Iota Communications (IOTC) 10-Q 17 Oct 16 2017 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Aug. 31, 2016	Oct. 14, 2016
Document And Entity Information
Entity Registrant Name	ARKADOS GROUP, INC.
Entity Central Index Key	1,095,130
Document Type	10-Q
Trading Symbol	AKDS
Document Period End Date	Aug. 31, 2016
Amendment Flag	false
Current Fiscal Year End Date	--05-31
Entity a Well-known Seasoned Issuer	No
Entity a Voluntary Filer	No
Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		13,373,167
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2,017

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Aug. 31, 2016	May 31, 2016
Current Assets:
Cash	$ 5,656	$ 56,172
Accounts receivable	222,534	192,100
Inventory	141,197	120,410
Prepaid expenses and other current assets	125,492	187,935
Total Current Assets	494,879	556,617
Property and equipment, net	7,378	7,642
Security deposit	20,384	20,384
Total Assets	522,641	584,643
Current Liabilities:
Accounts payable and accrued expenses	1,147,154	1,022,382
Deferred revenue	210,837	260,637
Accrued income tax	63,082	63,082
Debt subject to equity being issued	456,930	456,930
Notes payable	485,832	335,832
Total Current Liabilities	2,363,835	2,138,863
Total Liabilities	2,363,835	2,138,863
Stockholders' Deficiency:
Additional paid-in capital	41,645,382	41,645,382
Accumulated deficit	(43,487,913)	(43,200,939)
Total Stockholders' Deficiency	(1,841,194)	(1,554,220)
Total Liabilities and Stockholders' Deficiency	522,641	584,643
Convertible Preferred Stock [Member]
Stockholders' Deficiency:
Convertible preferred stock, $.0001 par value; 5,000,000 shares authorized, zero shares outstanding
Common Stock [Member]
Stockholders' Deficiency:
Common stock, $.0001 par value; 600,000,000 shares authorized; 13,373,167 shares issued and outstanding	$ 1,337	$ 1,337

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Aug. 31, 2016	May 31, 2016
Convertible Preferred Stock [Member]
Convertible preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Convertible preferred stock, authorized	5,000,000	5,000,000
Convertible preferred stock, outstanding	0	0
Common Stock [Member]
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, authorized	600,000,000	600,000,000
Common stock, issued	13,373,167	13,373,167
Common stock, outstanding	13,373,167	13,373,167

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended
	Aug. 31, 2016	Aug. 31, 2015
Income Statement [Abstract]
Sales	$ 424,487	$ 106,836
Cost of sales	380,009
Gross Profit	44,478	106,836
Operating Expenses:
Selling and general and administrative	312,941	529,192
Research and development	8,860	98,429
Total Operating Expenses	321,801	627,621
Loss From Operations	(277,323)	(520,785)
Other Income (Expenses):
Interest expense	(9,651)	(7,414)
Loss on translation adjustments		(562)
Total Other Expense	(9,651)	(7,976)
Loss Before Provision for Income Taxes	(286,974)	(528,761)
Provision for income taxes
Net Loss	$ (286,974)	$ (528,761)
Loss per Common Share - Basic and Diluted (in dollars per share)	$ (0.02)	$ (0.04)
Weighted Average Shares Outstanding - Basic and Diluted (in shares)	13,373,167	11,804,761

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	3 Months Ended
	Aug. 31, 2016	Aug. 31, 2015
Cash Flows from Operating Activities:
Net loss	$ (286,974)	$ (528,761)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	264
Changes in operating assets and liabilities:
Accounts receivable	(30,434)	71,027
Inventory	(20,787)	(186,799)
Prepaid expenses and other current assets	62,443	568
Security deposits		(18,510)
Accounts payable and accrued expenses	124,772	150,203
Deferred revenue	(49,800)	64,900
Accrued income tax benefits
Net Cash Used in Operating Activities	(200,516)	(447,372)
Cash Flows from Financing Activities:
Proceeds from sales of common stock		503,000
Proceeds from short-term note	150,000
Net Cash Provided by Financing Activities	150,000	503,000
Net Increase (Decrease) in Cash	(50,516)	55,628
Cash - Beginning of Year	56,172	234,994
Cash - End of Year	5,656	290,622
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
Cash paid for:
Interest paid
Income taxes paid

DESCRIPTION OF BUSINESS

DESCRIPTION OF BUSINESS	3 Months Ended
	Aug. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
DESCRIPTION OF BUSINESS	1. 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 (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 August 31, 2016 (unaudited) and May 31, 2016 and for the three months ended August 31, 2016 and 2015 (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 months ended August 31, 2016 (unaudited) are not necessarily indicative of the results to be expected for the pending full year ending May 31, 2017.

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	3 Months Ended
	Aug. 31, 2016
Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. 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 $43.5 million since inception, including a net loss of approximately $286,974 for the three months ended August 31, 2016. Additionally, the Company still had both working capital and stockholders’ deficiencies at August 31, 2016 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 consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. b. Principles of consolidation - The consolidated financial statements include the accounts of the Parent, and its wholly-owned subsidiaries, which include AES and Arkados. Intercompany accounts and transactions have been eliminated in consolidation. c. 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. d. 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 August 31, 2016 and May 31, 2016. e. 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 August 31, 2016 and May 31, 2016, the Company determined that an allowance for doubtful accounts was not needed. f. 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. 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. g. 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 Months ended August 31, 2016 2015 Convertible notes 86,580 114,795 Stock options 5,112,500 2,312,500 Warrants 5,225,987 4,776,320 Potentially dilutive securities 10,425,067 7,203,615 h. 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. There are no issuances of the Company’s common stock, warrants, and options during the three months ended August 31, 2016 and as a result there was no stock based compensation incurred during the period. Stock based compensation expense was $0 for the three months ended August 31, 2016 and August 31, 2015. i. 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. j. 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 August 31, 2016 and May 31, 2016. August 31, May 31, 2016 2016 (unaudited) Finished goods $ 60,012 $ 60,012 Work-in-process (unbilled labor and consulting) 81,185 60,398 $ 141,197 $ 120,410 k. 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. l. Research and Development –All research and development costs are expensed as incurred. m. 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. n. New Accounting Pronouncements – In March 2016, the Financial Accounting Standards Board (“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 Accounting Standards Update (“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. In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”. Currently deferred taxes for each tax jurisdiction are presented as a net current asset or liability and net noncurrent asset or liability on the balance sheet. To simplify the presentation, the new guidance requires that deferred tax liabilities and assets for all jurisdictions along with any related valuation allowances be classified as noncurrent in a classified statement of financial position. This guidance is effective for interim and annual reporting periods beginning after December 15, 2016, and early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance. In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement–Period Adjustments”. Changes to the accounting for measurement-period adjustments relate to business combinations. Currently, an acquiring entity is required to retrospectively adjust the balance sheet amounts of the acquiree recognized at the acquisition date with a corresponding adjustment to goodwill as a result of changes made to the balance sheet amounts of the acquiree. The measurement period is the period after the acquisition date during which the acquirer may adjust the balance sheet amounts recognized for a business combination (generally up to one year from the date of acquisition). The changes eliminate the requirement to make such retrospective adjustments, and, instead require the acquiring entity to record these adjustments in the reporting period they are determined. The new standard is effective for both public and private companies for annual reporting periods beginning after December 15, 2015. The Company is currently evaluating the impact of adopting this guidance. In August 2015, the FASB issued ASU No. 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. In April 2015, the FASB issued ASU 2 015-03, “Imputation of Interest – Simplifying the Presentation of Debt Issuance Costs.” This guidance requires that the debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the debt liability, consistent with the presentation of a debt discount. This amendment is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial statements of adopting this new guidance but at this time does not expect it to have a material impact on the Company’s consolidated financial statements. 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

ASSET SALE AND DEBT SUBJECT TO EQUITY BEING ISSUED	3 Months Ended
	Aug. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
ASSET SALE AND DEBT SUBJECT TO EQUITY BEING ISSUED	3. 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 August 31, 2016 and May 31, 2016. As of August 31, 2016 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 EX

ACCOUNTS PAYABLE AND ACCRUED EXPENSES	3 Months Ended
	Aug. 31, 2016
Payables and Accruals [Abstract]
ACCOUNTS PAYABLE AND ACCRUED EXPENSES	4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES As of August 31, 2016 and May 31, 2016, accounts payable and accrued expenses consist of the following amounts: August 31, May 31, 2016 2016 (Unaudited) Accounts payable $ 920,887 $ 782,654 Accrued interest payable 125,686 116,035 Accrued payroll 4,966 28,320 Accrued other 95,615 95,373 $ 1,147,154 $ 1,022,382

NOTES PAYABLE, RELATED PARTY PA

NOTES PAYABLE, RELATED PARTY PAYABLES AND DEBT SUBJECT TO EQUITY BEING ISSUED	3 Months Ended
	Aug. 31, 2016
Debt Disclosure [Abstract]
NOTES PAYABLE, RELATED PARTY PAYABLES AND DEBT SUBJECT TO EQUITY BEING ISSUED	5. NOTES PAYABLE, RELATED PARTY PAYABLES AND DEBT SUBJECT TO EQUITY BEING ISSUED 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 proceeds from the Promissory Note were used to partially repay two Convertible Notes as discussed below. On January 8, 2016, the Company entered into an Exchange Agreement with the noteholders of the Convertible Notes that were in default. On January 15, 2016, the Company applied the proceeds of the new Promissory Note together with the issuance of 50,000 shares of the Company’s common stock, to the payment of two outstanding 6% Convertible Notes that were in default having the aggregate outstanding principal amount of $130,000. In exchange for the payment and the shares, the holders of the outstanding 6% Convertible Notes surrendered their notes, and the Company issued a new 6% Convertible Note December 31, 2016 to them in the original principal amount of $40,000. The new Convertible Note bears interest at the rate of 6% per year, compounded quarterly, and matures on December 31, 2016. At any time during the term of the Convertible Note, the holders have the right to convert any unpaid portion of the Convertible Note and accrued interest into shares of common stock at an original conversion price of $1.20 per share. There is no beneficial conversion feature. The holders further agreed that their extension of the maturity of the outstanding Convertible Notes had been effective from October 31, 2015 until January 15, 2016. On March 31, 2016 and May 6, 2016, the Company executed Promissory Notes for loans, each in the amount of $10,000. The Promissory Notes bear interest at 6% per year, compounded quarterly. Both notes matured on June 30, 2016 and are now bearing annual interest of 12%. The proceeds from the Promissory Note were used to partially repay two Convertible Notes as discussed below. 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 2017. The loan bears interest at 10% per annum compounded quarterly.

STOCKHOLDERS' DEFICIENCY

STOCKHOLDERS' DEFICIENCY	3 Months Ended
	Aug. 31, 2016
Equity [Abstract]
STOCKHOLDERS' DEFICIENCY	6. STOCKHOLDERS’ DEFICIENCY FY 2016 (Year Ended May 31, 2016): a. 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. b. 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. c. 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; d. 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. e. 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. f. 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): There were no issuances of common stock during the period ended August 31, 2016.

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION	3 Months Ended
	Aug. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
STOCK-BASED COMPENSATION	7. 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 months ended August 31, 2016. 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 August 31, 2016 5,112,500 $ 0.99 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 - - Outstanding at August 31, 2016 5,225,987 $ 1.53 Issuances of warrants to purchase shares of the Company's common stock were as follows: 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 3years. 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 3years. The value of the warrant totaling $18,471 was charged as consulting. 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 3years. 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. FY 2017 (Year Ended May 31, 2017): There were no warrants granted during the three months ended August 31, 2016. 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

LICENSE AGREEMENTS	3 Months Ended
	Aug. 31, 2016
License Agreements
LICENSE AGREEMENTS	8. 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 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 $13,583 and $66,000 for the three months ended August 31, 2016 and 2015, respectively. 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- and $42,500 for the three months ended August 31, 2016 and 2015, 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 approximately $60,000 for the three months ended August 31, 2016.

COMMITMENTS

COMMITMENTS	3 Months Ended
	Aug. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS	9. 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. It can be renewed for two additional one-year terms 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 August 31, 2016 and 2015 was $22,777 and $10,766, respectively. Consulting Agreements None in the three months ended August 31, 2016.

CONCENTRATIONS OF CREDIT RISK

CONCENTRATIONS OF CREDIT RISK	3 Months Ended
	Aug. 31, 2016
Risks and Uncertainties [Abstract]
CONCENTRATIONS OF CREDIT RISK	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 Two customers accounted for 94% of net sales for the three ended August 31, 2016, as set forth below: Three months ended August 31, 2016 2015 Customer 1 80 % 60 % Customer 2 14 % 40 % Accounts Receivable Two customers accounted for 92% of the accounts receivable as of August 31, 2016, as set forth below: Three months ended August 31, May 31, (Unaudited) Customer 1 83 % 83 % Customer 2 9 % 11 %

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS	3 Months Ended
	Aug. 31, 2016
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	11. RELATED PARTY TRANSACTIONS There were no related party transactions during the period.

BUSINESS SEGMENT INFORMATION

BUSINESS SEGMENT INFORMATION	3 Months Ended
	Aug. 31, 2016
Segment Reporting [Abstract]
BUSINESS SEGMENT INFORMATION	12. BUSINESS SEGMENT INFORMATION As of August 31, 2016, 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. The Company evaluates performance based primarily on income (loss) from operations Information about segments is as follows: Arkados AES Consolidated Three months ended August 31, 2016 Revenues $ 76,883 $ 347,604 $ 424,487 Loss from operations $ (104,448 ) $ (172,875 ) $ (277,323 ) Three months ended August 31, 2015 Revenues $ 106,836 $ 80,410 $ 187,246 Loss from operations $ (257,737 ) $ (263,048 ) $ (520,785 ) Total assets August 31, 2016 $ 142,306 $ 380,335 $ 522,641 May 31, 2016 $ 236,797 $ 347,846 $ 584,643

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	3 Months Ended
	Aug. 31, 2016
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	13. SUBSEQUENT EVENTS 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.

SUMMARY OF SIGNIFICANT ACCOUN19

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
	Aug. 31, 2016
Accounting Policies [Abstract]
Basis of Presentation	a. 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 $43.5 million since inception, including a net loss of approximately $286,974 for the three months ended August 31, 2016. Additionally, the Company still had both working capital and stockholders’ deficiencies at August 31, 2016 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 consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
Principles of consolidation	b. 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.
Revenue Recognition	c. 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 equivalents	d. 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 August 31, 2016 and May 31, 2016.
Accounts receivable	e. 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 August 31, 2016 and May 31, 2016, the Company determined that an allowance for doubtful accounts was not needed.
Fair Value of Financial Instruments	f. 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. 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")	g. 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 Months ended August 31, 2016 2015 Convertible notes 86,580 114,795 Stock options 5,112,500 2,312,500 Warrants 5,225,987 4,776,320 Potentially dilutive securities 10,425,067 7,203,61 5
Stock Based Compensation	h. 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. There are no issuances of the Company’s common stock, warrants, and options during the three months ended August 31, 2016 and as a result there was no stock based compensation incurred during the period. Stock based compensation expense was $0 for the three months ended August 31, 2016 and August 31, 2015.
Use of Estimates	i. 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.
Inventory	j. 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 August 31, 2016 and May 31, 2016. August 31, May 31, 2016 2016 (unaudited) Finished goods $ 60,012 $ 60,012 Work-in-process (unbilled labor and consulting) 81,185 60,398 $ 141,197 $ 120,41 0
Property and equipment	k. 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	l. Research and Development –All research and development costs are expensed as incurred.
Foreign Currency Transactions	m. 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.
Recent Accounting Pronouncements	n. New Accounting Pronouncements – In March 2016, the Financial Accounting Standards Board (“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 Accounting Standards Update (“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. In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”. Currently deferred taxes for each tax jurisdiction are presented as a net current asset or liability and net noncurrent asset or liability on the balance sheet. To simplify the presentation, the new guidance requires that deferred tax liabilities and assets for all jurisdictions along with any related valuation allowances be classified as noncurrent in a classified statement of financial position. This guidance is effective for interim and annual reporting periods beginning after December 15, 2016, and early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance. In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement–Period Adjustments”. Changes to the accounting for measurement-period adjustments relate to business combinations. Currently, an acquiring entity is required to retrospectively adjust the balance sheet amounts of the acquiree recognized at the acquisition date with a corresponding adjustment to goodwill as a result of changes made to the balance sheet amounts of the acquiree. The measurement period is the period after the acquisition date during which the acquirer may adjust the balance sheet amounts recognized for a business combination (generally up to one year from the date of acquisition). The changes eliminate the requirement to make such retrospective adjustments, and, instead require the acquiring entity to record these adjustments in the reporting period they are determined. The new standard is effective for both public and private companies for annual reporting periods beginning after December 15, 2015. The Company is currently evaluating the impact of adopting this guidance. In August 2015, the FASB issued ASU No. 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. In April 2015, the FASB issued ASU 2 015-03, “Imputation of Interest – Simplifying the Presentation of Debt Issuance Costs.” This guidance requires that the debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the debt liability, consistent with the presentation of a debt discount. This amendment is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial statements of adopting this new guidance but at this time does not expect it to have a material impact on the Company’s consolidated financial statements. All newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company.

SUMMARY OF SIGNIFICANT ACCOUN20

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	3 Months Ended
	Aug. 31, 2016
Accounting Policies [Abstract]
Schedule of antidilutive securities excluded from computation of earnings per share	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 Months ended August 31, 2016 2015 Convertible notes 86,580 114,795 Stock options 5,112,500 2,312,500 Warrants 5,225,987 4,776,320 Potentially dilutive securities 10,425,067 7,203,615
Schedule of inventory	Inventory consists of the following at August 31, 2016 and May 31, 2016. August 31, May 31, 2016 2016 (unaudited) Finished goods $ 60,012 $ 60,012 Work-in-process (unbilled labor and consulting) 81,185 60,398 $ 141,197 $ 120,410

ACCOUNTS PAYABLE AND ACCRUED 21

ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)	3 Months Ended
	Aug. 31, 2016
Payables and Accruals [Abstract]
Schedule of accounts payable and accrued expenses	As of August 31, 2016 and May 31, 2016, accounts payable and accrued expenses consist of the following amounts: August 31, May 31, 2016 2016 (Unaudited) Accounts payable $ 920,887 $ 782,654 Accrued interest payable 125,686 116,035 Accrued payroll 4,966 28,320 Accrued other 95,615 95,373 $ 1,147,154 $ 1,022,382

STOCK-BASED COMPENSATION (Table

STOCK-BASED COMPENSATION (Tables)	3 Months Ended
	Aug. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Schedule of stock option activity for qualified and unqualified stock options	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 August 31, 2016 5,112,500 $ 0.99
Schedule of issuance of 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 - - Outstanding at August 31, 2016 5,225,987 $ 1.53

CONCENTRATIONS OF CREDIT RISK (

CONCENTRATIONS OF CREDIT RISK (Tables)	3 Months Ended
	Aug. 31, 2016
Risks and Uncertainties [Abstract]
Schedule of Net sales	Two customers accounted for 94% of net sales for the three ended August 31, 2016, as set forth below: Three months ended August 31, 2016 2015 Customer 1 80 % 60 % Customer 2 14 % 40 %
Schedule of accounts receivable	Two customers accounted for 92% of the accounts receivable as of August 31, 2016, as set forth below: Three months ended August 31, May 31, (Unaudited) Customer 1 83 % 83 % Customer 2 9 % 11 %

BUSINESS SEGMENT INFORMATION (T

BUSINESS SEGMENT INFORMATION (Tables)	3 Months Ended
	Aug. 31, 2016
Segment Reporting [Abstract]
Schedule of operating results for the business segment	Information about segments is as follows: Arkados AES Consolidated Three months ended August 31, 2016 Revenues $ 76,883 $ 347,604 $ 424,487 Loss from operations $ (104,448 ) $ (172,875 ) $ (277,323 ) Three months ended August 31, 2015 Revenues $ 106,836 $ 80,410 $ 187,246 Loss from operations $ (257,737 ) $ (263,048 ) $ (520,785 ) Total assets August 31, 2016 $ 142,306 $ 380,335 $ 522,641 May 31, 2016 $ 236,797 $ 347,846 $ 584,643

DESCRIPTION OF BUSINESS (Detail

DESCRIPTION OF BUSINESS (Details Narrative) - Number	Mar. 18, 2015	Aug. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of subsidiaries		2
Description of reverse stock split	1-for-30

SUMMARY OF SIGNIFICANT ACCOUN26

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - shares	3 Months Ended
	Aug. 31, 2016	Aug. 31, 2015
Potentially dilutive securities	10,425,067	7,203,615
Convertible Notes [Member]
Potentially dilutive securities	86,580	114,795
Stock Option [Member]
Potentially dilutive securities	5,112,500	2,312,500
Warrant [Member]
Potentially dilutive securities	5,225,987	4,776,320

SUMMARY OF SIGNIFICANT ACCOUN27

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($)	Aug. 31, 2016	May 31, 2016
Accounting Policies [Abstract]
Finished goods	$ 60,012	$ 60,012
Work-in-process (unbilled labor and consulting)	81,185	60,398
Inventory, net	$ 141,197	$ 120,410

SUMMARY OF SIGNIFICANT ACCOUN28

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended		149 Months Ended
	Aug. 31, 2016	Aug. 31, 2015	Aug. 31, 2016
Accounting Policies [Abstract]
Net income (loss)	$ (286,974)	$ (528,761)	$ 43,500,000
Stock based compensation	$ 0	$ 0

ASSET SALE AND DEBT SUBJECT T29

ASSET SALE AND DEBT SUBJECT TO EQUITY BEING ISSUED (Details Narrative) - USD ($)	Aug. 31, 2016	May 31, 2016	May 31, 2015
Debt outstanding	$ 456,930	$ 456,930
STMicroelectronics, Inc [Member]
Due to related party	$ 179,000		$ 179,000

ACCOUNTS PAYABLE AND ACCRUED 30

ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($)	Aug. 31, 2016	May 31, 2016
Payables and Accruals [Abstract]
Accounts payable	$ 920,887	$ 782,654
Accrued interest payable	125,686	116,035
Accrued payroll	4,966	28,320
Accrued other	95,615	95,373
Accounts payable and accrued expenses	$ 1,147,154	$ 1,022,382

NOTES PAYABLE, RELATED PARTY 31

NOTES PAYABLE, RELATED PARTY PAYABLES AND DEBT SUBJECT TO EQUITY BEING ISSUED (Details Narrative)	Jan. 15, 2016USD ($)Number$ / shares	Aug. 31, 2016USD ($)	May 06, 2016USD ($)	Mar. 31, 2016USD ($)	Jan. 31, 2016USD ($)	Jan. 08, 2016USD ($)
Principal amount						$ 130,000
6% Promissory Note Due 2017-01-15 [Member]
Principal amount					$ 60,000
6% Two Convertible Note Due 2015-10-31 [Member]
Principal amount						$ 130,000
Number of shares issued for conversion | Number	50,000
6% Convertible Note Due 2016-12-31 [Member]
Principal amount	$ 40,000
Conversion price (in dollars per share) | $ / shares	$ 1.20
12% Promissory Note Due 2016-06-30 [Member]
Principal amount			$ 10,000	$ 10,000
10% Promissory Note Due 2017-01-31 [Member]
Principal amount		$ 150,000

STOCKHOLDERS' DEFICIENCY (Detai

STOCKHOLDERS' DEFICIENCY (Details Narrative) - USD ($)	Apr. 28, 2016	Apr. 22, 2016	Apr. 08, 2016	Feb. 23, 2016	Jan. 08, 2016	Jun. 25, 2015	May 31, 2016	Jun. 02, 2015
Principal amount					$ 130,000
Shares issued, price per share		$ 0.51				$ 1.75
Value of shares issued for stock compensation		$ 344,250				$ 250,833
Number of shares issued for debt conversion					50,000
Accrued interest					$ 11,332
Asset Purchase Agreement [Member]
Warrant exercise price (in dollars per shares)	$ 2
Warrants to purchase common stock	166,667
Value of shares issued in connection with intangible assets	$ 249,113
Number of shares issued in connection with intangible assets	166,667
first tranche [Member]
Number of shares issued for services			150,000
Two tranche [Member]
Number of shares issued for services				150,000
New Note [Member]
Principal amount					$ 100,000
Private Placement Offering ("PPO") [Member]
Number of share issued during the period (in shares)							838,334
Proceeds from issuance of private placement							$ 503,000
Warrants to purchase common stock								838,334
Mark Gelnaw [Member]
Number of share issued during the period (in shares)						35,000
Terrence DeFranco [Member]
Number of share issued during the period (in shares)		500,000				108,333
Key Employees [Member]
Number of share issued during the period (in shares)		675,000

STOCK-BASED COMPENSATION (Detai

STOCK-BASED COMPENSATION (Details) - Employee Stock Option [Member] - $ / shares	3 Months Ended	12 Months Ended
	Aug. 31, 2016	May 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding at begining	5,112,500	1,012,500
Granted		4,100,000
Exercised
Expired or cancelled
Outstanding at ending	5,112,500	5,112,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [RollForward]
Outstanding at beginning	$ 0.99	$ 1.20
Granted		0.94
Exercised
Expired or cancelled
Outstanding at ending	$ 0.99	$ 0.99

STOCK-BASED COMPENSATION (Det34

STOCK-BASED COMPENSATION (Details 1) - Warrant [Member] - $ / shares	3 Months Ended	12 Months Ended
	Aug. 31, 2016	May 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Outstanding at begining	5,225,987	3,937,986
Granted		1,288,001
Exercised
Expired or cancelled
Outstanding at end	5,225,987	5,225,987
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted-Average Exercise Price [Roll Forward]
Outstanding at begining	$ 1.53	$ 1.45
Granted		1.78
Exercised
Expired or cancelled
Outstanding at end	$ 1.53	$ 1.53

STOCK-BASED COMPENSATION (Det35

STOCK-BASED COMPENSATION (Detail Narrative 1) - USD ($)	Apr. 28, 2016	Nov. 30, 2015	Aug. 31, 2016	May 31, 2016	May 31, 2014	Jun. 02, 2015
Asset Purchase Agreement [Member]
Warrants to purchase common stock	166,667
Number of shares issued in connection with intangible assets	166,667
Private Placement Offering ("PPO") [Member]
Warrants to purchase common stock						838,334
Warrant [Member] | Consulting Contract [Member]
Stock price (in dollars per share)		$ 1
Strike price (in dollars per share)		$ 1
Expected volatility (as a percent)		87.54%
Risk-free interest rate		1.21%
Dividend rate		0.00%
Expected term		3 years
Number of gross warrant granted		33,000
Method used		Black-Scholes option pricing model
Common stock, par value (in dollars per share)		$ 1
Warrant outstanding		18,471
Warrant [Member] | Software Development Agreement [Member]
Stock price (in dollars per share)		$ 1
Strike price (in dollars per share)		$ 1
Expected volatility (as a percent)		87.54%
Risk-free interest rate		1.21%
Dividend rate		0.00%
Expected term		3 years
Number of gross warrant granted		250,000
Method used		Black-Scholes option pricing model
Common stock, par value (in dollars per share)		$ 1
Warrant outstanding		139,928
Warrant [Member] | Asset Purchase Agreement [Member]
Stock price (in dollars per share)	$ 0.75
Strike price (in dollars per share)	$ 2
Expected volatility (as a percent)	293.00%
Risk-free interest rate	93.00%
Dividend rate	0.00%
Expected term	3 years
Number of gross warrant granted	124,000
Method used	Black-Scholes option pricing model
Common stock, par value (in dollars per share)	$ 2
Warrants to purchase common stock	166,667
Number of shares issued in connection with intangible assets	166,667
Warrant [Member] | Private Placement Offering ("PPO") [Member]
Number of gross warrant granted				833,330
Employee Stock Option [Member]
Total fair value of shares vested					$ 968,092
Number of gross option granted				4,100,000
Weighted average exercise price				$ 0.94
Employee Stock Option [Member] | Outside 2004 Plan [Member]
Number of gross option granted				2,100,000
Employee Stock Option [Member] | Minimum [Member]
Award vesting period			3 years
Employee Stock Option [Member] | Maximum [Member]
Award vesting period			10 years

LICENSE AGREEMENTS (Details Nar

LICENSE AGREEMENTS (Details Narrative) - USD ($)	3 Months Ended
	Aug. 31, 2016	Aug. 31, 2015
Master Agreement License of Process and Event Management System [Member]
License and services revenue	$ 13,583	$ 66,000
Percentage of fees for software services	10.00%
Agreement License of Meter Collar and Bridge Programmable Logic Controllers [Member]
License and services revenue	$ 0	$ 42,500
Agreement To Provide Service In Area Of Business Development [Member]
License and services revenue	$ 60,000

COMMITMENTS (Details Narrative)

COMMITMENTS (Details Narrative)	3 Months Ended
	Aug. 31, 2016USD ($)ft²	Aug. 31, 2015USD ($)	Jan. 15, 2015USD ($)
Monthly rental income, nonoperating	$ 2,034		$ 1,874
Lease term			2 years
Rent expenses	22,777	$ 10,766
AES [Member]
Monthly rental income, nonoperating	$ 57,300
Area occupied pursuant to a lease | ft²	1,850

CONCENTRATIONS OF CREDIT RISK38

CONCENTRATIONS OF CREDIT RISK (Details )	3 Months Ended
	Aug. 31, 2016	Aug. 31, 2015
Net Sales [Member]
Concentration risk, percentage	94.00%
Net Sales [Member] | Customer 1 [Member]
Concentration risk, percentage	80.00%	60.00%
Net Sales [Member] | Customer 2 [Member]
Concentration risk, percentage	14.00%	40.00%
Accounts Receivable [Member]
Concentration risk, percentage	92.00%
Accounts Receivable [Member] | Customer 1 [Member]
Concentration risk, percentage	83.00%	83.00%
Accounts Receivable [Member] | Customer 2 [Member]
Concentration risk, percentage	9.00%	11.00%

CONCENTRATIONS OF CREDIT RISK39

CONCENTRATIONS OF CREDIT RISK (Details Narrative)	3 Months Ended
	Aug. 31, 2016Number
Net Sales [Member]
Number of customers	2
Concentration risk, percentage	94.00%
Accounts Receivable [Member]
Number of customers	2
Concentration risk, percentage	92.00%

BUSINESS SEGMENT INFORMATION (D

BUSINESS SEGMENT INFORMATION (Details) - USD ($)	3 Months Ended
	Aug. 31, 2016	Aug. 31, 2015	May 31, 2016
Revenues	$ 424,487	$ 106,836
Loss from operations	(277,323)	(520,785)
Total assets	522,641		$ 584,643
Arkados [Member]
Revenues	76,883	106,836
Loss from operations	(104,448)	(257,737)
Total assets	142,306		236,797
AES [Member]
Revenues	347,604	80,410
Loss from operations	(172,875)	$ (263,048)
Total assets	$ 380,335		$ 347,846

BUSINESS SEGMENT INFORMATION 41

BUSINESS SEGMENT INFORMATION (Details Narrative)	3 Months Ended
	Aug. 31, 2016Number
Segment Reporting [Abstract]
Number of operating segments	2

SUBSEQUENT EVENTS (Details Narr

SUBSEQUENT EVENTS (Details Narrative)	Sep. 15, 2016shares
Subsequent Event [Member] | Two Consulting Agreement [Member] | Two Consultants [Member]
Number of shares issued upon services	200,000