to the Holder or credit the Holder's balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon such holder's conversion of any Conversion Amount (under Holder’s and Company’s expectation that any damages will tack back to the Issuance Date). Company will not be subject to any penalties once its transfer agent processes the shares to the DWAC system. If the Company fails to deliver shares in accordance with the timeframe stated in this Section, resulting in a Conversion Failure, the Holder, at any time prior to selling all of those shares, may rescind any portion, in whole or in part, of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the Outstanding Balance with the rescinded conversion shares returned to the Company (under Holder’s and Company’s expectations that any returned conversion amounts will tack back to the original date of the Note).

(iii) DWAC/FAST Eligibility. If the Company fails for any reason to deliver to the Holder the Shares by DWAC/FAST electronic transfer (such as by delivering a physical stock certificate), or if there is a Conversion Failure as defined in Section 3(b)(ii), and if the Holder incurs a Market Price Loss, then at any time subsequent to incurring the loss the Holder may provide the Company written notice indicating the amounts payable to the Holder in respect of the Market Price Loss and the Company must make the Holder whole by either of the following options at Holder’s election:

Market Price Loss = [(High trade price for the period between the day of conversion and the day the shares clear in the Holder’s brokerage account) x (Number of shares receivable from the conversion)] – [(Net Sales price realized by Holder) x (Number of shares receivable from the conversion)].

Option A – Pay Market Price Loss in Cash. The Company must pay the Market Price Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder’s written notice to the Company.

Option B – Add Market Price Loss to Outstanding Balance. The Company must pay the Market Price Loss by adding the Market Price Loss to the Outstanding Balance (under Holder’s and the Company’s expectation that any Market Price Loss amounts will tack back to the Issuance Date).

In the case that conversion shares are not deliverable by DWAC/FAST electronic transfer an additional 10% discount to the Conversion Price will apply.

(iv) DTC Eligibility & Sub-Penny. If the Company fails to maintain its status as “DTC Eligible” for any reason, or, if the effective Conversion Price as calculated in Section 3(a)(ii) is less than $0.01 at any time (regardless of whether or not a Conversion Notice has been submitted to the Company), the Principal Amount of the Note shall increase by ten thousand dollars ($10,000) (under Holder’s and Company’s expectation that any Principal Amount increase will tack back to the Issuance Date). In addition, the Conversion Price shall be permanently redefined to equal the lesser of (a) $0.01 or (b) 50% of the lowest trade occurring during the twenty five (25) consecutive Trading Days immediately preceding the applicable Conversion Date on which the Holder elects to convert all or part of this Note, subject to adjustment as provided in this Note.

(v) Par Value True-Up. In the event that the Conversion Price is less than Par Value on the Conversion Date, the Holder may elect to submit a Conversion Notice (attached hereto as Exhibit A) with a conversion price equal to the Company’s Par Value. In addition, upon written notice from the Holder in the form attached hereto as Exhibit B (the “True-Up Notice”), the Holder may require the Company, at the Holder’s election, to either (A) issue and deliver to the Holder a number of shares of Common Stock as equals (X) the Conversion Amount divided by 60% of the lowest trade occurring during the twenty five (25) consecutive Trading Days immediately preceding the applicable Conversion Date, less (Y) the Conversion Amount divided by the Par Value (Any additional shares of Common Stock issuable pursuant to this Section 3(b)(v) shall be referred to herein as “True-Up Shares”), or (B) add to the Outstanding Balance a dollar amount equal to the number of True-Up Shares (as calculated above) multiplied by the high trade price on the Conversion Date (Any dollar amount added to the Outstanding Balance pursuant to this Section 3(b)(v) shall be referred to herein as the “True-Up Balance”) (under Holder’s and the Company’s expectation that any True-Up Balance amounts will tack back to the Issuance Date).

(vi) Book-Entry . Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.

(c)

Limitations on Conversions or Trading .

(i) Beneficial Ownership . The Company shall not effect any conversions of this Note and the Holder shall not have the right to convert any portion of this Note or receive shares of Common Stock as payment of interest hereunder to the extent that after giving effect to such conversion or receipt of such interest payment, the Holder, together with any affiliate thereof, would beneficially own (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion or receipt of shares as payment of interest. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 4.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the principal amount of this Note is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount of this Note that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum principal amount permitted to be converted on such Conversion Date in accordance with Section 3(a) and, any principal amount tendered for conversion in excess of the permitted amount hereunder shall remain outstanding under this Note. In the event that the Market Capitalization of the Company falls below $2,500,000, the term “4.99%” above shall be permanently replaced with “9.99%”. “Market Capitalization” shall be defined as the product of (a) the closing price of the Common Stock of the Common stock multiplied by (b) the number of shares of Common Stock outstanding as reported on the Company’s most recently filed Form 10-K or Form 10-Q. The provisions of this Section may be waived by Holder upon not less than 65 days prior written notification to the Company.

(ii) Capitalization. So long as this as this Note is outstanding, upon written request of the Holder, the Company shall furnish to the Holder the then-current number of common shares issued and outstanding, the then-current number of common shares authorized, and the then-current number of shares reserved for third parties.

(d)

Other Provisions .

(i) Share Reservation. The Company shall at all times reserve and keep available out of its authorized Common Stock a number of shares equal to at least 3 (three) times the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Note; and within 3 (three) Business Days following the receipt by the Company of a Holder's notice that such minimum number of shares of Common Stock is not so reserved, the Company shall promptly reserve a sufficient number of shares of Common Stock to comply with such requirement. The Company will at all times reserve at least 1,000,000 shares of Common Stock for conversion.

(ii) Prepayment. At any time prior to the Maturity Date, the Company shall have the option to pre-pay the entire remaining outstanding principal amount of this Note in cash, provided that (i) the Company shall pay the Holder 100% of the Outstanding Balance and (ii) the Holder may still convert this Note pursuant to the terms hereof at all times until such prepayment amount has been received in full.

(iii) Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Company or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Company shall notify the Holder of such additional or more favorable term and such term, at Holder’s option, shall become a part of the transaction documents with the Holder. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage.

(iv) All calculations under this Section 3 shall be rounded up to the nearest $0.00001 or whole share.

(v) Nothing herein shall limit a Holder's right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Company's failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

(4) SECTION 3(A)(9) OR 3(A)(10) TRANSACTION . So long as this Note is outstanding, the Company shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(10) of the Securities Act (a “3(a)(10) Transaction”). In the event that the Company does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(10) Transaction while this note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than $25,000, will be assessed and will become immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.

(5) PIGGYBACK REGISTRATION RIGHTS . The Company shall include on the next registration statement the Company files with SEC (or on the subsequent registration statement if such registration statement is withdrawn) all shares issuable upon conversion of this Note. Failure to do so will result in liquidated damages of 25% of the outstanding principal balance of this Note, but not less than $25,000, being immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.

(6)

REISSUANCE OF THIS NOTE .

(a) Assignability. The Company may not assign this Note. This Note will be binding upon the Company and its successors and will inure to the benefit of the Holder and its successors and assigns and may be assigned by the Holder to anyone of its choosing without Company’s approval.

(b) Lost, Stolen or Mutilated Note . Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note representing the outstanding Principal.

(7) NOTICES . Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) (iii) upon receipt, when sent by email; or (iv) one (1) Trading Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be those set forth in the communications and documents that each party has provided the other immediately preceding the issuance of this Note or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

The addresses for such communications shall be:

If to the Company, to:

_______________________________________

Attn:

Email:

If to the Holder:

Lucas Hoppel

Phone: 858-232-5110

Email: Luke@LukeHoppel.com

(8) APPLICABLE LAW AND VENUE . This Note shall be governed by and construed in accordance with the laws of the State of Nevada, without giving effect to conflicts of laws thereof. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of California or in the federal courts located in the city of San Diego, in the State of California. Both parties and the individuals signing this Agreement agree to submit to the jurisdiction of such courts.

(9) WAIVER . Any waiver by the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver must be in writing.

(10) LIQUIDATED DAMAGES . Holder and Company agree that in the event Company fails to comply with any of the terms or provisions of this Note, Holder's damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties' inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Holder and Company agree that any fees, balance adjustments, default interest or other charges assessed under this Note are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Holder's and Company's expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period under Rule 144).

[Signature Page Follows]

IN WITNESS WHEREOF , the Company has caused this Convertible Note to be duly executed by a duly authorized officer as of the date set forth above.

	COMPANY:

	Arkados Group, Inc .

	By:	/s/ Terrence DeFranco

	Name:	Terrence DeFranco

	Title:	Chief Executive Officer

	HOLDER:

	Lucas Hoppel

	By:	/s/ Lucas Hoppel

[Signature Page to Convertible Note No. AKDS-2]

EXHIBIT A

CONVERSION NOTICE

[Company Contact, Position]

[Company Name]

[Company Address]

[Contact Email Address}

The undersigned hereby elects to convert a portion of the $________ Convertible Note _______ issued to Lucas Hoppel on ____________ into Shares of Common Stock of ____________ according to the conditions set forth in such Note as of the date written below.

By accepting this notice of conversion, you are acknowledging that the number of shares to be delivered represents less than 10% (ten percent) of the common stock outstanding. If the number of shares to be delivered represents more than 9.99% of the common stock outstanding, this conversion notice shall immediately automatically extinguish and debenture Holder must be immediately notified.

Date of Conversion:

Conversion Amount:

Conversion Price:

Shares to be Delivered:

Shares delivered in name of:

Lucas Hoppel

Signature:

EXHIBIT B

TRUE-UP NOTICE

[Company Contact, Position]

[Company Name]

[Company Address]

[Contact Email Address}

The undersigned hereby gives notice to [Company Name] ., a ______ corporation (the “Company”), pursuant to that certain Note dated _______ ___, 20__ by and between the Company and the Holder (the “Note”), that the Holder elects to:

___

Receive fully paid and non-assessable True-Up Shares pursuant to Section 3(b)(v) of the Note (such Additional Origination Shares shall be calculated as set forth below), or

___

Add to the Outstanding Balance a dollar amount equal to the True-Up Amount (such True-Up Amount shall be calculated as set forth below).

The number of True-Up Shares Holder is entitled to receive is calculated as follows:

Conversion Amount ($___) / ___% of the lowest trade occurring during the _________ (__) consecutive Trading Days immediately preceding the applicable Conversion Date ($_.__) - Conversion Amount ($___) divided by the Par Value ($_.__) =

____________ True-Up Shares

The amount of True-Up Balance to be added to the Outstanding Balance is calculated as follows:

Number of True-Up Shares (_____) * high trade price on the Conversion Date ($_.__)=

____________ True-Up Balance

Shares delivered in name of:

Lucas Hoppel

Signature:

Exhibit 4.3

AMENDMENT #1

TO THE SECURITIES PURCHASE AGREEMENT AND $38,500 PROMISSORY NOTE DATED

January 27, 2017.

The parties agree that the Securities Purchase Agreement and $38,500 Promissory Note by and between Arkados Group, Inc. ( “ Company ” ) and Lucas Hoppel ( “ Holder ” ) is hereby amended as follows:

Maturity Date: The Maturity Date shall be extended to April 21 ^st , 2017.

Inducement Shares: The Holder will receive an additional 27,398 shares of the Company ’ s restricted common shares.

Conversion Right: Section 3(a) of the Promissory Note shall be permanently changed to allow the Holder the right to convert the Note into shares of the Company ’ s common stock regardless if an event of default has occurred or not.

Conversion Price: The Conversion Price in Section 3(a)(ii) of the Promissory Note shall permanently be changed to a fixed price equaling $0.60 (sixty) cents.

ALL OTHER TERMS AND CONDITIONS OF THE $38,500 PROMISSORY NOTE REMAIN IN FULL FORCE AND EFFECT.

Please indicate acceptance and approval of this amendment dated March 31st, 2017 by signing below:

/s/ Terrence DeFranco		/s/ Lucas Hoppel
Terrence DeFranco		Lucas Hoppel
Arkados Group, Inc.
Chief Executive Officer

Exhibit 4.5

Arkados, INC.

FIRST AMENDMENT TO Convertible PROMISSORY NOTE

THIS FIRST AMENDMENT TO CONVERTIBLE PROMISSORY NOTE (this “ Agreement ”) is made and entered into as of January 27, 2017 (the “ Effective Date ”), by and between Arkados Group, Inc., a Delaware corporation (the “ Company ”), and Lucas Hoppel (the “ Purchaser ”). Initially capitalized terms not otherwise defined herein shall have the meaning set forth in the Note (defined herein).

RECITALS

A. The Company and the Purchaser are parties to that certain Securities Purchase Agreement dated as of October 28, 2016 (the “ Purchase Agreement ”).

B. In connection to the Purchase Agreement, the Purchaser purchased a convertible promissory note from the Company in the aggregate original principal amount of $38,500 dated as of October 28, 2016 (the “ Note ”).

C. Pursuant to Section 1(a) of the Note, the Maturity Date may be extended at the option of the Purchaser in the event that, and for so long as, an Event of Default shall not have occurred and be continuing on the Maturity Date or any event shall not have occurred and be continuing on the Maturity Date that with the passage of time and the failure to cure would result in an Event of Default.

D. Pursuant to Section 2.6 of the Purchase Agreement, no provision of the Notes shall be waived or amended other than an instrument in writing signed by the Purchaser.

C. The Company and Purchaser, in connection to his financial interest in the Company as the holder of 20,000 restricted shares of the Company’s common stock, hereby desires to amend certain terms of the Note as set forth below.

AGREEMENT

In consideration of the foregoing recitals and the mutual promises and covenants contained herein, the parties, intending to be legally bound, hereby agree as follows:

1. Amendment to the Definition of the Maturity Date. Notwithstanding anything to the contrary in the Note issued thereunder prior to the date of this Agreement, all references to the date of “January 30 ^th , 2017” throughout the Note, shall be amended, restated and replaced in its entirety by the following date: “March 31 ^st , 2017.”

2. Waiver of Event of Default . If applicable, the Purchaser hereby waives any Event of Default (as defined under the Note) for the Company’s failure to observe or perform any other covenant, obligation, condition or agreement contained in the Purchaser’s Note or Purchase Agreement if such breach occurred prior to the date of this Agreement.

3. Reaffirmation . Except as expressly provided herein, the undersigned agree that all of the terms, covenants, conditions, restrictions and other provisions contained in the Note shall remain in full force and effect.

4. Entire Agreement . This Amendment, together with the Purchase Agreement and the Note, contains the entire agreement of the parties and supersedes any prior or contemporaneous written or oral agreements between them concerning the subject matter of this Amendment.

5. Counterparts . This Amendment may be executed in counterparts, each of which shall be an original and all of which, taken together, shall constitute a single instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date and year first above written.

	COMPANY

	Arkados Group, Inc.,
	a Delaware corporation

	By:	/s/ Terrence DeFranco
	Name:	Terrence DeFranco
	Title:	CEO

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date and year first above written

	PURCHASER

	If an entity:



	By:
	Name:
	Title:

	Address:

	Facsimile:
	Email:

	If an individual:

	/s/ Lucas Hoppel

	Name:	Lucas Hoppel

	Address:

	Facsimile:
	Email:

Exhibit 4.6

AMENDMENT #2

TO THE SECURITIES PURCHASE AGREEMENT AND $38,500 PROMISSORY NOTE DATED
OCTOBER 28, 2016 AND THE AMENDMENT DATED JANUARY 27 ^TH , 2017.

Maturity Date: The Maturity Date shall be extended to April 21 ^st , 2017.

Inducement Shares: The Holder will receive an additional 27,398 shares of the Company ’ s restricted common shares.

Conversion Price: The Conversion Price in Section 3(a)(ii) of the Promissory Note shall permanently be changed to a fixed price equaling $0.60 (sixty) cents.

ALL OTHER TERMS AND CONDITIONS OF THE $38,500 PROMISSORY NOTE REMAIN IN FULL FORCE AND EFFECT.

Please indicate acceptance and approval of this amendment dated March 31st, 2017 by signing below:

/s/ Terrence DeFranco		/s/ Lucas Hoppel
Terrence DeFranco		Lucas Hoppel
Arkados Group, Inc.
Chief Executive Officer

Exhibit 4.7

NEITHER THIS NOTE NOR THE SECURITIES THAT MAY BE ISSUED BY THE COMPANY UPON CONVERSION HEREOF (COLLECTIVELY, THE “SECURITIES”) HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THE SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED: (I) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, OR APPLICABLE STATE SECURITIES LAWS; OR (II) IN THE ABSENCE OF AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR; (III) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE 1933 ACT.

10% CONVERTIBLE PROMISSORY NOTE

MATURITY DATE OF OCTOBER 1, 2017 *THE “MATURITY DATE”

$125,000 FEBRUARY 1, 2017 *THE “ISSUANCE DATE”

PRINCIPAL AMOUNT: $125,000

PURCHASE PRICE: $116,000

FOR VALUE RECEIVED , Arkados Group, Inc., a Delaware Corporation (the “ Company ”) doing business in Newark, NJ, hereby promises to pay to the order of JSJ Investments Inc., an accredited investor and Texas Corporation, or its assigns (the “ Holder ”), the principal amount of One Hundred and Twenty Five Thousand Dollars ($125,000) (“ Note ”), on demand of the Holder at any time on or after October 1, 2017 (the “ Maturity Date ”), and to pay interest on the unpaid principal balance hereof at the rate of Ten Percent (10%) per annum (the “ Interest Rate ”) commencing on the date hereof (the “ Issuance Date ”).

The Principal Amount is One Hundred and Twenty Five Thousand Dollars ($125,000) and the consideration paid by the Holder is One Hundred and Sixteen Thousand Dollars ($116,000) (the “Consideration”); there exists an original issue discount of $9,000 (the “OID”)).

Payments of Principal and Interest .

Pre-Payment and Payment of Principal and Interest . The Company may pay this Note in full, together with any and all accrued and unpaid interest, plus any applicable pre-payment premium set forth herein and subject to the terms of this Section 1.a, at any time on or prior to the date which occurs 180 days after the Issuance Date hereof (the “Prepayment Date”). In the event the Note is not prepaid in full on or before the Prepayment Date, it shall be deemed a “Pre-Payment Default” hereunder. Until the Thirtieth (30 ^th ) day after the Issuance Date, the Company may pay the principal at a cash redemption premium of 115%, in addition to outstanding interest, without the Holder’s consent; from the 31 ^st day to the Ninetieth (90 ^th ) day after the Issuance Date the Company may pay the principal at a cash redemption premium of 125%, in addition to outstanding interest, without the Holder’s consent; from the 91 ^st day to the One Hundred and Twentieth (120 ^th ) day after the Issuance Date, the Company may pay the principal at a cash redemption premium of 130%, in addition to outstanding interest, without the Holder’s consent; from the 121 ^st day to the Prepayment Date, the Company may pay the principal at a cash redemption premium of 135%, in addition to outstanding interest, without the Holder’s consent. After the Prepayment Date up to the Maturity Date this Note shall have a cash redemption premium of 140% of the then outstanding principal amount of the Note, plus accrued interest and Default Interest, if any, which may only be paid by the Company upon Holder’s prior written consent. At any time on or after the Maturity Date, the Company may repay the then outstanding principal plus accrued interest and Default Interest (defined below), if any, to the Holder.

Demand of Repayment . The principal and interest balance of this Note shall be paid to the Holder hereof on demand by the Holder at any time on or after the Maturity Date. The Default Amount (defined herein), if applicable, shall be paid to Holder hereof on demand by the Holder at any time such Default Amount becomes due and payable to Holder.

Interest . This Note shall bear interest (“ Interest ”) at the rate of Ten Percent (10%) per annum from the Issuance Date until the same is paid, or otherwise converted in accordance with Section 2 below, in full and the Holder, at the Holder’s sole discretion, may include any accrued but unpaid Interest in the Conversion Amount. Interest shall commence accruing on the Issuance Date, shall be computed on the basis of a 365-day year and the actual number of days elapsed and shall accrue daily and, after the Maturity Date, compound quarterly. Upon an Event of Default, as defined in Section 10 below, the Interest Rate shall increase to Eighteen Percent (18%) per annum for so long as the Event of Default is continuing (“ Default Interest ”).

General Payment Provisions . This Note shall be paid in lawful money of the United States of America by check or wire transfer to such account as the Holder may from time to time designate by written notice to the Company in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day (as defined below), the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. For purposes of this Note, “ Business Day ” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the State of Texas are authorized or required by law or executive order to remain closed.

Conversion of Note . . In accordance with the terms of subsection 2(b) below, the Conversion Amount (see Paragraph 2(a)(i)) of this Note shall be convertible into shares of the Company’s common stock (the “ Common Stock ”) according to the terms and conditions set forth in this Paragraph 2.

Certain Defined Terms . For purposes of this Note, the following terms shall have the following meanings:

“ Conversion Amount ” means the sum of (a) the principal amount of this Note to be converted with respect to which this determination is being made, (b) Interest; and (c) Default Interest, if any, if so included at the Holder’s sole discretion.

ii.

“ Conversion Price ” means: Upon the occurrence of a Pre-payment Default or an Event of Default, a 40% discount to the lowest trading price during the previous twenty (20) trading days to the date of a Conversion Notice.

iii.

“ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

iv.

“ Shares ” means the Shares of the Common Stock of the Company into which any balance on this Note may be converted upon submission of a “ Conversion Notice ” to the Company substantially in the form attached hereto as Exhibit 1.

Holder’s Conversion Rights . The Holder shall be entitled to convert all of the outstanding and unpaid principal and accrued interest of this Note into fully paid and non-assessable shares of Common Stock in accordance with the stated Conversion Price commencing on the date that is 180 days from the date hereof, except that upon the occurrence of an Organic Change, as defined in Section 3 below, or an Event of Default, as defined in Section 10(a) below, the Note will become immediately convertible. The Holder shall not be entitled to convert on a Conversion Date that amount of the Note in connection with that number of shares of Common Stock which would be in excess of the sum of the number of shares of Common Stock issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to aggregate conversions of 4.99% (“Conversion Limitation 1”). The Holder shall have the authority to determine whether the restriction contained in this Section 2(b) will limit any conversion hereunder. The Holder may waive the conversion limitation described in this Section 2(b), in whole or in part, upon and effective after 61 days prior written notice to the Company to increase or decrease such percentage to any other amount as determined by Holder in its sole discretion (“Conversion Limitation 2”).

Fractional Shares . The Company shall not issue any fraction of a share of Common Stock upon any conversion; if such issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share except in the event that rounding up would violate the conversion limitation set forth in section 2(b) above.

Conversion Amount . The Conversion Amount shall be converted pursuant to Rule 144(b)(1)(ii) and Rule 144(d)(1)(ii) as promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended, into unrestricted shares at the Conversion Price.

Mechanics of Conversion . The conversion of this Note shall be conducted in the following manner:

Holder’s Conversion Requirements . To convert this Note into shares of Common Stock on any date set forth in the Conversion Notice by the Holder (the “ Conversion Date ”), the Holder shall transmit by email, facsimile or otherwise deliver, for receipt on or prior to 11:59 p.m., Eastern Time, on such date or on the next business day, a copy of a fully executed notice of conversion in the form attached hereto as Exhibit 1 to the Company.

ii.

Company’s Response . Upon receipt by the Company of a copy of a Conversion Notice, the Company shall as soon as practicable, but in no event later than one (1) Business Day after receipt of such Conversion Notice, send, via email, facsimile or overnight courier, a confirmation of receipt of such Conversion Notice to such Holder indicating that the Company will process such Conversion Notice in accordance with the terms herein. Within two (2) Business Days after the date the Conversion Notice is delivered, the Company shall have issued and electronically transferred the shares to the Broker indicated in the Conversion Notice; should the Company be unable to transfer the shares electronically, it shall, within two (2) Business Days after the date the Conversion Notice was delivered, have surrendered to an overnight courier for delivery the next day to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder, for the number of shares of Common Stock to which the Holder shall be entitled.

iii.

Record Holder . The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

iv.

Timely Response by Company . Upon receipt by Company of a Conversion Notice, Company shall respond within one business day to Holder confirming the details of the Conversion, and provide within two business days the Shares requested in the Conversion Notice.

Liquidated Damages for Delinquent Response . If the Company fails to deliver for whatever reason (including any neglect or failure by, e.g., the Company, its counsel or the transfer agent) to Holder the Shares as requested in a Conversion Notice within three (3) business days of the Conversion Date, the Company shall be deemed in “ Default of Conversion .” Beginning on the fourth (4 ^th ) business day after the date of the Conversion Notice, after the Company is deemed in Default of Conversion, there shall accrue liquidated damages (the “ Conversion Damages ”) of Additional Shares due to Holder equal to Twenty-Five percent (25%) of the number stated in the Conversion Notice and for every five (5) Trading Days while a Default of Conversion is in effect and continuing the Company shall continue to incur a Conversion Penalty in the amount of Twenty-Five percent (25%) of the number of shares stated in the Conversion Notice issuable to Holder (the “ Additional Shares ”), which may be applied to the Conversion at the Holder’s election. The Additional Shares shall be issued and the amount of the Note retired will not be reduced beyond that stated in the Conversion Notice. If the Additional Shares owed the Holder cause the Shares requested by the Conversion Notice to exceed Conversion Limitation 1 or Conversion Limitation 2, as applicable, the Holder may opt instead to have the Conversion Amount reduced by the value, as calculated using the Conversion Price, of the Additional Shares owing to Holder pursuant to this Section 2(e)(v). At any time after a Default of Conversion the Holder may, at their sole discretion, rescind the Conversion The Parties agree that, at the time of drafting of this Note, the Holder’s damages as to the delinquent response are incapable or difficult to estimate and that the liquidated damages called for is a reasonable forecast of just compensation.

vi.

Liquidated Damages for Inability to Issue Shares . If the Company fails to deliver Shares requested by a Conversion Notice due to an exhaustion of authorized and issuable common stock such that the Company must increase the number of shares of authorized Common Stock before the Shares requested may be issued to the Holder, the discount set forth in the Conversion Price will be increased by 5 percentage points (i.e. from 40% to 45%) for the Conversion Notice in question and all future Conversion Notices until the outstanding principal and interest of the Note is converted or paid in full. These liquidated damages shall not render the penalties prescribed by Paragraph 2(e)(v) void, and shall be applied in conjunction with Paragraph 2(e)(v) unless otherwise agreed to in writing by the Holder. The Parties agree that, at the time of drafting of this Note, the Holder’s damages as to the inability to issue shares are incapable or difficult to estimate and that the liquidated damages called for is a reasonable forecast of just compensation.

vii.

Rescindment of Conversion Notice . If: (i) the Company fails to respond to Holder within one business day from the date of delivery of a Conversion Notice confirming the details of the Conversion, (ii) the Company fails to provide the Shares requested in the Conversion Notice within three business days from the date of the delivery of the Conversion Notice, (iii) the Holder is unable to procure a legal opinion required to have the Shares issued unrestricted and/or deposited to sell for any reason related to the Company's standing with the SEC or FINRA, or any action or inaction by the Company, (iv) the Holder is unable to deposit the Shares requested in the Conversion Notice for any reason related to the Company's standing with the SEC or FINRA, or any action or inaction by the Company, (v) if the Holder is informed that the Company does not have the authorized and issuable Shares available to satisfy the Conversion, or (vi) if OTC Markets changes the Company's designation to 'Limited Information' (Yield), 'No Information' (Stop Sign), 'Caveat Emptor' (Skull and Crossbones), or 'OTC', 'Other OTC' or 'Grey Market' (Exclamation Mark Sign) on the day of or any day after the date of the Conversion Notice, the Holder maintains the option and sole discretion to rescind the Conversion Notice (" Rescindment ") by delivering a notice of rescindment to the Company in the same manner that a Conversion Notice is required to be delivered to the Company pursuant to the terms of this Note.

viii.

Transfer Agent Fees and Legal Fees . The issuance of the certificates shall be without charge or expense to the Holder. The Company shall pay any and all Transfer Agent fees, legal fees, and advisory fees required for execution of this Note and processing of any Notice of Conversion, including but not limited to the cost of obtaining a legal opinion with regard to the Conversion. The Holder will deduct $3,000 from the principal payment of the Note solely to cover the cost of obtaining any and all legal opinions required to obtain the Shares requested in any given Conversion Notice. These fees do not make provision for or suffice to defray any legal fees incurred in collection or enforcement of the Note as described in Paragraph 13.

ix.

Conversion Right Unconditional . If the Holder shall provide a Notice of Conversion as provided herein, the Company’s obligations to deliver Common Stock shall be absolute and unconditional, irrespective of any claim of setoff, counterclaim, recoupment, or alleged breach by the Holder of any obligation to the Company.

Other Rights of Holder : Reorganization, Reclassification, Consolidation, Merger or Sale. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company’s assets to another Person or other transaction which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities, cash or other assets with respect to or in exchange for Common Stock is referred to herein as “ Organic Change .” Prior to the consummation of any (i) Organic Change or (ii) other Organic Change following which the Company is not a surviving entity, the Company will secure from the Person purchasing such assets or the successor resulting from such Organic Change (in each case, the “ Acquiring Entity ”) a written agreement (in form and substance reasonably satisfactory to the Holder) to deliver to Holder in exchange for this Note, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to this Note, and reasonably satisfactory to the Holder. Prior to the consummation of any other Organic Change, the Company shall make appropriate provision (in form and substance reasonably satisfactory to the Holder) to ensure that the Holder will thereafter have the right to acquire and receive in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of the Note, such shares of stock, securities, cash or other assets that would have been issued or payable in such Organic Change with respect to or in exchange for the number of shares of Common Stock which would have been acquirable and receivable upon the conversion of the Note as of the date of such Organic Change (without taking into account any limitations or restrictions on the convertibility of the Note set forth in Section 2(b) or otherwise). All provisions of this Note must be included to the satisfaction of Holder in any new Note created pursuant to this section.

Representations and Warranties of the Company . In connection with the transactions provided for herein, the Company hereby represents and warrants to the Holder the following:

Organization, Good Standing and Qualification . The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.

Authorization . All corporate action has been taken on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement. The Company has taken all corporate action required to make all of the obligations of the Company reflected in the provisions of this Agreement, valid and enforceable obligations. The shares of capital stock issuable upon conversion of the Note have been authorized or will be authorized prior to the issuance of such shares.

Fiduciary Obligations . The Company hereby represents that it intends to use the proceeds of the Note primarily for the operations of its business and not for any personal, family, or household purpose. The Company hereby represents that its board of directors, in the exercise of its fiduciary duty, has approved the execution of this Agreement based upon a reasonable belief that the proceeds of the Note provided for herein is appropriate for the Company after reasonable inquiry concerning its financial objectives and financial situation.

Data Request Form . The Company hereby represents and warrants to Holder that all of the information furnished to Holder pursuant to the data request form (“ DRF ”) dated January 24, 2017 is true and correct in all material respects as of the date hereof.

Covenants of the Company .

So long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s prior written consent pay, declare or set apart for such payment any dividend or other distribution (whether in cash, property, or other securities) on shares of capital stock solely in the form of additional shares of Common Stock

So long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s prior written consent redeem, repurchase, or otherwise acquire (whether for cash or in exchange for property or other securities) in any one transaction or series of transactions any shares of capital stock of the Company or any warrants, rights, or options to acquire any such shares.

So long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s prior written consent incur any liability for borrowed money, except (a) borrowings in existence as of this date and of which the Company has informed the Holder in writing before the date hereof or (b) indebtedness to trade creditors or financial institutions incurred in the ordinary course of business.

So long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s prior written consent sell, lease, or otherwise dispose of a significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned upon a specified use of the proceeds thereof.

Issuance of Common Stock Equivalents . If the Company, at any time after the Issuance Date, shall issue any securities convertible into or exchangeable for, directly or indirectly, Common Stock (“ Convertible Securities ”), other than the Note, or any rights or warrants or options to purchase any such Common Stock or Convertible Securities, shall be issued or sold (collectively, the “ Common Stock Equivalents ”) and the aggregate of the price per share for which additional Shares of Common Stock may be issuable thereafter pursuant to such Common Stock Equivalent, plus the consideration received by the Company for issuance of such Common Stock Equivalent divided by the number of shares of Common Stock issuable pursuant to such Common Stock Equivalent (the “ Aggregate Per Common Share Price ”) shall be less than the applicable Conversion Price then in effect, or if, after any such issuance of Common Stock Equivalents, the price per share for which additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall make the Aggregate Per Share Common Price be less than the applicable Conversion Price in effect at the time of such amendment or adjustment, then the applicable Conversion Price upon each such issuance or amendment shall be reduced to the lower of: (i) the Conversion Price; or (ii) a twenty-five percent (25%) discount to the lowest Aggregate Per Common Share Price (whether or not such Common Stock Equivalents are actually then exercisable, convertible or exchangeable in whole or in part) as of the earlier of (A) the date on which the Company shall enter into a firm contract for the issuance of such Common Stock Equivalent, or (B) the date of actual issuance of such Common Stock Equivalent. No adjustment of the applicable Conversion Price shall be made under this Section 6 upon the issuance of any Convertible Security which is outstanding on the day immediately preceding the Issuance Date.

Reservation of Shares . The Company shall at all times, so long as any principal amount of the Note is outstanding, reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Note, eight times the number of shares of Common Stock as shall at all times be sufficient to effect the conversion of all of the principal amount, plus Interest and Default Interest, if any, of the Note then outstanding (“ Share Reserve ”), unless the Holder stipulates otherwise in the “ Irrevocable Letter of Instructions to the Transfer Agent .” So long as this Note is outstanding, upon written request of the Holder or via telephonic communication, the Company’s Transfer Agent shall furnish to the Holder the then-current number of common shares issued and outstanding, the then-current number of common shares authorized, the then-current number of unrestricted shares, and the then-current number of shares reserved for third parties.

Voting Rights . The Holder of this Note shall have no voting rights as a note holder, except as required by law, however, upon the conversion of any portion of this Note into Common Stock, Holder shall have the same voting rights as all other Common Stock holders with respect to such shares of Common Stock then owned by Holder.

Reissuance of Note . In the event of a conversion or redemption pursuant to this Note of less than all of the Conversion Amount represented by this Note, the Company shall promptly cause to be issued and delivered to the Holder, upon tender by the Holder of the Note converted or redeemed, a new note of like tenor representing the remaining principal amount of this Note which has not been so converted or redeemed and which is in substantially the same form as this Note, as set forth above.

10.

Default and Remedies .

Event of Default . For purposes of this Note, an “ Event of Default ” shall occur upon:

the Company’s default in the payment of the outstanding principal, Interest or Default Interest of this Note when due, whether at Maturity, acceleration or otherwise;

ii.

the occurrence of a Default of Conversion as set forth in Section 2(e)(v);

iii.

the failure by the Company for ten (10) days after notice to it to comply with any material provision of this Note not included in this Section 10(a);

iv.

the Company’s breach of any covenants, warranties, or representations made by the Company herein;

any of the information in the DRF is false or misleading in any material respect;

vi.

the default by the Company in any Other Agreement entered into by and between the Company and Holder, for purposes hereof “Other Agreement” shall mean, collectively, all agreements and instruments between, among or by: (1) the Company, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including without limitation, promissory notes;

vii.

the cessation of operations of the Company or a material subsidiary;

viii.

the Company pursuant to or within the meaning of any Bankruptcy Law; (a) commences a voluntary case; (b) consents to the entry of an order for relief against it in an involuntary case; (c) consents to the appointment of a Custodian of it or for all or substantially all of its property; (d) makes a general assignment for the benefit of its creditors; or (e) admits in writing that it is generally unable to pay its debts as the same become due;

ix.

court of competent jurisdiction entering an order or decree under any Bankruptcy Law that: (a) is for relief against the Company in an involuntary case; (b) appoints a Custodian of the Company or for all or substantially all of its property; or (c) orders the liquidation of the Company or any subsidiary, and the order or decree remains unstayed and in effect for thirty (30) days;

the Company files a Form 15 with the SEC;

xi.

the Company’s failure to timely file all reports required to be filed by it with the Securities and Exchange Commission;

xii.

the Company’s failure to timely file all reports required to be filed by it with OTC Markets to remain a “Current Information” designated company;

xiii.

the Company sells securities after the Issuance Date that do not have a fixed conversion price;

xiv.

the Company’s Common Stock is reported as “No Inside” by OTC Markets at any time while any principal, Interest or Default Interest under the Note remains outstanding;

xv.

the Company’s failure to maintain the required Share Reserve pursuant to the terms of the Irrevocable Letter of Instructions to the Transfer Agent;

xvi.

the Company directs its transfer agent not to transfer, or delays, impairs, or hinders its transfer agent in transferring or issuing (electronically or in certificated form) any certificate for Shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw and stop transfer instructions) on any certificate for any Shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor its obligations pursuant to a Conversion Notice submitted by the Holder) and any such failure shall continue uncured for three (3) Business Days after the Conversion Notice has been delivered to the Company by Holder;

xvii.

the Company’s failure to remain current in its billing obligations with its transfer agent and such delinquency causes the transfer agent to refuse to issue Shares to Holder pursuant to a Conversion Notice;

xviii.

the Company effectuates a reverse split of its Common Stock and fails to provide twenty (20) days prior written notice to Holder of its intention to do so; or

xix.

OTC Markets changes the Company's designation to 'No Information' (Stop Sign), 'Caveat Emptor' (Skull and Crossbones), or 'OTC', 'Other OTC' or 'Grey Market' (Exclamation Mark Sign).

xx.

"Change of Control Transaction" means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the Securities Exchange Act of 1934) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 40% of the voting securities of the Company, (b) the Company merges into or consolidates with any other Person, as that term is defined in the Securities Act of 1933, as amended, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 60% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 60% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Issuance Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to which the Company is a party or by which it is bound.

xxi.

Altering the conversion terms of any notes that are currently outstanding.

The Term “ Bankruptcy Law ” means Title 11, U.S. Code, or any similar Federal or State Law for the relief of debtors. The term “ Custodian ” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

Remedies . If an Event of Default occurs, the Holder may in its sole discretion determine to request immediate repayment of all or any portion of the Note that remains outstanding; at such time the Company will be required to pay the Holder the Default Amount (defined herein) in cash. For purposes hereof, the “ Default Amount ” shall mean: the product of (A) the then outstanding principal amount of the Note, plus accrued Interest and Default Interest, divided by (B) the Conversion Price as determined on the Issuance Date, multiplied by (C) the highest price at which the Common Stock traded at any time between the Issuance Date and the date of the Event of Default. If the Company fails to pay the Default Amount within five (5) Business Days of written notice that such amount is due and payable, then Holder shall have the right at any time, so long as the Company remains in default (and so long and to the extent there are a sufficient number of authorized but unissued shares), to require the Company, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Company equal to the Default Amount divided by the Conversion Price then in effect.

11.

Vote to Change the Terms of this Note . This Note and any provision hereof may only be amended by an instrument in writing signed by the Company and the Holder.

12.

Lost or Stolen Note . Upon receipt by the Company of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of an indemnification undertaking by the Holder to the Company in a form reasonably acceptable to the Company and, in the case of mutilation, upon surrender and cancellation of the Note, the Company shall execute and deliver a new Note of like tenor and date and in substantially the same form as this Note; provided, however, the Company shall not be obligated to re-issue a Note if the Holder contemporaneously requests the Company to convert such remaining principal amount, plus accrued Interest and Default Interest, if any, into Common Stock.

13.

Payment of Collection, Enforcement and Other Costs . If: (i) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding; or (ii) an attorney is retained to represent the Holder of this Note in any bankruptcy, reorganization, receivership or other proceedings affecting creditors’ rights and involving a claim under this Note, then the Company shall pay to the Holder all reasonable attorneys’ fees, costs and expenses incurred in connection therewith, in addition to all other amounts due hereunder.

14.

Cancellation . After all principal, accrued Interest and Default Interest, if any, at any time owed on this Note has been paid in full or otherwise converted in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.

15.

Waiver of Notice . To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note.

16.

Governing Law . This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the laws of the State of Texas, without giving effect to provisions thereof regarding conflict of laws. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in Texas for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by sending, through certified mail or overnight courier, a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

17.

Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief . The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including a decree of specific performance and/or other injunctive relief), and no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder’s right to pursue actual damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder thereof and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).

18.

Specific Shall Not Limit General; Construction . No specific provision contained in this Note shall limit or modify any more general provision contained herein. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any person as the drafter hereof.

19.

Failure or Indulgence Not Waiver . No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude further exercise thereof or of any other right, power or privilege.

20.

Partial Payment . In the event of partial payment by the Holder, the principal sum due to the Holder shall be prorated based on the consideration actually paid by the Holder such that the Company is only required to repay the amount funded and the Company is not required to repay any unfunded portion of this Note, with the exception of any OID contemplated herein.

21.

Entire Agreement . This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects herein. None of the terms of this Agreement can be waived or modified, except by an express agreement signed by all Parties hereto.

22.

Additional Representations and Warranties . The Company expressly acknowledges that the Holder, including but not limited to its officer, directors, employees, agents, and affiliates, have not made any representation or warranty to it outside the terms of this Agreement. The Company further acknowledges that there have been no representations or warranties about future financing or subsequent transactions between the parties.

23.

Notices . All notices and other communications given or made to the Company pursuant hereto shall be in writing (including facsimile or similar electronic transmissions) and shall be deemed effectively given: (i) upon personal delivery, (ii) when sent by electronic mail or facsimile, as deemed received by the close of business on the date sent, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery. All communications shall be sent either by email, or fax, or to the email address or facsimile number set forth on the signature page hereto. The physical address, email address, and phone number provided on the signature page hereto shall be considered valid pursuant to the above stipulations; should the Company’s contact information change from that listed on the signature page, it is incumbent on the Company to inform the Holder.

24.

Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the rest of the Agreement shall be enforceable in accordance with its terms.

25.

Usury . If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal, Interest or Default Interest on this Note.

26.

Successors and Assigns . This Agreement shall be binding upon all successors and assigns hereto.

— SIGNATURE PAGE TO FOLLOW —

IN WITNESS WHEREOF , the Company has caused this Note to be signed by its CEO, on and as of the Issuance Date.

COMPANY

Signature:	/s/ Terrence Defranco

By:	Terrence Defranco

Title:	Chief Executive Officer

Address:	211 Warren street, Suite 320

	Newark, NJ 07103



Email:

Phone:

Facsimile:

JSJ Investments Inc.

Signature:

/s/ Sameer Hirji

Sameer Hirji, President
JSJ Investments Inc.
10830 North Central Expressway, Suite 152
Dallas TX 75231
888-503-2599

Exhibit 1

Conversion Notice

Reference is made to the 10% Convertible Note issued by Arkados Group, Inc. (the "Note"), dated February 1, 2017 in the principal amount of $125,000 with 10% interest. This note currently holds a principal balance of $125,000. Upon the occurrence of a Pre-payment Default or an Event of Default, the features of conversion stipulate a Conversion Price equal to a 40% discount to the lowest trading price during the previous twenty (20) trading days to the date of a Conversion Notice, pursuant to the provisions of Section 2(a)(ii) in the Note.

In accordance with and pursuant to the Note, the undersigned hereby elects to convert $______ of the principal/interest balance of the Note, indicated below into shares of Common Stock (the "Common Stock"), of the Company, by tendering the Note specified as of the date specified below.

Date of Conversion: __________

Please confirm the following information:

Conversion Amount: $ ____________________

Conversion Price: $ ____________________ ( ____ % discount from $ ____________________)

Number of Common Stock to be issued:
Current Issued/Outstanding:

If the Issuer is DWAC eligible, please issue the Common Stock into which the Note is being converted in the name of the Holder of the Note and transfer the shares electronically to:

[BROKER INFORMATION]

Holder Authorization:

JSJ Investments Inc.

10830 North Central Expressway, Suite 152 * Do not send certificates to this address

Dallas, TX 75231

888-503-2599

Tax ID: 20-2122354

Sameer Hirji, President

[DATE]

[CONTINUED ON NEXT PAGE]

PLEASE BE ADVISED , pursuant to Section 2(e)(ii) of the Note, “Upon receipt by the Company of a copy of the Conversion Notice, the Company shall as soon as practicable, but in no event later than one (1) Business Day after receipt of such Conversion Notice, SEND, VIA EMAIL, FACSIMILE OR OVERNIGHT COURIER, A CONFIRMATION OF RECEIPT OF SUCH CONVERSION NOTICE TO SUCH HOLDER INDICATING THAT THE COMPANY WILL PROCESS SUCH CONVERSION NOTICE in accordance with the terms herein. Within two (2) Business Days after the date of the Conversion Confirmation, the Company shall have issued and electronically transferred the shares to the Broker indicated in the Conversion Notice; should the Company be unable to transfer the shares electronically, they shall, within two (2) Business Days after the date of the Conversion Confirmation, have surrendered to FedEx for delivery the next day to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder, for the number of shares of Common Stock to which the Holder shall be entitled.”

Signature:


Terrence DeFranco
CEO
Arkados Group, Inc.

Exhibit 4.8

10% CONVERTIBLE PROMISSORY NOTE

Maturity Date of November 3, 2017 *the “Maturity Date”

$103,000 March 3, 2017 *the “Issuance Date”

FOR VALUE RECEIVED , Arkados Group, Inc., a Delaware Corporation (the “ Company ”) doing business in Newark, NJ, hereby promises to pay to the order of JSJ Investments Inc., an accredited investor and Texas Corporation, or its assigns (the “ Holder ”), the principal amount of One Hundred and Three Thousand Dollars ($103,000) (“ Note ”), on demand of the Holder at any time on or after November 3, 2017 (the “ Maturity Date ”), and to pay interest on the unpaid principal balance hereof at the rate of Ten Percent (10%) per annum (the “ Interest Rate ”) commencing on the date hereof (the “ Issuance Date ”).

Payments of Principal and Interest .

Certain Defined Terms . For purposes of this Note, the following terms shall have the following meanings:

ii.

iii.

iv.

Holder’s Conversion Rights . The Holder shall be entitled to convert all of the outstanding and unpaid principal and accrued interest of this Note into fully paid and non-assessable shares of Common Stock in accordance with the stated Conversion Price commencing on the date that is 180 days from the date hereof, except that upon the occurrence of an Organic Change, as defined in Section 3 below, or an Event of Default, as defined in Section 10(a) below, the Note will become immediately convertible. The Holder shall not be entitled to convert on a Conversion Date that amount of the Note in connection with that number of shares of Common Stock which would be in excess of the sum of the number of shares of Common Stock issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to aggregate conversions of 4.99% (“Conversion Limitation 1”). The Holder shall have the authority to determine whether the restriction contained in this Section 2(b) will limit any conversion hereunder. The Holder may waive the conversion limitation described in this Section 2(b) , in whole or in part, upon and effective after 61 days prior written notice to the Company to increase or decrease such percentage to any other amount as determined by Holder in its sole discretion (“Conversion Limitation 2”).

Mechanics of Conversion . The conversion of this Note shall be conducted in the following manner:

ii.

iii.

iv.

Liquidated Damages for Delinquent Response . If the Company fails to deliver for whatever reason (including any neglect or failure by, e.g., the Company, its counsel or the transfer agent) to Holder the Shares as requested in a Conversion Notice within three (3) business days of the Conversion Date, the Company shall be deemed in “ Default of Conversion .” Beginning on the fourth (4 ^th ) business day after the date of the Conversion Notice, after the Company is deemed in Default of Conversion, there shall accrue liquidated damages (the “ Conversion Damages ”) of Additional Shares due to Holder equal to Twenty-Five percent (25%) of the number stated in the Conversion Notice and for every five (5) Trading Days while a Default of Conversion is in effect and continuing the Company shall continue to incur a Conversion Penalty in the amount of Twenty-Five percent (25%) of the number of shares stated in the Conversion Notice issuable to Holder (the “ Additional Shares ”), which may be applied to the Conversion at the Holder’s election. The Additional Shares shall be issued and the amount of the Note retired will not be reduced beyond that stated in the Conversion Notice. If the Additional Shares owed the Holder cause the Shares requested by the Conversion Notice to exceed Conversion Limitation 1 or Conversion Limitation 2, as applicable, the Holder may opt instead to have the Conversion Amount reduced by the value, as calculated using the Conversion Price, of the Additional Shares owing to Holder pursuant to this Section 2(e)(v). At any time after a Default of Conversion the Holder may, at their sole discretion, rescind the Conversion The Parties agree that, at the time of drafting of this Note, the Holder’s damages as to the delinquent response are incapable or difficult to estimate and that the liquidated damages called for is a reasonable forecast of just compensation.

vi.

vii.

viii.

ix.

Representations and Warranties of the Company . In connection with the transactions provided for herein, the Company hereby represents and warrants to the Holder the following:

Covenants of the Company .

Issuance of Common Stock Equivalents . If the Company, at any time after the Issuance Date, shall issue any securities convertible into or exchangeable for, directly or indirectly, Common Stock (“ Convertible Securities ”), other than the Note, or any rights or warrants or options to purchase any such Common Stock or Convertible Securities, shall be issued or sold (collectively, the “ Common Stock Equivalents ”) and the aggregate of the price per share for which additional Shares of Common Stock may be issuable thereafter pursuant to such Common Stock Equivalent, plus the consideration received by the Company for issuance of such Common Stock Equivalent divided by the number of shares of Common Stock issuable pursuant to such Common Stock Equivalent (the “ Aggregate Per Common Share Price ”) shall be less than the applicable Conversion Price then in effect, or if, after any such issuance of Common Stock Equivalents, the price per share for which additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall make the Aggregate Per Share Common Price be less than the applicable Conversion Price in effect at the time of such amendment or adjustment, then the applicable Conversion Price upon each such issuance or amendment shall be reduced to the lower of: (i) the Conversion Price; or (ii) a twenty-five percent (25%) discount to the lowest Aggregate Per Common Share Price (whether or not such Common Stock Equivalents are actually then exercisable, convertible or exchangeable in whole or in part) as of the earlier of (A) the date on which the Company shall enter into a firm contract for the issuance of such Common Stock Equivalent, or (B) the date of actual issuance of such Common Stock Equivalent. No adjustment of the applicable Conversion Price shall be made under this Section 6 upon the issuance of any Convertible Security which is outstanding on the day immediately preceding the Issuance Date.

10.

Default and Remedies .

Event of Default . For purposes of this Note, an “ Event of Default ” shall occur upon:

the Company’s default in the payment of the outstanding principal, Interest or Default Interest of this Note when due, whether at Maturity, acceleration or otherwise;

ii.

the occurrence of a Default of Conversion as set forth in Section 2(e)(v);

iii.

the failure by the Company for ten (10) days after notice to it to comply with any material provision of this Note not included in this Section 10(a);

iv.

the Company’s breach of any covenants, warranties, or representations made by the Company herein;

any of the information in the DRF is false or misleading in any material respect;

vi.

vii.

the cessation of operations of the Company or a material subsidiary;

viii.

ix.

the Company files a Form 15 with the SEC;

xi.

the Company’s failure to timely file all reports required to be filed by it with the Securities and Exchange Commission;

xii.

the Company’s failure to timely file all reports required to be filed by it with OTC Markets to remain a “Current Information” designated company;

xiii.

the Company sells securities after the Issuance Date that do not have a fixed conversion price;

xiv.

the Company’s Common Stock is reported as “No Inside” by OTC Markets at any time while any principal, Interest or Default Interest under the Note remains outstanding;

xv.

the Company’s failure to maintain the required Share Reserve pursuant to the terms of the Irrevocable Letter of Instructions to the Transfer Agent;

xvi.

xvii.

xviii.

the Company effectuates a reverse split of its Common Stock and fails to provide twenty (20) days prior written notice to Holder of its intention to do so; or

xix.

OTC Markets changes the Company's designation to 'No Information' (Stop Sign), 'Caveat Emptor' (Skull and Crossbones), or 'OTC', 'Other OTC' or 'Grey Market' (Exclamation Mark Sign).

xx.

xxi.

Altering the conversion terms of any notes that are currently outstanding.

11.

Vote to Change the Terms of this Note . This Note and any provision hereof may only be amended by an instrument in writing signed by the Company and the Holder.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

Successors and Assigns . This Agreement shall be binding upon all successors and assigns hereto.

— SIGNATURE PAGE TO FOLLOW —

IN WITNESS WHEREOF , the Company has caused this Note to be signed by its CEO, on and as of the Issuance Date.

COMPANY	Arkados Group, Inc.

Signature:	/s/ Terrence DeFranco

By:	Terrence DeFranco

Title:	Chief Executive Officer

Address:	211 Warren Street, Suite 320, Newark, NJ 07103



Email:	tmdefranco@arkadosgroup.com

Phone:	862-373-1983

Facsimile:

JSJ Investments Inc.

Signature:

/s/ Sameer Hirji

Sameer Hirji, President

JSJ Investments Inc.

10830 North Central Expressway, Suite 152

Dallas TX 75231

888-503-2599

Exhibit 1

Conversion Notice

Reference is made to the 10% Convertible Note issued by Arkados Group, Inc. (the "Note"), dated March 3, 2017 in the principal amount of $103,000 with 10% interest. This note currently holds a principal balance of $103,000. Upon the occurrence of a Pre-payment Default or an Event of Default, the features of conversion stipulate a Conversion Price equal to a 40% discount to the lowest trading price during the previous twenty (20) trading days to the date of a Conversion Notice, pursuant to the provisions of Section 2(a)(ii) in the Note.

Date of Conversion: __________

Please confirm the following information:

Conversion Amount: $ ____________________

Conversion Price: $ ____________________ ( ____ % discount from $ ____________________)

Number of Common Stock to be issued: _____________________________________________________________________

Current Issued/Outstanding: _______________________________________________________________________________

If the Issuer is DWAC eligible, please issue the Common Stock into which the Note is being converted in the name of the Holder of the Note and transfer the shares electronically to:

[BROKER INFORMATION]

Holder Authorization:

JSJ Investments Inc.

10830 North Central Expressway, Suite 152 * Do not send certificates to this address

Dallas, TX 75231

888-503-2599

Tax ID: 20-2122354

Sameer Hirji, President

[DATE]

[CONTINUED ON NEXT PAGE]

Signature:


Terrence DeFranco
CEO
Arkados Group, Inc.

Exhibit 4.9

Arkados, INC.

Form OF Second AMENDMENT TO PROMISSORY NOTE

THIS SECOND AMENDMENT TO PROMISSORY NOTE (this “ Amendment ”) is made and entered into as of ___________, 2017, by and between Arkados Group, Inc., a Delaware corporation (the “ Company ”), and (the “ Purchaser ”).

RECITALS

A. The Company sold, and the Purchaser purchased, a promissory note in the aggregate principal amount of $ from the Company reflected by its Promissory Note No. dated and amended on (the “ Note ”).

B. Pursuant to Section 2.3 of the Note, the terms of the Note may be amended by an instrument in writing signed by the Company and the Purchaser.

C. The Company and Purchaser, in connection to its financial interest in the Company as the holder of 416,667 shares of the Company’s common stock, hereby desires to amend certain terms of the Note as set forth below.

AGREEMENT

In consideration of the foregoing recitals and the mutual promises and covenants contained herein, the parties, intending to be legally bound, hereby agree as follows:

1. Amendment to the Title of the Note. The third line of the title of Note shall be amended, restated and replaced in its entirety as follows:

“DUE ”

2. Amendment to the First Sentence of the First Paragraph of the Note. The first sentence of the first paragraph of the Note shall be amended, restated and replaced in its entirety as follows:

“Arkados Group, Inc., a Delaware corporation (the “ Company ”) with principal offices at 211 Warren Street, Suite 320, Newark, NJ 07103, for value received, hereby promises to pay the registered holder hereof (the “Holder”) the principal sum set forth above on (the “ Maturity Date ”), in such coin or currency of the United States of America as at the time of payment shall be the legal tender for the payment of public and private debts, and to pay interest, less any amounts required by law to be deducted or withheld, computed on the basis of a 365-day year, on the unpaid principal balance hereof from the date hereof (the “ Original Issue Date ”), at the rate of 6% per year, compounded quarterly, until such principal sum shall have become due and payable.”

3. Effective Date . The Parties hereby agree that this Amendment shall be effective as of March 31, 2017.

4. Waiver of Event of Default . If applicable, the Purchaser hereby waives any Event of Default (as defined under the Note) for the Company’s failure to observe or perform any other covenant, obligation, condition or agreement contained in the Purchaser’s Note if such breach occurred prior to the date of this Amendment. For avoidance of doubt, the Note shall continue to bear interest at the rate of 6% per year and not the Default Interest rate, as defined in the Note.

5. Reaffirmation . Except as expressly provided herein, the undersigned agree that all of the terms, covenants, conditions, restrictions and other provisions contained in the Note shall remain in full force and effect.

6. Entire Agreement . This Amendment, together with the Note, contains the entire agreement of the parties and supersedes any prior or contemporaneous written or oral agreements between them concerning the subject matter of this Amendment.

7. Counterparts . This Amendment may be executed in counterparts, each of which shall be an original and all of which, taken together, shall constitute a single instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the date and year first above written.

	COMPANY

	Arkados Group, Inc.,
	a Delaware corporation

	By:
	Name:	Terrence DeFranco
	Title:	CEO

IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the date and year first above written

	PURCHASER


	[Name of Noteholder}

	Address:

	Facsimile:
	Email:

EXHIBIT 4.10

ARKADOS, INC.

SECOND AMENDMENT TO CONVERTIBLE PROMISSORY NOTE NUMBER 2016-1

THIS SECOND AMENDMENT TO CONVERTIBLE PROMISSORY NOTE NUMBER 2016-1 (this “ Amendment ”) is made and entered into as of April 20, 2017, by and between Arkados Group, Inc., a Delaware corporation (the “ Company ”), and William and Susan Carson, (the “ Purchasers ”).

RECITALS

A. The Company and Mr. Carson are parties to that certain Securities Purchase Amendment dated as of September 10, 2014 (the “ Individual SPA ”), pursuant to which Mr. Carson purchased, and the Company sold and issued to Mr. Carson its 6% Convertible Note No. 2014-3 dated September 10, 2014 (“ Note 2014-3 ”) in the original principal amount of $65,000.

B. The Purchasers and the Company entered into that certain Securities Purchase Amendment, dated September 10, 2014 (the “ Joint SPA ,” and, together with the Individual SPA, the “ SPAs ” each an “ SPA ”), pursuant to which the Purchasers purchased, and the Company sold and issued to the Purchasers its 6% Convertible Note No. 2014-4 dated September 10, 2014 (“ Note 2014-4 ,” and, together with Note 2014-3, collectively the “ 2014 Notes ”) also in the original principal amount of $65,000.

C. The Purchasers and the Company entered into that certain Exchange Agreement dated as of January 8, 2016, pursuant to which, among other things, the Company and the Purchasers agreed to reduce the amount due under the Notes to $40,000 and to extend the ‘Maturity Date’ of the Notes to December 31, 2016 (the “ Exchange Agreement ”) by cancelling the 2014 Notes and issuing the Purchasers a 6% Convertible Note No. 2016-1 dated January 8, 2016 in the original principal amount of $40,000 (“ Note 2016-1 ”).

D. Pursuant to Section 4.3 of Note 2016-1, Note 2016-1 may only be amended by an instrument in writing signed by the Company and the Purchasers.

AGREEMENT

In consideration of the foregoing recitals and the mutual promises and covenants contained herein, the parties, intending to be legally bound, hereby agree as follows:

1. Amendment to the Title of Note 2016-1. The third line of the title of Note 2016-1 shall be amended, restated and replaced in its entirety as follows:

“DUE MAY 15, 2017”

2. Amendment to the First Sentence of the First Paragraph of Note 2016-1. The first sentence of the first paragraph of Note 2016-1 shall be amended, restated and replaced in its entirety as follows:

“Arkados Group, Inc., a Delaware corporation (the “Company”) with principal offices at 211 Warren Street, Suite 320, Newark, NJ 07103, for value received, hereby promises to pay the registered holder hereof (the “Holder”) the principal sum set forth above on May 15, 2017 (the “Maturity Date”), in such coin or currency of the United States of America as at the time of payment shall be the legal tender for the payment of public and private debts, and to pay interest, less any amounts required by law to be deducted or withheld, computed on the basis of a 365-day year, on the unpaid principal balance hereof from the date hereof (the “Original Issue Date”), at the rate of 6% per year, compounded quarterly, until such principal sum shall have become due and payable, or has been converted pursuant to Section 1.1, below.”

3. Effective Date . The Parties hereby agree that this Amendment shall be effective as of March 31, 2017.

4. Waiver of Event of Default . If applicable, the Purchasers hereby waive any Event of Default (as defined under Note 2016-1) for the Company’s failure to observe or perform any other covenant, obligation, condition or agreement contained in the Purchaser’s Note 2016-1 or that certain SPA, pursuant to which the 2014 Note was originally issued, if such breach occurred prior to the date of this Amendment. For avoidance of doubt, Note 2016-1 shall continue to bear interest at the rate of 6% per year and not the Default Interest rate defined in Note 2016-1.

5. Reaffirmation . Except as expressly provided herein, the undersigned agree that all of the terms, covenants, conditions, restrictions and other provisions contained in Note 2016-1 shall remain in full force and effect.

6. Entire Agreement . This Amendment, together with the SPAs, Exchange Agreement and Note 2016-1, contains the entire agreement of the parties and supersedes any prior or contemporaneous written or oral agreements between them concerning the subject matter of this Amendment.

7. Counterparts . This Amendment may be executed in counterparts, each of which shall be an original and all of which, taken together, shall constitute a single instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the date and year first above written.

	COMPANY

	Arkados Group, Inc.,
	a Delaware corporation

	By:	/s/ Terrence DeFranco
	Name:	Terrence DeFranco
	Title:	CEO

IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the date and year first above written

	PURCHASERS

	William Carson and Susan Carson

	By:	/s/ William Carson
		William Carson

	By:	/s/ Susan Carson
		Susan Carson

	Address:

	Facsimile:
	Email:

Exhibit 10.1

EXCHANGE AGREEMENT

This Exchange Agreement (this “ Agreement ”), effective as of the 8th day of January, 2016 (the “ Effective Date ”), is entered into by and between Arkados Group, Inc., a Delaware corporation (the “ Company ”), with headquarters located at 211 Warren St., Suite 320, Newark, NJ 07103, and William Carson (“ Mr. Carson ”) and Susan Carson (“ Mrs. Carson ,” and, collectively with Mr. Carson, the “ Holders ”), individuals having their address at 2703 Cottonwood Lane, Colleyville, TX 76034.

WHEREAS, Mr. Carson and the Company entered into that certain Securities Purchase Agreement, dated September 10, 2014 (the “ Individual SPA ”), pursuant to which Mr. Carson purchased, and the Company sold and issued to Mr. Carson its 6% Convertible Note No. 2014-3 dated September 10, 2014 (“ Note 2014-3 ”) in the original principal amount of $65,000;

WHEREAS, the Holders and the Company entered into that certain Securities Purchase Agreement, dated August __, 2014 (the “ Joint SPA ,” and, together with the Individual SPA, the “SPAs”), pursuant to which the Holders purchased, and the Company sold and issued to the Holders its 6% Convertible Note No. 2014-4 dated September 10, 2014 (“ Note 2014-4 ,” and, together with Note 2014-3, the “ Notes ”) also in the original principal amount of $65,000;

WHEREAS, the Notes matured on October 31, 2015, and the Company has requested the Holders to extend the Maturity Date (as defined in the Notes) to December 31, 2016;

WHEREAS, the Holders are willing to reduce the amount due under the Notes to $40,000 and to extend the Maturity Date in exchange for a cash payment of $60,000 and the Company’s issuance to the Holders of 50,000 shares of its Common Stock, par value $0.001 per share (the “ Common Stock ”) and certain changes to the terms and conditions of the Notes.

NOW THEREFORE, in consideration of the sum of $10.00 paid in hand, the sufficiency and receipt of which is hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:

1. Immediately upon the full execution of this Agreement, the Holders will tender the Notes for cancellation by the Company. In exchange the Company will issue, sell and deliver to the Holders its 6% Convertible Note due December 31, 2016 in the original principal amount of $40,000, such note to be in the form set forth as Exhibit “A” to this Agreement (“Note 2016-1”).

2. Immediately upon the full execution of this Agreement, the Company will pay the sum of $60,000 to the Holders by wire transfer of immediately available fund to the following bank account of the Holders:

[insert bank name, routing number, bank a/c number]

3. Immediately upon the full execution of this Agreement, the Company will immediately instruct its transfer agent to issue 50,000 shares of the Common Stock (the Shares”). The Shares are “restricted securities” as defined in Rule 144 under the Securities Act of 1933, as amended, and, accordingly, the certificate representing the Shares will bear a restrictive legend.

4. The Holders hereby accept the Shares and the sum of $60,000 as payment in full for all interest accrued on the Notes (including interest, Default Interest and all other penalty amounts due under the Notes) through the Effective Date and $70,000 aggregate principal amount of the Notes. The Holders hereby release the Company from any and all claims that have accrued or may have accrued under the SPAs or the Notes up to the Effective Date.

5. In order to induce the Company to issue Note 2016-1 and the Shares, the Holders repeat and reconfirm their representations and warranties contained in Sections 1d through 1i of the SPAs.

6. The SPAs are hereby amended to the extent required to reflect the terms of this Agreement.

7. Each party to this Agreement shall use its, his or her commercially reasonable efforts at its own expense to take all actions and to do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement.

8. This Agreement shall supersede any and all prior amendments or agreements between the parties with respect to the subject matter. This Agreement may not be amended except by a written instrument executed by all of the parties.

9. This Agreement may be executed in counterparts and facsimile of same shall be deemed an original.

IN WITNESS WHEREOF, the parties have hereafter set their signature as of the Effective Date.

	HOLDERS:

		/s/ William Carson
		( Signature )
	Name: William Carson

		/s/ Susan Carson
		( Signature )
	Name: Susan Carson

	COMPANY:

	ARKADOS GROUP, INC.

	By:	/s/ Terrence DeFranco
	Name:	Terrence DeFranco
	Title:	Chief Executive Officer

EXHIBIT A

Form of Convertible Note

THIS NOTE AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR ANY STATE SECURITIES LAWS OR THE PROVISIONS OF THIS NOTE.

ARKADOS GROUP, INC.

6% CONVERTIBLE NOTE

DUE DECEMBER 31, 2016

Number: 2016-1

Principal: US$40,000

Original Issue Date: January 8, 2016

Registered Holder: William Carson and Susan Carson, jointly

Arkados Group, Inc., a Delaware corporation (the “ Company ”) with principal offices at 211 Warren Street, Suite 320, Newark, NJ 07103, for value received, hereby promises to pay the registered holder hereof (the “Holder”) the principal sum set forth above on December 31, 2016 (the “ Maturity Date ”), in such coin or currency of the United States of America as at the time of payment shall be the legal tender for the payment of public and private debts, and to pay interest, less any amounts required by law to be deducted or withheld, computed on the basis of a 365-day year, on the unpaid principal balance hereof from the date hereof (the “ Original Issue Date ”), at the rate of 6% per year, compounded quarterly, until such principal sum shall have become due and payable, or has been converted pursuant to Section 1.1, below. Interest shall be paid, on the Maturity Date, or if the principal of the Note is earlier converted pursuant to Section 1.1 below, upon such exchange or conversion. All references herein to dollar amounts refer to U.S. dollars and all references to Common Stock shall refer to voting stock.

This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twelve percent 12% per annum from the due date thereof until the same is paid (“ Default Interest ”). Interest shall commence accruing on the date that the Note is made and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “ Common Stock ”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Company by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “ business day ” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “ Purchase Agreement ”).

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

(a) Conversion Right . The Holder shall have the right from time to time, and at any time during the period beginning on the effective date of the Company’s Amendment to its Certificate of Incorporation increasing the Company’s authorized shares of Common Stock discussed in Section 1.3 below, and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) — each in respect of the remaining outstanding principal amount of this Note — to convert all or any part of the outstanding and unpaid principal amount of this Note and any outstanding accrued interest into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Company into which such Common Stock shall hereafter be changed or reclassified, at the conversion price (the “ Conversion Price ”) determined as provided herein (a “ Conversion ”). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “ Notice of Conversion ”), delivered to the Company by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail to the Company before 6:00 p.m., New York, New York time on such conversion date (the “ Conversion Date ”). The term “ Conversion Amount ” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if applicable, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to this Note.

1.2 Conversion Price . The conversion price (the “ Conversion Price ”) shall be equal to $1.20 (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).

1.3 Authorized Shares . The Company covenants that during the period the conversion right exists, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Company is required at all times to have authorized and reserved a sufficient number of shares equal to at least the number issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “ Reserved Amount ”). The Reserved Amount shall be increased from time to time in accordance with the Company’s obligations pursuant to the Purchase Agreement. The Company represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Company shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Company shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes. The Company hereby acknowledges that the number of shares of its Common Stock authorized and reserved for issuance is below the number of Conversion Shares issued and issuable upon conversion of or otherwise pursuant to the Note (based on the Conversion Price) and any other shares of Common Stock issued or issuable pursuant to the terms of this Note, the Company will promptly take all corporate action necessary to authorize and reserve a sufficient number of shares, including, without limitation, calling a special meeting of stockholders, if necessary, to authorize additional shares to meet the Company’s obligations under this Section 1.3, in the case of an insufficient number of authorized shares, and using its best efforts to obtain stockholder approval of an increase in such authorized number of shares.

1.4 Method of Conversion .

(i) Mechanics of Conversion . Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Company a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Company.

(ii) Surrender of Note Upon Conversion . Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless the entire unpaid principal amount of this Note is so converted. The Holder and the Company shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Company shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

(iii) Payment of Taxes . The Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Company shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Company the amount of any such tax, or shall have established to the satisfaction of the Company that such tax has been paid.

(iv) Delivery of Common Stock Upon Conversion . Upon receipt by the Company from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Company shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “ Deadline ”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.

(v) Obligation of Company to Deliver Common Stock . Upon receipt by the Company of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Company defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Company’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Company to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Company, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Company before 6:00 p.m., New York, New York time, on such date.

(vi) Delivery of Common Stock by Electronic Transfer . In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Company is participating in the Depository Trust Company (“ DTC ”) Fast Automated Securities Transfer (“ FAST ”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Company shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“ DWAC ”) system.

(vii) Failure to Deliver Common Stock Prior to Deadline . Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) a reasonable equivalent approximation of the damages would be $100 per day, for each day beyond the Deadline that the Company fails to deliver such Common Stock through willful or deliberate acts on the part of the Company. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Company by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Company agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, and interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.

1.5 Concerning the Shares . The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Company or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“ Rule 144 ”) or (iv) such shares are transferred to an “ affiliate ” (as defined in Rule 144) of the Company who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

The legend set forth above shall be removed and the Company shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Company or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be reasonably acceptable by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not reasonably accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

1.6 Effect of Certain Events.

(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Company, the effectuation by the Company of a transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of, or the consolidation, merger or other business combination of the Company with or into any other Person (as defined below) or Persons when the Company is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Company shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “ Person ” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Company shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Company or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Company shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note), and (b) the Holder hereof has an opportunity to participate in the transaction as if such Holder was a holder of common stock immediately prior to the closing of such transaction and receive the consideration paid to the other holders of Common Stock of the Company, or have this Note assumed by the acquirer giving effect to the identical conversion price, at the election of the Holder hereof. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

(c) Adjustment Due to Distribution . If the Company shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Company’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “ Distribution ”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

(d) Adjustment Due to Dilutive Issuance . If, at any time when any Notes are issued and outstanding, the Company issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “ Dilutive Issuance ”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Company in such Dilutive Issuance.

The Company shall be deemed to have issued or sold shares of Common Stock if the Company in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“ Convertible Securities ”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “ Options ”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

Additionally, the Company shall be deemed to have issued or sold shares of Common Stock if the Company in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

(e) Purchase Rights . If, at any time when any Notes are issued and outstanding, the Company issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “ Purchase Rights ”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(f) Notice of Adjustments . Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Company, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

1.7 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) all be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Company to comply with the terms of this Note. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Company’s failure to convert this Note.

1.8 Prepayment. The Company shall have no right of prepayment or redemption of this Note.

1.9 Qualifying Financing . Upon the closing of a financing transaction in which the Company raises cash proceeds net of the costs of the transaction of not less than $1,000,000 in one transaction or in a series of related transactions in which the Company issues equity securities or securities convertible into or exchangeable for, equity securities, or options or rights to purchase equity securities to one or more investors, this Note shall immediately become due and payable.

ARTICLE II. CERTAIN COVENANTS

2.1 Distributions on Capital Stock . So long as the Company shall have any obligation under this Note, the Company shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Company’s disinterested directors.

2.2 Restriction on Stock Repurchases . So long as the Company shall have any obligation under this Note, the Company shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Company or any warrants, rights or options to purchase or acquire any such shares.

2.3 Sale of Assets . So long as the Company shall have any obligation under this Note, the Company shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

2.4 Advances and Loans . So long as the Company shall have any obligation under this Note, the Company shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Company, except loans, credits or advances (a) in existence or committed on the date, (b) made in the ordinary course of business or (c) not in excess of $500,000 .

2.5 Stockholder Approval. The Company will promptly take all corporate action necessary to authorize and reserve a sufficient number of shares, including, without limitation, calling a special meeting of stockholders to authorize additional shares to meet the Company’s obligations under this Section 2.5, in the case of an insufficient number of authorized shares, and using its best efforts to obtain stockholder approval of an increase in such authorized number of shares.

2.6 Reporting Requirements. The Company will within 60 days from the date of this Note to take all necessary actions to bring the Company current with its reporting requirements of the Exchange Act.

ARTICLE III. EVENTS OF DEFAULT

If any of the following events of default (each, an “ Event of Default ”) shall occur:

3.1 Failure to Pay Principal or Interest . The Company fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.

3.2 Conversion and the Shares . The Company fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Company directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for five (5) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Company to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Company to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Company’s transfer agent in order to process a conversion; such advanced funds shall be paid by the Company to the Holder within forty eight (48) hours of a demand from the Holder.

3.3 Breach of Covenants . The Company breaches any covenant or other term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days after written notice thereof to the Company from the Holder.

3.4 Breach of Representations and Warranties . Any representation or warranty of the Company made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.5 Receiver or Trustee . The Company or any subsidiary of the Company shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6 Judgments . Any money judgment, writ or similar process shall be entered or filed against the Company or any subsidiary of the Company or any of its property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

3.7 Bankruptcy . Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company or any subsidiary of the Company.

3.8 Failure to Comply with the Exchange Act . The Company shall fail to comply with the reporting requirements of the Exchange Act; and/or the Company shall cease to be subject to the reporting requirements of the Exchange Act.

3.9 Liquidation . Any dissolution, liquidation, or winding up of Company or any substantial portion of its business.

3.10 Cessation of Operations . Any cessation of operations by Company or Company admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Company’s ability to continue as a “going concern” shall not be an admission that the Company cannot pay its debts as they become due.

3.11 Maintenance of Assets . The failure by Company to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).

3.12 Financial Statement Restatement . The restatement of any financial statements filed by the Company with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.13 Reverse Splits . The Company effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

3.14 Reserved.

3.15 Cross-Default . Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Company of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder . “ Other Agreements ” means, collectively, all agreements and instruments between, among or by: (1) the Company, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Company to the Holder.

Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Company shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE COMPANY SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1, 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, , and/or 3.15 exercisable through the delivery of written notice to the Company by such Holders (the “ Default Notice ”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3.1 hereof), the Note shall become immediately due and payable and the Company shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “ Mandatory Prepayment Date ”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “ Default Sum ”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

If the Company fails to pay the Default Amount within twenty (20) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Company remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Company, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Company equal to the Default Amount divided by the Conversion Price then in effect.

ARTICLE IV. MISCELLANEOUS

4.1 Failure or Indulgence Not Waiver . No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2 Notices . All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If to the Company, to:

Terrence DeFranco

President

211 Warren Street

Suite 320

Newark, NJ 07103

If to the Holder:

William Carson and Susan Carson

[insert address]

4.3 Amendments . This Note and any provision hereof may only be amended by an instrument in writing signed by the Company and the Holder. The term “ Note ” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4 Assignability . This Note shall be binding upon the Company and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

4.5 Cost of Collection . If default is made in the payment of this Note, the Company shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

4.6 Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of New Jersey except with respect to the Default Interest Rate, which will be governed by the law of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New Jersey or in the federal courts located in the state and county of Santa Clara. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens . The Company and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

4.7 Certain Amounts . Whenever pursuant to this Note the Company is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Company and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Company represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Company and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

4.8 Purchase Agreement . By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

4.9 Notice of Corporate Events . Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Company shall provide the Holder with prior notification of any meeting of the Company’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Company of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Company or any proposed liquidation, dissolution or winding up of the Company, the Company shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Company shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.

4.10 Remedies . The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

IN WITNESS WHEREOF, Company has caused this Note to be signed in its name by its duly authorized officer as of the issuance date.

	ARKADOS GROUP, INC.

	By:	/s/ Terrence DeFranco
	Terrence DeFranco
	President and Chief Executive Officer

EXHIBIT A

NOTICE OF CONVERSION

The undersigned hereby elects to convert US$_______________ principal amount plus interest in the amount of US$______________ per day accruing through the Date of Conversion of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of ARKADOS GROUP, INC., a Delaware corporation (the “Company”) according to the conditions of the convertible note of the Company dated as of January 8, 2016 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

	¨	The Company shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

		Name of DTC Prime Broker:
		Account Number:

	¨	The undersigned hereby requests that the Company issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

Date of Conversion:	___________________

Total obligation converted:	US$ ________________

Applicable Conversion Price:	US$1.20 per US$1.00 of Principal and interest converted

Number of Shares of Common Stock to be Issued
Pursuant to Conversion of the Notes:	____________________

Amount of Principal Balance Due remaining
Under the Note after this conversion:	_____________________

U.S. Social Security Number/Taxpayer
Identification Number/Employer Identification Number	________________ (William)

	________________ (Susan)

PLEASE NOTE: If non-US individual or company, you will be required to complete a W-8-BEN (individual) or W-8-BEN-E (entity) prior to acceptance of the conversion.

Acknowledgement:

By:
(signature)

Name (printed) :

Title:
Date:

By:
(signature)

Name (printed) :

Title:
Date:

Exhibit 10.2

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (this “ Agreement ”), dated as of January 27, 2017, is entered into by and between A RKADOS G ROUP , I NC ., a Delaware corporation, (the “ Company ”), and L UCAS H OPPEL (the “ Buyer ”).

A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “ SEC ”) under the Securities Act of 1933, as amended (the “ 1933 Act ”).

B. Upon the terms and conditions stated in this Agreement, the Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement (i) a Convertible Promissory Note of the Company, in the form attached hereto as Exhibit A (the “ Note ”), in the original principal amount of $38,500.00 (the “ Original Principal Amount ”) (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “ Note ”) and (ii) twenty thousand (20,000) restricted common shares in the Company (“ Inducement Shares ”) to be delivered to Holder, via overnight courier, within 7 (seven) calendar days following the Closing Date. On the sixth month anniversary of this note, in the event the Companies shares price has declined the Company agrees to issue the Buyer additional shares such that the aggregate value of the Inducement Shares equal the aggregate value of the Inducement Shares as of the closing date.

NOW THEREFORE , the Company and the Buyer hereby agree as follows:

1. Purchase and Sale . On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company (i) the Note in the original principal amount of $38,500, and (ii) the Inducement Shares.

1.1. Form of Payment . On the Closing Date, (i) the Buyer shall pay the purchase price of $35,000 (the “ Purchase Price ”) for the Securities to be issued and sold to it at the Closing (as defined below) by wire transfer of immediately available funds to a Company account designated by the Company, in accordance with the Company’s written wiring instructions, against delivery of the Securities, and (ii) the Company shall deliver such duly executed Securities on behalf of the Company, to the Buyer, against delivery of such Purchase Price.

1.2. Closing Date . The date and time of the issuance and sale of the Securities pursuant to this Agreement (the “ Closing Date ”) shall be on or about January 27, 2017, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall occur on the Closing Date at such location as may be agreed to by the parties.

1.3. Share Reservation . The Company shall at all times require its transfer agent to establish a reserve of shares of its authorized but unissued and unreserved Common Stock in the amount of 1,000,000 shares for purposes of exercise of the Warrant or conversion of the Note. The Company shall cause the Transfer Agent to agree that it will not reduce the reserve under any circumstances, unless such reduction is pre-approved in writing by the Buyer.

2. Buyer’s Investment Representations; Governing Law; Miscellaneous .

2.1 Buyer’s Investment Representations .

(a) This Agreement is made in reliance upon the Buyer’s representation to the Company, which by its acceptance hereof Buyer hereby confirms, that the Securities to be received by it will be acquired for investment for its own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that it has no present intention of selling, granting participation in, or otherwise distributing the same, but subject nevertheless to any requirement of law that the disposition of its property shall at all times be within its control.

(b) The Buyer understands that the Securities are not registered under the 1933 Act, on the basis that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from registration under the 1933 Act pursuant to Section 4(a)(2) thereof, and that the Company’s reliance on such exemption is predicated on the Buyer’s representations set forth herein. The Buyer realizes that the basis for the exemption may not be present if, notwithstanding such representations, the Buyer has in mind merely acquiring shares of the Securities for a fixed or determinable period in the future, or for a market rise, or for sale if the market does not rise. The Buyer does not have any such intention.

(c) The Buyer understands that the Securities may not be sold, transferred, or otherwise disposed of without registration under the 1933 Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Securities or an available exemption from registration under the 1933 Act, the Stock must be held indefinitely. In particular, the Buyer is aware that the Securities may not be sold pursuant to Rule 144 or Rule 701 promulgated under the 1933 Act unless all of the conditions of the applicable Rules are met. Among the conditions for use of Rule 144 is the availability of current information to the public about the Company. Such information is not now available, and the Company has no present plans to make such information available. The Buyer represents that, in the absence of an effective registration statement covering the Securities, it will sell, transfer, or otherwise dispose of the Securities only in a manner consistent with its representations set forth herein and then only in accordance with the provisions of Section 5(d) hereof.

(d) The Buyer agrees that in no event will it make a transfer or disposition of any of the Securities (other than pursuant to an effective registration statement under the 1933 Act), unless and until (i) the Buyer shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the disposition, and (ii) if requested by the Company, at the expense of the Buyer or transferee, the Buyer shall have furnished to the Company either (A) an opinion of counsel, reasonably satisfactory to the Company, to the effect that such transfer may be made without registration under the 1933 Act or (B) a “no action” letter from the Securities and Exchange Commission to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the Securities and Exchange Commission that action be taken with respect thereto. The Company will not require such a legal opinion or “no action” letter in any transaction in compliance with Rule 144.

(e) The Buyer represents and warrants to the Company that it is an “accredited investor” within the meaning of Securities and Exchange Commission Rule 501 of Regulation D, as presently in effect and, for the purpose of Section 25102(f) of the California Corporations Code, he or she is excluded from the count of “purchasers” pursuant to Rule 260.102.13 thereunder.

2.2 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in New York, New York. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens . In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

2.3 Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.

2.4 Headings . The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

2.5 Severability . In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

2.6 Entire Agreement; Amendments . This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the Buyer.

2.7 Notices . Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of:

2.7.1 the date delivered, if delivered by personal delivery as against written receipt therefor or by e-mail to an executive officer, or by confirmed facsimile,

2.7.2 the fifth Trading Day after deposit, postage prepaid, in the United States Postal Service by registered or certified mail, or

2.7.3 the third Trading Day after mailing by domestic or international express courier, with delivery costs and fees prepaid, in each case, addressed to each of the other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by ten (10) calendar days’ advance written notice similarly given to each of the other parties hereto):

If to the Company, to:

	Arkados Group, Inc.

If to the Buyer:

	Lucas Hoppel
	295 Palmas Inn Way
	Ste 104 PMB 346
	Humacao, PR 00791
	Phone: 619-436-4924
	Email: Luke@LukeHoppel.com

2.8 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Company hereunder may not be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior written consent of the Buyer, which consent may be withheld at the sole discretion of the Buyer; provided, however , that in the case of a merger, sale of substantially all of the Company’s assets or other corporate reorganization, the Buyer shall not unreasonably withhold, condition or delay such consent. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Buyer hereunder may be assigned by Buyer to a third party, including its financing sources, in whole or in part, without the need to obtain the Company’s consent thereto.

2.9 Third Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

2.10 Survival . The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and hold harmless the Buyer and all its officers, directors, employees, attorneys, and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

2.11 No Strict Construction . The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

2.12 Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

2.13 Buyer’s Rights and Remedies Cumulative . All rights, remedies, and powers conferred in this Agreement and the Transaction Documents on the Buyer are cumulative and not exclusive of any other rights or remedies, and shall be in addition to every other right, power, and remedy that the Buyer may have, whether specifically granted in this Agreement or any other Transaction Document, or existing at law, in equity, or by statute; and any and all such rights and remedies may be exercised from time to time and as often and in such order as the Buyer may deem expedient.

2.14 Ownership Limitation . If at any time after the Closing, the Buyer shall or would receive shares of Common Stock in payment of interest or principal under Note, upon exercise of the Warrant, so that the Buyer would, together with other shares of Common Stock held by it or its Affiliates, own or beneficially own by virtue of such action or receipt of additional shares of Common Stock a number of shares exceeding 9.99% of the number of shares of Common Stock outstanding on such date (the “ Maximum Percentage ”), the Company shall not be obligated and shall not issue to the Buyer shares of Common Stock which would exceed the Maximum Percentage, but only until such time as the Maximum Percentage would no longer be exceeded by any such receipt of shares of Common Stock by the Buyer. The foregoing limitations are enforceable, unconditional and non-waivable and shall apply to all Affiliates and assigns of the Buyer.

Attorneys’ Fees and Cost of Collection . In the event of any action at law or in equity to enforce or interpret the terms of this Agreement or any of the other Transaction Documents, the parties agree that the party who is awarded the most money shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid by such prevailing party in connection with the litigation and/or dispute without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair a court’s power to award fees and expenses for frivolous or bad faith pleading.

[Remainder of page intentionally left blank; signature page to follow]

SUBSCRIPTION AMOUNT:

Original Principal Amount of Note:	$	38,500.00
Purchase Price:	$	35,000.00

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

THE COMPANY:

Arkados Group, Inc.

By:	/s/ Terrence DeFranco
	Mr. Terrence DeFranco
	Chief Executive Officer

THE BUYER:

Lucas Hoppel

By:	/s/ Lucas Hoppel

EXHIBIT A

NOTE

Exhibit 10.3

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of the 6th day of April, 2017, by and between ARKADOS GROUP, INC. , a Delaware corporation, with headquarters located at 211 Warren Street, Suite 320, Newark, NJ 07103 (the “Company”), and the undersigned with principal address set forth on the Purchaser Signature and Subscription Page hereto (the “Purchaser”).

WHEREAS :

A. The Company and the Purchaser are executing and delivering this Agreement in reliance upon the Regulation S or Regulation D exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”), or under Section 4(a)(2) of the 1933 Act;

B. Purchaser desires to purchase, and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement, such number of shares of common stock, par value $0.0001 of the Company (the “Common Stock”) set forth on the Purchaser Signature and Subscription Page for the aggregate purchase price stated on the Purchaser Signature and Subscription Page (the “Purchase Price), as well as a warrant to acquire such equal number of shares of common stock at an exercise price of $1.00 per share (the “Warrant” and the shares of the shares of Common Stock issuable upon exercise of or otherwise pursuant to the Warrants, collectively, the “Warrant Shares”). The Common Stock together with the Warrant shall be referred to hereinafter as the “Offered Units”).

NOW THEREFORE , in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Closing .

a. On or before the Closing Date (as defined below), (i) the Purchaser shall pay to the Company by wire transfer of immediately available funds in accordance with the Company’s written wiring instructions, the Purchase Price. The Company, upon confirmation of the receipt of funds, but in no event later than the Closing Date, shall deliver instructions to its transfer agent to issue the Common Stock to Purchaser and shall likewise promptly issue the Warrants accompanying such purchased Common Stock to Purchaser.

b. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 5 and Section 6 below, the date and time of the issuance and sale of the Offered Units pursuant to this Agreement (the “Closing Date”) shall be 5:00 p.m., Eastern Daylight Time on or about April __, 2017, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.

2. Purchaser’s Representations and Warranties. The Purchaser represents and warrants to the Company that:

a. Investment Purpose . The Purchaser is purchasing the Offered Units for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act.

b. Accredited Investor Status . The Purchaser (i) an “accredited investor” as that term is defined in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of Rule 501(a)(3) (an “Accredited Investor”), (ii) experienced in making investments of the kind described in this Agreement and the related documents, (iii) able, by reason of the business and financial experience of its officers (if an entity) and professional advisors (who are not affiliated with or compensated in any way by the Company or any of its affiliates or selling agents), to protect its own interests in connection with the transactions described in this Agreement, and the related documents, and (iv) able to afford the entire loss of its investment in the Offered Units.

c. Reliance on Exemptions . The Purchaser understands that the Offered Units are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Purchaser’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Offered Units.

d. Information . The Purchaser and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Offered Units which have been requested by the Purchaser. Without limiting the generality of the foregoing, Buyer has also had the opportunity to obtain and to review the Company’s most recent Annual Report on Form 10-K for the fiscal year ended May 31, 2016, and Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2016 (collectively, the “SEC Documents”). The Purchaser and its advisors, if any, have been afforded the opportunity to ask questions of the Company and to promptly receive answers to those questions. Notwithstanding the foregoing, the Company has not disclosed to the Purchaser any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Purchaser, or unless Purchaser enters into a non-disclosure agreement with the Company agreeing to maintain the confidentiality of the such information. Neither such inquiries nor any other due diligence investigation conducted by Purchaser or any of its advisors or representatives shall modify, amend or affect Purchaser’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Purchaser understands that its investment in the Offered Units iinvolves a significant degree of risk.

e. Governmental Review . The Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the purchase or sale of the Offered Units.

f. Transfer or Re-sale . The Purchaser understands that (i) the sale or re-sale of the Common Stock and the Warrants has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Offered Units may not be transferred unless (a) the Common Stock or the Warrants are sold pursuant to an effective registration statement under the 1933 Act, (b) the Purchaser shall have delivered to the Company, at the cost of the Purchaser, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Offered Units to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be reasonably acceptable to the Company, (c) the Offered Units are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Purchaser who agrees to sell or otherwise transfer the Offered Units only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Offered Units are sold pursuant to Rule 144, or (e) the Offered Units are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Purchaser shall have delivered to the Company, at the cost of the Purchaser, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be reasonably acceptable to the Company; (ii) any sale of such Offered Units made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Offered Units under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Offered Units under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case).

g. Legends . The Purchaser understands that the Offered Units may only be sold pursuant to Rule 144, or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold and the shares of Common Stock and the Warrant may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such ssecurities):

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AND WITH RESPECT TO THE SHARES OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SAID ACT THAT IS THEN APPLICABLE TO THE SHARES, AS TO WHICH A PRIOR OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER OR TRANSFER AGENT MAY BE REQUIRED.”

The legend set forth above shall be removed, and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be reasonably acceptable to the Company so that the sale or transfer is effected.

h. Organization; Authorization; Enforcement . Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. This Agreement and any additional transaction agreements relating to the Offered Units, have been duly and validly authorized, executed and delivered on behalf of the Purchaser and create a valid and binding agreement of the Purchaser enforceable in accordance with its terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors’ rights generally.

i. Investment Risk. Purchaser understands that its investment in the Offered Units constitutes high risk investment, its investment in the Offered Units involves a high degree of risk, including the risk of loss of the Purchaser’s entire investment

j. Residency . The state in which any offer to sell Securities hereunder was made to or accepted by the Purchaser is the state shown as the Buyer’s address contained herein, and Purchaser is a resident of such state only.

3. Representations and Warranties of the Company . The Company represents and warrants to the Purchaser that:

a. Organization and Qualification . The Company is a corporation duly organized, validly existing and in good standing under the laws of Delaware, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. Each of the Subsidiaries (as defined below), if any, of the Company is a corporation or other form of business entity duly organized, validly existing and in good standing under the laws of its jurisdiction or organization, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

b. Authorization; Enforcement . (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, and to consummate the transactions contemplated hereby and thereby and to issue the Offered Units, in accordance with the terms hereof, (ii) the execution and delivery of this Agreement, the Offered Units by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Offered Units) have been duly authorized by the Company’s Board of Directors, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Offered Units, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium, and other similar laws affecting the enforcement of creditors’ rights generally.

c. Capitalization . As of the date hereof, the authorized capital stock of the Company consists of: (i) 600,000,000 shares of Common Stock, $0.0001 par value per share, of which 14,163,763 shares are issued and outstanding, and for which 10,456,054 shares are issuable for derivative securities outstanding and approximately 146,000 shares are intended to settle outstanding pre-2010 unsecured debt obligations; and (ii) 5,000,000 shares of Preferred Stock, $0.0001 par value per share, of which no shares are issued and outstanding; All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. As of the effective date of this Agreement, except for those disclosed in the Company’s filed reports with the SEC and options that may be issued to executives of the Company (i) there are no other outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or, with the exception of pending obligations to issue incentive options to executive officers of the Company pursuant to employment contracts, no arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries that are not mentioned here, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Offered Units that are not contained here. The Company has made available to the Purchaser true and correct copies of the Company’s Certificate of Incorporation as in effect on the date hereof (“Certificate of Incorporation”), and the Company’s By-laws, as in effect on the date hereof (the “By-laws”).

d. Issuance of Shares . The Common Stock is duly authorized and will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

e. No Conflicts; Approvals . The execution, delivery and performance of this Agreement, the Offered Units by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). There are no required consents, authorizations or orders of, or filings or registrations with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement, to issue the Common Stock. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.

f. SEC Documents; Financial Statements . The Company is subject to the reporting requirements of the 1934 Act. The Company is current on its reporting obligations with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “1934 Act”). As of their respective dates, any reports filed within the last fiscal year, as amended, complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of such reports, as amended, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

g. Absence of Certain Changes . Since November 30, 2016, when viewed from the perspective of the Company and its Subsidiaries taken as a whole, there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, of the Company or any of its Subsidiaries.

h. Absence of Litigation . There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect.

i. Patents, Copyrights, etc . The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future).

j. Tax Status . The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority, nor is the Company subject to any tax investigation by any governmental agency.

k. Certain Transactions . Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties and other than the grant of stock options to officers of the Company, none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

l. Disclosure . There is no fact known to the Company (other than general economic conditions known to the public generally or as disclosed in the SEC Documents) that has not been disclosed in writing to the Purchaser that (i) would reasonably be expected to have a Material Adverse Effect, (ii) would reasonably be expected to materially and adversely affect the ability of the Company to perform its obligations pursuant to this Agreement.

m. Acknowledgment Regarding Purchase of Securities . The Company acknowledges and agrees that the Purchaser is acting solely in the capacity of arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Purchaser or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Purchaser’s purchase of the Offered Units. The Company further represents to the Purchaser that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

n. No Integrated Offering . Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Offered Units to the Purchaser. The issuance of the Offered Units to the Purchaser will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

o. No Brokers . The Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

p. Permits; Compliance . The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Since November 30, 2013, neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

q. Environmental Matters . The Company is in compliance with all applicable Environmental Laws in all respects except where the failure to comply does not have and could not reasonably be expected to have a Material Adverse Effect. For purposes of the foregoing:

“Environmental Laws” means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other “Superfund” or “Superlien” law or any other applicable federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, the environment or any Hazardous Material.

“Hazardous Material” means and includes any hazardous, toxic or dangerous waste, substance or material, the generation, handling, storage, disposal, treatment or emission of which is subject to any Environmental Law.

r. Title to Property . The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects or such as would not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.

s. Insurance . The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

t. Internal Accounting Controls . The Company maintains a system of internal accounting controls sufficient, in the judgment of the Company’s Board of Directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

u. Foreign Corrupt Practices . Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

v. No Investment Company . The Company is not, and upon the issuance and sale of the Offered Units as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.

4. COVENANTS .

a. Best Efforts . The parties shall use their reasonable best efforts to satisfy timely each of the conditions described in Section 5 and 6 of this Agreement.

b. Form D; Blue Sky Laws . Unless it believes it is exempt from any such filings, the Company agrees to file a Form D with respect to the Offered Units as required under Regulation D and to provide a copy thereof to the Purchaser promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Offered Units for sale to the Purchaser at the applicable closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Purchaser on or prior to the Closing Date.

c. Use of Proceeds . The Company shall use the proceeds for general working capital purposes, including legal and accounting expenses related to SEC filings.

d. Listing . The Company will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules to maintain listing on the pink sheets or any equivalent replacement exchange, as applicable. .

e. No Integration . The Company shall not knowingly make any offers or sales of any security (other than the Offered Units) under circumstances that would require registration of the ssecurities being offered or sold hereunder under the 1933 Act or cause the offering of the ssecurities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

5. REGISTRATION RIGHTS.

a. As promptly as possible, and in any event on or prior to the date that is seventy four (74) days after the Closing Date (the “ Initial Filing Date ”), the Company shall prepare and file with the SEC a Registration Statement covering the resale of all of the Common Stock and the Warrant Shares issued or issuable pursuant to the Transaction Documents (collectively, the “ Registrable Securities ”), without taking into account any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance with the 1933 Act and the 1934 Act) and shall contain (except if otherwise requested by the SEC) the “Plan of Distribution” in substantially the form attached hereto as Annex B . To the extent the staff of the SEC does not permit all of the Registrable Securities to be registered on the initial Registration Statement filed pursuant to this Section 5(a) (the “ Initial Registration Statement ”), the Company shall file additional Registration Statements (each an “ Additional Registration Statement ”), as promptly as possible, and in any event on or prior to the Additional Filing Date, successively trying to register on each such Additional Registration Statement the maximum number of remaining Registrable Securities until all of the Registrable Securities have been registered with the SEC.

b. The Company shall use its commercially reasonable efforts to cause each Registration Statement to be declared effective by the SEC as promptly as possible after the filing thereof, but in any event prior to the applicable Required Effectiveness Date, and shall use its commercially reasonable efforts to keep the Registration Statement continuously effective under the 1933 Act until the earlier of the date that all Registrable Securities covered by such Registration Statement have been sold or can be sold publicly without restriction or limitation under Rule 144 (including, without limitation, the requirement to be in compliance with Rule 144(c)(1)) (the “ Effectiveness Period ”); provided that, upon notification by the SEC that a Registration Statement will not be reviewed or is no longer subject to further review and comments, the Company shall request acceleration of such Registration Statement within three (3) Trading Days after receipt of such notice and request that it becomes effective on 4:00 p.m. New York City time on the Effective Dave and file a prospectus supplement for any Registration Statement, whether or not required under Rule 424 (or otherwise), by 9:00 a.m. New York City time the day after the Effective Date.

c. The Company shall notify the Purchasers in writing promptly (and in any event within two Trading Days) after receiving notification from the SEC that a Registration Statement has been declared effective.

d. Should an Event (as defined below) occur, then upon the occurrence of such Event, and on every monthly anniversary thereof until the applicable Event is cured, the Company shall pay to each Purchaser an amount in cash, as liquidated damages and not as a penalty, equal to one percent (1.0%) of the aggregate Purchase Price of the Registrable Securities then held by the Purchaser; provided, however, that the total amount of payments pursuant to this Section 5(d) shall not exceed, when aggregated with all such payments paid to all Purchasers, ten percent (10%) of the aggregate Purchase Price hereunder. The payments to which a Purchaser shall be entitled pursuant to this Section 5(d) are referred to herein as “ Event Payments .” Any Event Payments payable pursuant to the terms hereof shall apply on a pro-rated basis for any portion of a month prior to the cure of an Event. All pro-rated calculations made pursuant to this paragraph shall be based upon the actual number of days in such pro-rated month. Each of the following shall constitute an “Event”:

(i) a Registration Statement is not filed on or prior to its Filing Date or is not declared effective on or prior to its Required Effectiveness Date or does not register all Registrable Securities; provided that if the SEC, by written or oral comment or otherwise, limits the Company’s ability to request effectiveness, or prohibits the effectiveness of, a Registration Statement with respect to any or all the Registrable Securities pursuant to Rule 415, it shall not be a breach or default by the Company under this Agreement and shall not be deemed a failure by the Company to use reasonable best efforts;

(ii) except as provided for in Section 5(e) (the “Excluded Events”), after the Effective Date of a Registration Statement, a Purchaser is not permitted to sell Registrable Securities under the Registration Statement (or a subsequent Registration Statement filed in replacement thereof) for any reason (other than the fault of such Purchaser) for five (5) or more Trading Days (whether or not consecutive);

(iii) except as a result of the Excluded Events, the Common Stock is not listed or quoted, or is suspended from trading, on an Eligible Market for a period of three Trading Days (which need not be consecutive Trading Days) during the Effectiveness Period; and

(iv) at any time during the period commencing from the six (6) month anniversary of the Closing Date and ending at the termination of the Effectiveness Period, if a Registration Statement is not available for the resale of all of the Registrable Securities and the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c); provided, that Event Payments on the Registrable Securities may not accrue under more than one of the foregoing clauses (i), (ii), (iii) and (iv), at any one time; and provided further, that (1) upon the filing of the Registration Statement as required hereunder (in the case of Section 5(d)(i)), (2) upon the effectiveness of a Registration Statement as required hereunder (in the case of Section 5(d)(ii)), (3) upon the resumed trading of the Common Stock (in the case of Section 5(d)(iii)), or (4) upon the resumption of a Purchasers ability to resell the Registrable Securities under an effective Registration Statement or the Company’s satisfaction of the current public information requirement under Rule 144(c) of the Securities Act (in the case of Section 5.1(d)(iv)), Event Payments on the Registrable Securities as a result of such clause shall cease to accrue. It is understood and agreed that, notwithstanding any provision to the contrary, no Event Payments shall accrue on any Registrable Securities that are then covered by, and may be sold under, an effective Registration Statement.

e. Notwithstanding anything in this Agreement to the contrary:

(i) notwithstanding Section 5, the Company, upon written notice to the Purchasers, shall be permitted to suspend the availability of a Registration Statement covering the Registrable Securities for any bona fide reason whatsoever for up to 15 consecutive days (the “Deferral Period”) in any 90-day period without being obligated to pay liquidated damages; provided, that Deferral Periods may not total more than 45 days in the aggregate in any twelve-month period. The Company shall not be required to specify in the written notice to the Purchasers the nature of the event giving rise to the Deferral Period; and

(ii) the Company may, by written notice to the Purchasers, suspend sales under a Registration Statement after the Effective Date thereof and/or require that the Purchasers immediately cease the sale of shares of Common Stock pursuant thereto and/or defer the filing of any subsequent Registration Statement if the Company is engaged in a material merger, acquisition or sale and the Board of Directors determines in good faith, by appropriate resolutions, that, as a result of such activity, (A) it would be materially detrimental to the Company (other than as relating solely to the price of the Common Stock) to maintain a Registration Statement at such time or (B) it is in the best interests of the Company to suspend sales under such registration at such time. Upon receipt of such notice, each Purchaser shall immediately discontinue any sales of Registrable Securities pursuant to such registration until such Purchaser is advised in writing by the Company that the current Prospectus or amended Prospectus, as applicable, may be used. In no event, however, shall this right be exercised to suspend sales beyond the period during which (in the good faith determination of the Company’s Board of Directors) the failure to require such suspension would be materially detrimental to the Company. The Company’s rights under this Section 5(e) may be exercised for a period of no more than 20 calendar days at a time and not more than three times in any twelve-month period, without such suspension being considered as part of an Event Payment determination. Immediately after the end of any suspension period under this Section 5(e), the Company shall take all necessary actions (including filing any required supplemental prospectus) to restore the effectiveness of the applicable Registration Statement and the ability of the Purchasers to publicly resell their Registrable Securities pursuant to such effective Registration Statement.

f. Registration Procedures . In connection with the Company’s registration obligations hereunder, the Company shall:

(i) Not less than three Trading Days prior to the filing of a Registration Statement or any related Prospectus or any amendment or supplement thereto, furnish via email to those Purchasers who have supplied the Company with email addresses copies of all such documents proposed to be filed (or at the request of one or more Purchasers, only certain sections thereof), which documents (other than any document that is incorporated or deemed to be incorporated by reference therein) will be subject to the review of such Purchasers. The Company shall reflect in each such document when so filed with the SEC such comments regarding the Purchasers and the plan of distribution as the Purchasers may reasonably and promptly propose no later than two Trading Days after the Purchasers have been so furnished with copies of such documents as aforesaid.

(ii) (A) Subject to Section 5(e), prepare and file with the SEC such amendments, including post-effective amendments, to each Registration Statement and the Prospectus used in connection therewith as may be necessary to keep the Registration Statement continuously effective, as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the SEC such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (B) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; and (C) comply in all material respects with the provisions of the 1933 Act and the 1934 Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the Purchasers thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented.

(iii) Notify the Purchasers as promptly as reasonably possible, and if requested by the Purchasers, confirm such notice in writing no later than two Trading Days thereafter, of any of the following events: (A) the SEC notifies the Company whether there will be a “review” of any Registration Statement; (B) any Registration Statement or any post-effective amendment is declared effective; (C) the SEC issues any stop order suspending the effectiveness of any Registration Statement or initiates any Proceedings for that purpose; (D) the Company receives notice of any suspension of the qualification or exemption from qualification of any Registrable Securities for sale in any jurisdiction, or the initiation or threat of any Proceeding for such purpose; or (E) the financial statements included in any Registration Statement become ineligible for inclusion therein or any Registration Statement or Prospectus or other document contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(iv) Use its commercially reasonable efforts to avoid the issuance of or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of any Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as soon as possible.

(v) If requested by a Purchaser, provide such Purchaser, without charge, at least one conformed copy of each Registration Statement and each amendment thereto, including financial statements and schedules, and all exhibits to the extent requested by such Purchaser (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the SEC.

(vi) Promptly deliver to each Purchaser, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Purchaser may reasonably request. The Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Purchasers in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto to the extent permitted by federal and state securities laws and regulations.

(vii) (A) In the time and manner required by each Trading Market on which the Common Stock is listed, prepare and file with such Trading Market an additional shares listing application covering all of the Registrable Securities; (B) take all steps necessary to cause such Registrable Securities to be approved for listing on each such Trading Market as soon as possible thereafter; (C) provide to each Purchaser evidence of such approval; and (D) except as a result of the Excluded Events, during the Effectiveness Period, maintain the listing of such Registrable Securities on each such Trading Market or another Eligible Market.

(viii) Prior to any public offering of Registrable Securities, use its commercially reasonable efforts to register or qualify or cooperate with the selling Purchasers in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or “blue sky” laws of such jurisdictions within the United States as any Purchaser requests in writing, to keep each such registration or qualification (or exemption therefrom) effective for so long as required, but not to exceed the duration of the Effectiveness Period, and to do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided , however , that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.

(ix) Cooperate with the Purchasers to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by this Agreement and under law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Purchasers may reasonably request.

(x) Upon the occurrence of any event described in Sections 5(f)(iii)(C), (D) or (E) , as promptly as reasonably possible, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading,

(xi) Cooperate with any reasonable due diligence investigation undertaken by the Purchasers in connection with the sale of Registrable Securities, including, without limitation, by making available documents and information; provided that the Company will not deliver or make available to any Purchaser material, nonpublic information.

(xii) Comply with all rules and regulations of the SEC applicable to the registration of the Registrable Securities.

(xiii) It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of any particular Purchaser or to make any Event Payments set forth in Section 5(c) to such Purchaser that the intended method of disposition of the Registrable Securities held by it (if different from the Plan of Distribution set forth on Exhibit B hereto) as shall be reasonably required to effect the registration of such Registrable Securities and shall complete and execute such documents in connection with such registration as the Company may reasonably request.

(xiv) The Company shall comply with all applicable rules and regulations of the SEC under the Securities Act and the Exchange Act, including, without limitation, Rule 172 under the Securities Act, file any final Prospectus, including any supplement or amendment thereof, with the SEC pursuant to Rule 424 under the Securities Act, promptly inform the Purchasers in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Purchasers are required to make available a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder.

(xv) Not identify any Purchaser as an underwriter without its prior written consent in any public disclosure or filing with the SEC, the Trading Market or any Eligible Market and any Purchaser being deemed an underwriter by the SEC shall not relieve the Company of any obligations it has under this Agreement; provided , however , that the foregoing shall not prohibit the Company from including the disclosure found in the “Plan of Distribution” section attached hereto as Annex B in the Registration Statement. In addition, and notwithstanding anything to the contrary contained herein, if the Company has received a comment by the SEC requiring an Purchaser to be named as an underwriter in the Registration Statement (which notwithstanding the reasonable best efforts of the Company is not withdrawn by the SEC) and such Purchaser elects in writing not to be named as a selling stockholder in the Registration Statement, the Purchaser shall not be entitled to any Event Payments with respect to such Registration Statement.

g. Registration Expenses . The Company shall pay all fees and expenses incident to the performance of or compliance with Section 5 of this Agreement by the Company, including without limitation (i) all registration and filing fees and expenses, including without limitation those related to filings with the SEC, any Trading Market, any required filing with the Financial Industry Regulatory Authority by the Agents (but not any Purchaser), and in connection with applicable state securities or blue sky laws, (ii) printing expenses (including without limitation expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement, and (vi) all listing fees to be paid by the Company to the Trading Market.

h. Indemnification .

(i) Indemnification by the Company . The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Purchaser, the officers, directors, partners, members, agents and employees of each of them, each Person who controls any such Purchaser (within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act) and the officers, directors, partners, members, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all Losses, as incurred, arising out of or relating to (A) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (B) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (C) any cause of action, suit or claim brought or made against such Indemnified Party (as defined in Section 5(h)(iii) below) by a third party (including for these purposes a derivative action brought on behalf of the Company), arising out of or resulting from (x) execution, delivery, performance or enforcement of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (y) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (z) the status of Indemnified Party as holder of the Securities or (D) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus or any form of Company prospectus or in any amendment or supplement thereto or in any Company preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that (1) such untrue statements, alleged untrue statements, omissions or alleged omissions are based solely upon information regarding such Purchaser furnished in writing to the Company by such Purchaser for use therein, or to the extent that such information relates to such Purchaser or such Purchaser’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved by such Purchaser expressly for use in the Registration Statement, or (2) with respect to any prospectus, if the untrue statement or omission of material fact contained in such prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented, if such corrected prospectus was timely made available by the Company to the Purchaser, and the Purchaser seeking indemnity hereunder was advised in writing not to use the incorrect prospectus prior to the use giving rise to Losses.

(ii) Indemnification by Purchasers . Each Purchaser shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the 1933 Act and Section 20 of the 1934 Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses (as determined by a court of competent jurisdiction in a final judgment not subject to appeal or review) arising solely out of any untrue statement of a material fact contained in the Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto, or arising out of or relating to any omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, but only to the extent that such untrue statement or omission is contained in any information so furnished by such Purchaser in writing to the Company specifically for inclusion in such Registration Statement or such Prospectus or to the extent that (i) such untrue statements or omissions are based solely upon information regarding such Purchaser furnished to the Company by such Purchaser in writing expressly for use therein, or to the extent that such information relates to such Purchaser or such Purchaser’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved by such Purchaser expressly for use in the Registration Statement (it being understood that the Plan of Distribution set forth on Annex B constitutes information reviewed and expressly approved by such Purchaser in writing expressly for use in the Registration Statement), such Prospectus or such form of Prospectus or in any amendment or supplement thereto. In no event shall the liability of any selling Purchaser hereunder be greater in amount than the dollar amount of the net proceeds received by such Purchaser upon the sale of the Registrable Securities giving rise to such indemnification obligation.

(iii) Conduct of Indemnification Proceedings .

(A) If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “ Indemnified Party ”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “ Indemnifying Party ”) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party.

(B) An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (2) the Indemnifying Party shall have failed within 45 days of receiving notification of a Proceeding from an Indemnified Party to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of separate counsel shall be at the expense of the Indemnifying Party). It being understood, however, that the Indemnifying Party shall not, in connection with any one such Proceeding (including separate Proceedings that have been or will be consolidated before a single judge) be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties, which firm shall be appointed by a majority of the Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

(C) All reasonable fees and documented expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within 20 Trading Days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder.

(iv) Contribution . If a claim for indemnification under Section 5(h)(i) or (ii) is unavailable to an Indemnified Party (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 5(h)(iii), any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section 5 was available to such party in accordance with its terms. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(h)(iv) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(h)(iv), no Purchaser shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Purchaser from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(v) Additional Liability . The indemnity and contribution agreements contained in this Section 5 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

i. Dispositions . Each Purchaser agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement and shall sell its Registrable Securities in accordance with the Plan of Distribution set forth in the Prospectus. Each Purchaser further agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Sections 5(f)(iii)(C), (D) or (E), such Purchaser will discontinue disposition of such Registrable Securities under the Registration Statement until such Purchaser is advised in writing by the Company that the use of the Prospectus, or amended Prospectus, as applicable, may be used. The Company may provide appropriate stop orders to enforce the provisions of this paragraph. Each Purchaser, severally and not jointly with the other Purchasers, agrees that the removal of the restrictive legend from certificates representing Securities as set forth in Section 5 and elsewhere in this Agreement is predicated upon the Company’s reliance that the Purchaser will comply with the provisions of this subsection.

j. Definitions . In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated:

“ Additional Filing Date ” means the later of (i) the date sixty (60) days after the date substantially all of the Registrable Securities registered under the immediately preceding Registration Statement are sold and (ii) the date six (6) months from the Effective Date of the immediately preceding Registration Statement, or, if such date is not a Business Day, the next date that is a Business Day.

“ Additional Registration Statement ” has the meaning set forth in Section 5(a) .

“ Additional Required Effectiveness Date ” means the date which is the earliest of (i) if the Registration Statement does not become subject to review by the SEC, (a) sixty (60) days after the Additional Filing Date or (b) five (5) Trading Days after the Company receives notification from the SEC that the Additional Registration Statement will not become subject to review and the Company fails to request to accelerate the effectiveness of the Registration Statement, or (ii) if the Additional Registration Statement becomes subject to review by the SEC, one hundred and twenty (120) days after the Additional Filing Date, or, if such date is not a Business Day, the next date that is a Business Day.

“ Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law to remain closed.

“ Effective Date ” means the date that a Registration Statement is first declared effective by the SEC.

“ Effectiveness Period ” has the meaning set forth in Section 5(b).

“ Eligible Market ” means any of the following markets or exchanges on which the shares of Common Stock are listed or quoted for trading on the date in question: the OTC Bulletin Board, The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market, the New York Stock Exchange, NYSE Arca, the NYSE MKT, or the OTCQX Marketplace or the OTCQB ad OTC Pink quotation systems operated by OTC Markets Group Inc. (or any successor to any of the foregoing).

“ Event ” has the meaning set forth in Section 5(d) .

“ Event Payments ” has the meaning set forth in Section 5(d) .

“ Excluded Events ” has the meaning set forth in Section 5(d)(ii) .

“ Filing Date ” means the Initial Filing Date and the Additional Filing Date, as applicable.

“ Indemnified Party ” has the meaning set forth in Section 5(h)(iii)(A) .

“ Indemnifying Party ” has the meaning set forth in Section 5(h)(iii)(A) .

“Initial Filing Date ” has the meaning set forth in Section 5(a) .

“ Initial Registration Statement ” has the meaning set forth in Section 5(a) .

“ Initial Required Effectiveness Date ” means the date which is the earliest of (i) if the Registration Statement does not become subject to a full review by the SEC, (a) ninety (90) days after the Closing Date or (b) five (5) Trading Days after the Company receives notification from the SEC that the Registration Statement will not become subject to review and the Company fails to request to accelerate the effectiveness of the Registration Statement, or (ii) if the Registration Statement becomes subject to a full review by the SEC, one hundred and twenty (120) days after the Closing Date, or, if such date is not a Business Day, the next date that is a Business Day.

“ Losses ” means any and all losses, claims, damages, liabilities, settlement costs and expenses, including, without limitation reasonable attorneys’ fees.

“ Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, a partial proceeding, such as a deposition), whether commenced or threatened in writing.

“ Prospectus ” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the 1934 Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

“ Registrable Securities ” has the meaning set forth in Section 5(a) .

“ Registration Statement ” means each registration statement required to be filed under Article VI, including the Initial Registration Statement, all Additional Registration Statements, and, in each case, the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

“ Required Effectiveness Date ” means the Initial Required Effectiveness Date and the Additional Required Effectiveness Date, as applicable.

“ Rule 144 ,” “ Rule 415 ,” and “ Rule 424 ” means Rule 144, Rule 415 and Rule 424, respectively, promulgated by the SEC pursuant to the Securities Act, as such Rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.

“ Securities ” means, collectively, the Common Stock, the Warrants and the Warrant Shares issued to the Purchasers pursuant to this Agreement.

“ Trading Day ” means (a) any day on which the Common Stock is listed or quoted and traded on its primary Trading Market, or (b) if the Common Stock is not then listed or quoted and traded on its primary Trading Market, then a day on which trading of the Common Stock occurs on an Eligible Market, or (c) if the Common Stock is not listed or quoted as set forth in clauses (a) or (b) hereof, any Business Day.

“ Trading Market ” means any Eligible Market, or any national securities exchange, market or trading or quotation facility on which the Common Stock is then listed or quoted.

“ Transaction Documents ” means this Agreement, the schedules, exhibits and annexes attached hereto, and the Warrants.

6. Conditions to the Company’s Obligation to Sell . The obligation of the Company hereunder to issue the Offered Units to the Purchaser at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

a. The Purchaser shall have executed this Agreement and delivered the same to the Company.

b. The Purchaser shall have delivered the Purchase Price in accordance with Section 1(b) above.

c. The representations and warranties of the Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Purchaser shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchaser at or prior to the Closing Date.

d. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

7. Conditions to The Purchaser’s Obligation to Purchase . The obligation of the Purchaser hereunder to pay the Purchase Price to the Company at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Purchaser’s sole benefit and may be waived by the Purchaser at any time in its sole discretion:

a. The Company shall have executed this Agreement and delivered the same to the Purchaser.

b. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date), and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Purchaser shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Purchaser.

c. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

d. No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.

8. Miscellaneous .

a. Replacement of Securities . If any certificate or instrument evidencing any securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. The holder/applicant(s) for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement securities.

b. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens . The Company and Purchaser waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

c. Counterparts . This Agreement may be executed by facsimile and in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.

d. Headings . The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

e. Severability . In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

f. Entire Agreement; Amendments . This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Purchaser makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Purchaser.

g. Notices . All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) hand delivered, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable national courier service with charges prepaid, or (iv) transmitted by facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If to the Company, to:

Arkados Group, Inc.

Attn: Terrence DeFranco

211 Warren Street, Suite 320

Newark, NJ 07103

With a copy by fax only to (which copy shall not constitute notice):

Mark Crone

Corporate Counsel

LKP Global Law, LLP

1901 Avenue of the Stars, Suite 480

Los Angeles, CA 90067

Fax: (424) 239-1882

If to the Purchaser:

To the address first set forth in the Purchaser Signature and Subscription Page

of this Agreement

Each party shall provide notice (in accordance with the requirements of this provision) to the other party of any change in address.

h. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Purchaser shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other.

i. Third Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

j. Survival . The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Purchaser. The Company agrees to indemnify and hold harmless the Purchaser and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

k. Publicity . The Company shall have the right to make, without prior approval, any SEC, OTC or FINRA filings, or any other public statements with respect to the transactions contemplated hereby as is required by applicable law and regulations.

l. Further Assurances . Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

m. No Strict Construction . The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

n. Remedies . Each of the parties acknowledges that a breach by it of its obligations hereunder will cause immediate and irreparable harm to the other party by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, each party acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by a party of the provisions of this Agreement, that the other party shall be entitled, in addition to all other available remedies at law or in equity, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

SIGNATURE PAGES FOLLOW]

COMPANY SIGNATURE PAGE

TO ARKADOS SECURITIES PURCHASE AGREEMENT

IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Securities Purchase Agreement to be duly executed as of the date first written above .

COMPANY :
ARKADOS GROUP, INC.

By:	/s/ Terrence DeFranco
	Terrence DeFranco
	President and Chief Executive Officer

[PURCHASER SIGNATURE AND SUBSCRIPTION PAGE TO FOLLOW]

PURCHASER SIGNATURE AND SUBSCRIPTION PAGE

TO ARKADOS SECURITIES PURCHASE AGREEMENT

IN WITNESS WHEREOF , each of the undersigned has caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Instructions: Please complete Section 1 through Section 4 below.

PURCHASER:

Section 1

INVESTOR INFORMATION AND SUBSCRIPTION:

(choose one alternative by placing “X” in box):

¨ (if entity):

Entity Name: _______________________________ (must be exact legal name)

By:_______________________________________

(Signature)

Name (Printed): _________________________________________

Title:______________________________________

Entity Taxpayer Identification Number: ______________________________________

Email Address of Authorized contact:________________________________________________

¨ (if individual):

¨ (if joint ownership with individual named):

By:			By:
	(Signature)			(Signature)

Name (Printed):

SSN:

Section 2:

ADDRESS, FACSIMILE, EMAIL FOR NOTICE (SECTION 7(G)) TO PURCHASER:

_______________________________________________________________________________________

Section 3:

ADDRESS FOR DELIVERY OF SECURITIES TO PURCHASER (if different from Section 2 above):

______________________________________________________________________________________

Section 4:

AGGREGATE SUBSCRIPTION AMOUNT:

Aggregate Number of Shares Purchased:	__________________

Aggregate Purchase Price:	$_________________

Annex A

CLOSING STATEMENT

All funds will be wired into the account listed below. All funds will be disbursed in accordance with this Closing Statement.

Disbursement Date:	upon receipt by the Company

I. PURCHASE PRICE

	Gross Proceeds to be Received	$	1,000,000.00

II. DISBURSEMENTS

	Fees	$	5,000.00

Total Amount Disbursed to Company:		$	995,000.00	¹

does not include commissions of up to ten percent (10%) of gross proceeds received from investors introduced by a broker dealer

WIRE INSTRUCTIONS :

Arkados Group, Inc.

211 Warren Street

Suite 320

Newark, NJ 07103

Bank Information:

Bank of America

1 Springfield Avenue

Newark, NJ 07102

Account Number: 381045612075

ABA/Routing Number: 026009593

Swift Code: BOFAUS3N (US dollars), BOFAUS6S (foreign currency)

Annex B

PLAN OF DISTRIBUTION

We may sell the securities offered through this prospectus (1) to or through underwriters or dealers, (2) directly to purchasers, including our affiliates, (3) through agents, or (4) through a combination of any of these methods. The securities may be distributed at a fixed price or prices, which may be changed, market prices prevailing at the time of sale, prices related to the prevailing market prices, or negotiated prices. The prospectus supplement will include the following information:

•

the terms of the offering;

•

the names of any underwriters or agents;

•

the name or names of any managing underwriter or underwriters;

•

the purchase price of the securities;

•

the net proceeds from the sale of the securities;

•

any delayed delivery arrangements;

•

any underwriting discounts, commissions and other items constituting underwriters’ compensation;

•

any initial public offering price;

•

any discounts or concessions allowed or reallowed or paid to dealers; and

•

any commissions paid to agents.

Sale Through Underwriters or Dealers

If underwriters are used in the sale, the underwriters will acquire the securities for their own account, including through underwriting, purchase, security lending or repurchase agreements with us. The underwriters may resell the securities from time to time in one or more transactions, including negotiated transactions. Underwriters may sell the securities in order to facilitate transactions in any of our other securities (described in this prospectus or otherwise), including other public or private transactions and short sales. Underwriters may offer securities to the public either through underwriting syndicates represented by one or more managing underwriters or directly by one or more firms acting as underwriters. Unless otherwise indicated in the prospectus supplement, the obligations of the underwriters to purchase the securities will be subject to certain conditions, and the underwriters will be obligated to purchase all the offered securities if they purchase any of them. The underwriters may change from time to time any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers. The prospectus supplement will include the names of the principal underwriters the respective amount of securities underwritten, the nature of the obligation of the underwriters to take the securities and the nature of any material relationship between an underwriter and us.

If dealers are used in the sale of securities offered through this prospectus, we will sell the securities to them as principals. They may then resell those securities to the public at varying prices determined by the dealers at the time of resale. The prospectus supplement will include the names of the dealers and the terms of the transaction.

Direct Sales and Sales Through Agents

We may sell the securities offered through this prospectus directly. In this case, no underwriters or agents would be involved. Such securities may also be sold through agents designated from time to time. The prospectus supplement will name any agent involved in the offer or sale of the offered securities and will describe any commissions payable to the agent by us. Unless otherwise indicated in the prospectus supplement, any agent will agree to use its reasonable best efforts to solicit purchases for the period of its appointment.

We may sell the securities directly to institutional investors or others who may be deemed to be underwriters within the meaning of the Securities Act with respect to any sale of those securities. The terms of any such sales will be described in the prospectus supplement.

At-the-Market Offerings

To the extent that we make sales through one or more underwriters or agents in at-the-market offerings, we will do so pursuant to the terms of a sales agency financing agreement or other at-the-market offering arrangement between us, on the one hand, and the underwriters or agents, on the other. If we engage in at-the-market sales pursuant to any such agreement, we will issue and sell our securities through one or more underwriters or agents, which may act on an agency basis or a principal basis. During the term of any such agreement, we may sell securities on a daily basis in exchange transactions or otherwise as we agree with the underwriters or agents. Any such agreement will provide that any securities sold will be sold at prices related to the then prevailing market prices for our securities. Therefore, exact figures regarding proceeds that will be raised or commissions to be paid cannot be determined at this time. Pursuant to the terms of the agreement, we may agree to sell, and the relevant underwriters or agents may agree to solicit offers to purchase blocks of our common stock or other securities. The terms of any such agreement will be set forth in more detail in the applicable prospectus or prospectus supplement.

Market Making, Stabilization and Other Transactions

Unless the applicable prospectus supplement states otherwise, each series of offered securities will be a new issue and will have no established trading market. We may elect to list any series of offered securities on an exchange. Any underwriters that we use in the sale of offered securities may make a market in such securities, but may discontinue such market making at any time without notice. Therefore, we cannot assure you that the securities will have a liquid trading market.

Any underwriter may also engage in stabilizing transactions, syndicate covering transactions and penalty bids in accordance with Rule 104 under the Securities Exchange Act of 1934, as amended. Stabilizing transactions involve bids to purchase the underlying security in the open market for the purpose of pegging, fixing or maintaining the price of the securities. Syndicate covering transactions involve purchases of the securities in the open market after the distribution has been completed in order to cover syndicate short positions.

Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the securities originally sold by the syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions. Stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of the securities to be higher than it would be in the absence of the transactions. The underwriters may, if they commence these transactions, discontinue them at any time.

Derivative Transactions and Hedging

We, the underwriters or other agents may engage in derivative transactions involving the securities. These derivatives may consist of short sale transactions and other hedging activities. The underwriters or agents may acquire a long or short position in the securities, hold or resell securities acquired and purchase options or futures on the securities and other derivative instruments with returns linked to or related to changes in the price of the securities. In order to facilitate these derivative transactions, we may enter into security lending or repurchase agreements with the underwriters or agents. The underwriters or agents may effect the derivative transactions through sales of the securities to the public, including short sales, or by lending the securities in order to facilitate short sale transactions by others. The underwriters or agents may also use the securities purchased or borrowed from us or others (or, in the case of derivatives, securities received from us in settlement of those derivatives) to directly or indirectly settle sales of the securities or close out any related open borrowings of the securities.

Electronic Auctions

We may also make sales through the Internet or through other electronic means. Since we may from time to time elect to offer securities directly to the public, with or without the involvement of agents, underwriters or dealers, utilizing the Internet or other forms of electronic bidding or ordering systems for the pricing and allocation of such securities, you should pay particular attention to the description of that system we will provide in a prospectus supplement.

Such electronic system may allow bidders to directly participate, through electronic access to an auction site, by submitting conditional offers to buy that are subject to acceptance by us, and which may directly affect the price or other terms and conditions at which such securities are sold. These bidding or ordering systems may present to each bidder, on a so-called “real-time” basis, relevant information to assist in making a bid, such as the clearing spread at which the offering would be sold, based on the bids submitted, and whether a bidder’s individual bids would be accepted, prorated or rejected. For example, in the case of a debt security, the clearing spread could be indicated as a number of “basis points” above an index treasury note. Of course, many pricing methods can and may also be used.

Upon completion of such an electronic auction process, securities will be allocated based on prices bid, terms of bid or other factors. The final offering price at which securities would be sold and the allocation of securities among bidders would be based in whole or in part on the results of the Internet or other electronic bidding process or auction.

General Information

Agents, underwriters, and dealers may be entitled, under agreements entered into with us, to indemnification by us against certain liabilities, including liabilities under the Securities Act.

EXHIBIT 31.1

CERTIFICATION

I, Terrence DeFranco, certify that:

I have reviewed this Quarterly Report on Form 10-Q of Arkados Group, Inc.;

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

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

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 21, 2017	By:	/s/ Terrence DeFranco
		Terrence DeFranco
		Chief Executive Officer, Chief Financial Officer and Director

EXHIBIT 32.1

CERTIFICATION

In connection with the Quarterly Report of Arkados Group, Inc. (the “Company”) on Form 10-Q for the quarter ended February 28, 2017, as filed with the Securities and Exchange Commission (the “Report”), I, Terrence DeFranco, Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: April 21, 2017	By:	/s/ Terrence DeFranco
		Terrence DeFranco
		Chief Executive Officer, Chief Financial Officer and Director