8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 30, 2009

ARKADOS GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-27587	22-3586087
(State of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

220 Old New Brunswick Road, Suite 202

Piscataway, NJ  08854

(Address of Principal Executive Offices)

(732) 465-9300

(Registrant's telephone number, including area code)

N/A

(former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.24d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.23e-4(c))I

INTRODUCTORY NOTE

         This Report on Form 8-K filed by 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 Report on Form 10-K for the year ended May 31, 2008 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.

Item 1.01    Entry into a Material Definitive Agreement.

On June 30, 2009, we entered into a First Amendment to our lease dated May 2, 2006 with Bridgeview Plaza Associates relating to our principal executive offices located at 220 Old New Brunswick Road, Piscataway, New Jersey.  The First Amendment is filed as Exhibit 99.1 to this Report.  We agreed to extend the lease term until July 1, 2014, the landlord excused us from paying the installment of base rent applicable to the month of July, 2009 and applied the security deposit of $27,225.00 to $33,495.10 of past due rent and charges and we agreed to the following base rent schedule:

Lease Period	Annual Base Rent	Monthly Base Rent
Months 1 -12	$103,669.50	$8,639.13
Month 13	-0-	-0-
Months 14-24	$106,779.59	$8,898.30
Month 25	-0-	-0-
Months 26 - 36	$109.982.97	$9,165.25
Months 37 - 48	$113,282.46	$9,440.21
Months 49 - 60	$116,680.94	$9,723.42

In addition, we agreed to pay all arrearages and deliver a security deposit of $27,225 to landlord by July 31, 2009.  We failed to make these payments and on August 31, 2009, the landlord took further legal action against us.

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On September 14, 2009 we entered into a Second Amendment to our lease dated May 2, 2006 with Bridgeview Plaza Associates.  The Second Amendment is filed as Exhibit 99.2 to this Report.  Under the Second Amendment, we paid the landlord $40,000 of $52,375.51 then past due and agreed to pay the balance of the arrearages by September 30, 2009, curing existing defaults.

On September 22, 2009 we entered into an agreement for bridge financing with Burton LaSalle Capital Corp..  Pursuant to the agreement, we may issue up to $1,000,000 8% Subordinated Notes due January 31, 2010 to Burton LaSalle Capital Corp. and other investors.  Pursuant to the notes, interest is due at the annual rate of 8% is due on the earlier of the exchange or conversion of the notes into shares of common stock of the company or the notes become due on January 31, 2010 or earlier upon acceleration because of a default.  A form of note and related subscription letter are filed as Exhibit 99.3 and 99.4, respectively, to this Report. As of September 21, 2009, Burton LaSalle had loaned us the sum of $115,350 and we issued several notes to Button LaSalle in equivalent amount.  The principal amount of the notes is exchangeable at the option of the holders into private equity financing we are able to place at a 33% discount to the price charge to other investors.  In the event we are able to effectuate a recapitalization and the price to new equity investors is less than $200,000 per 1% of the post recapitalized company, we may force such conversion. The can be no assurance that additional investors will purchase more notes, that Burton LaSalle will purchase more notes or that any aspects of a recapitalization or equity financing can be consummated.

Item 3.01    Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.

On September 21, 2009, our trading symbol on the OTCBB was changed from AKDS to AKDSE because of our failure to file our Form 10-K for the year ended May 31, 2009.  In accordance with FINRA Rule 6530, our stock will no longer be quoted on the OTCBB unless we file the Form 10-K by October 16, 2009, the expiration of the grace period under the rule.  While we are making an effort to file the Form 10-K Report to maintain these quotations, there can be no assurance that we will be successful.  In addition, the maintenance of quotations will be dependent on our filing the Form 10-Q for the period ended August 31, 2009 timely on or before October 14, 2009.

Item 9.01    Financial Statements and Exhibits.

(c) Exhibits.

Exhibit Number
99.1	First Amendment dated June 30, 2009 to Lease between Arkados, Inc. and Bridgeview Plaza Associates dated May 2, 2006.
99.2	Second Amendment dated September 14, 2009 to Lease between Arkados, Inc. and Bridgeview Plaza Associates dated May 2, 2006.
99.3	Form of 8% Subordinated Notes due January 31, 2010.
99.4	Form of Subscription Letter for 8% Subordinated Notes due January 31, 2010

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ARKADOS GROUP, INC.
Date:  September 23, 2009	By:	/s/ Larry Crawford
		Larry Crawford
		Chief Financial Officer

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EX-99.1

EXHIBIT 99.1

FIRST AMENDMENT TO LEASE

BY AND BETWEEN:

BRIDGEVIEW PLAZA ASSOCIATES,

a New Jersey limited partnership,

“Landlord”

-and-

ARKADOS, INC.,

a Delaware corporation,

“Tenant”

DATED:

LAW OFFICES

EPSTEIN, BROWN & GIOIA, LLC

245 Green Village Road

P.O. Box 901

Chatham Township, NJ 07928-0901

(973) 593-4900

Fax (973) 593-4966

July 1, 2009

FIRST AMENDMENT TO LEASE dated this 30th day of June, 2009, by and between BRIDGEVIEW PLAZA ASSOCIATES, a New Jersey limited partnership, having an office at Schoolhouse Plaza, 374 Millburn Avenue, 4th Floor, Millburn, New Jersey 07041, hereinafter called the “Landlord”; and ARKADOS, INC., a Delaware corporation, having an address at 220 Old New Brunswick Road, Piscataway, New Jersey 08854, hereinafter called the “Tenant”.

W I T N E S S E T H :

WHEREAS, the Landlord owns certain lands and premises in the Township of Piscataway, County of Middlesex and State of New Jersey, which lands and premises are commonly known as 220 Old New Brunswick Road, upon which there has been erected a building containing approximately 36,170 square feet, hereinafter called the “Building”; and

WHEREAS, the Landlord and Tenant have previously entered into a lease agreement dated May 2, 2006, hereinafter called the “Lease”, in connection with the leasing of approximately 6,600 square feet in the Building, hereinafter called the “Leased Premises”; and

WHEREAS, the Landlord and Tenant have agreed to extend the Lease for a further period of five (5) years, which extended term shall commence as of August 1, 2009 and shall expire on July 31, 2014.

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NOW, THEREFORE, in consideration of the sum of one ($1.00) DOLLAR and other good and valuable consideration, the parties hereto covenant and agree as follows:

1. The Lease is hereby extended for a further period of five (5) years, which Lease extension shall commence as of August 1, 2009, and shall expire as of July 31, 2014, hereinafter called the “Extended Term”.

2.                (a) Tenant shall not be responsible for the payment of the installment of Base Rent which is applicable to the month of July, 2009. All of the terms and conditions of the Lease, including the obligation for the payment of additional rent and all other charges set forth in the Lease shall be applicable to such one (1) month period.

(b) Tenant shall pay Base Extended Term as follows:

Lease Period	Annual Base Rent		Monthly Base Rent
Months 1 - 12	$	103,669.50	$	8,639.13
Month 13		0		0
Months 14 - 24	$	106,779.59	$	8,898.30
Month 25		0		0
Months 26 - 36	$	109,982.97	$	9,165.25
Months 37 - 48	$	113,282.46	$	9,440.21
Months 49 - 60	$	116,680.94	$	9,723.42

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(c) All of the foregoing payments of Base Rent shall be made in the same manner as provided in Article 3 of the Lease, together with all additional rent and other charges set forth therein.

3. It is expressly understood and agreed that the Tenant shall continue to occupy the Leased Premises as of the commencement of the Extended Term in an “as is” condition.

4.Article 43 of the Lease, entitled “Option to Renew”, is hereby deleted in its entirety.

5. Provided the Tenant is not in default pursuant to the terms and conditions of the Lease, the Tenant is hereby given the right and privilege to renew the Lease for one (1) five (5) year renewal period, to commence at the end of the Extended Term, which renewal shall be upon the same terms and conditions as in the Lease contained, except as follows:

(1) Tenant shall pay during the five (5) year renewal term annual Base Rent based upon the fair market value per square foot applicable to the Leased Premises. The fair market value shall be determined as follows: After Tenant has given written notice to the Landlord, as hereinafter provided, of its exercise of the within option, the Landlord shall deliver to Tenant a written notice stating the Base Rent to be paid for the Leased Premises during the five (5) year

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renewal term. In the event that the Tenant objects to the Base Rent quoted by Landlord, the issue of fair market value shall be open to negotiation between Landlord and Tenant. In the event the parties cannot agree within thirty (30) days after Landlord’s notice of the then fair market rental value, the parties shall agree on the appointment of a real estate appraiser (the “Appraiser”) having the M.A.I. designation, the cost of which shall be shared equally by Landlord and Tenant, which Appraiser shall be knowledgeable in the Middlesex County, New Jersey market rental area, who shall make a fair market rental determination. If the parties cannot agree within thirty (30) days subsequent to the appointment of the Appraiser, then the matter shall be submitted to binding arbitration pursuant to the rules for commercial arbitration of the American Arbitration Association, at the equal administrative cost of Landlord and Tenant. It is expressly understood and agreed that in any event the renewal Base Rent for the five (5) year renewal term shall not be less than the annual Base Rent of ONE HUNDRED SIXTEEN THOUSAND SIX HUNDRED EIGHTY AND 94/100 ($116,680.94) DOLLARS, in the event fair market rent shall be determined to be less than said sum as such determination shall be made in the manner hereinabove provided.

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(2)The right, option, and privilege of the Tenant to renew the Lease as hereinabove set forth is expressly conditioned upon the Tenant delivering to the Landlord, in writing, by certified mail, return receipt requested, twelve (12) months’ prior notice of its intention to renew, which notice shall be given to the Landlord by the Tenant no later than twelve (12) months’ prior to the date fixed for termination of the Extended Term of the Lease.

(3)The obligation to pay the Base Rent as hereinabove provided shall be in addition to the obligation to pay all Additional Rent and other charges required by the terms and conditions of the Lease.

6. Landlord and Tenant acknowledge that Landlord has applied the Tenant’s security deposit, in the amount of TWENTY SEVEN THOUSAND TWO HUNDRED TWENTY FIVE AND 00/100 ($27,225.00)

DOLLARS, to Tenant’s arrearages in rent. Tenant is currently indebted to Landlord for past due rent and other charges in the amount of THIRTY THREE THOUSAND FOUR HUNDRED NINETY FIVE AND 10/100 ($33,495.10) DOLLARS, which includes the amount set forth in that certain judgment of possession (the “Judgment”) issued by the Superior Court of New Jersey, Law Division, Special Civil Part sitting in Middlesex County, under docket number LT-006503-09, together with electric and escalation charges for the month

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of July, 2009. Tenant agrees that it shall pay such arrearages to Landlord on or before July 31, 2009.

7.On or before July 31, 2009, Tenant shall deliver to Landlord a security deposit in the amount of TWENTY FIVE THOUSAND NINE HUNDRED SEVENTEEN AND 39/100 ($25,917.39) DOLLARS, to be held by Landlord in accordance with the provisions of Article 40 of the Lease.

8.Landlord hereby agrees that it will not seek to enforce the Judgment and serve a warrant of removal on Tenant until after July 31, 2009, in the event Tenant is then in default under the terms and conditions of the Lease, as amended hereby.

9.The parties hereto mutually represent, one to the other, that neither party engaged the services of a real estate broker in connection with the negotiation and consummation of this transaction. Landlord agrees to indemnify, defend and save harmless Tenant in connection with the claims of any real estate broker claiming commissions in connection with this transaction and claiming authority from Landlord. Tenant agrees to indemnify, defend and save harmless Landlord in connection with the claims of any real estate broker claiming commissions in connection with this transaction and claiming authority from Tenant.

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10.Except as hereinabove referred to, all other terms and conditions of the Lease shall remain in full force and effect, unimpaired and unmodified.

11.This agreement shall be binding upon the parties hereto, their heirs, successors and assigns.

12.The submission of this First Amendment to Lease by Landlord to Tenant for review and approval shall not be deemed an option to lease, an offer to lease, or a reservation of the Leased Premises in favor of Tenant, it being intended that no rights or obligations shall be created by Landlord or Tenant until the execution and delivery of this First Amendment to Lease by Landlord and Tenant, one to the other.

IN WITNESS WHEREOF, the parties hereto have caused these presents to be executed by their proper corporate officers and caused their proper corporate seals to be hereto affixed the day and year first above written.

WITNESS:	BRIDGEVIEW PLAZA ASSOCIATES
/s/ Brian Fitzsimons	/s/ Douglas Friedrich, GP
Brian Fitzsimons
WITNESS:	ARKADOS, INC.
/s/ Larry L. Crawford	/s/ Oleg Logvinov
Larry L. Crawford	Oleg Logvinov, CEO

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STATE OF NEW JERSEY	)
	)	SS.:
COUNTY OF ESSEX	)

BE IT REMEMBERED, that on this 2nd day of July, 2009, before me, the subscriber, a notary public of NJ personally appeared Douglas Friedrich who, I am satisfied, is a General Partner on behalf of BRIDGEVIEW PLAZA ASSOCIATES, a New Jersey limited partnership, the Partnership mentioned in the within Instrument, and thereupon he acknowledged that he signed, sealed and delivered the same as the act and deed of the partnership, for the uses and purposes therein expressed.

/s/ Helen Montgomery

Helen Montgomery

NOTARY PUBLIC OF NEW JERSEY

My Commission Expires Aug. 4, 2010

STATE OF	)
	)	SS.:
COUNTY OF	)

BE IT REMEMBERED, that on this        day of       , 2009, before me, the subscriber,                  , personally appeared                     , who, I am satisfied, is the person who signed the within Instrument as      , of ARKADOS, INC.,           a Delaware corporation, the Corporation named therein, and he thereupon acknowledged that the said instrument made by the corporation and sealed with its corporate seal, was signed and sealed with the corporate seal and delivered by him as such officer, and is the voluntary act and deed of the corporation, made by virtue of authority from its Board of Directors.

____________________________________

PREPARED BY: ROBERT K. BROWN, ESQ.

EX-99.2

EXHIBIT 99.2

SECOND AMENDMENT TO LEASE

BY AND BETWEEN:

BRIDGEVIEW PLAZA ASSOCIATES,

a New Jersey limited partnership,

“Landlord”

-and-

ARKADOS, INC.,

a Delaware corporation,

“Tenant”

DATED:

LAW OFFICES

EPSTEIN, BROWN & GIOIA, LLC

245 Green Village Road

P.O. Box 901

Chatham Township, NJ 07928-0901

(973) 593-4900

Fax (973) 593-4966

September 9, 2009

SECOND AMENDMENT TO LEASE dated this 14th day of September, 2009, by and between BRIDGEVIEW PLAZA ASSOCIATES, a New Jersey limited partnership, having an office at Schoolhouse Plaza, 374 Millburn Avenue, 4th Floor, Millburn, New Jersey 07041, hereinafter called the “Landlord”; and ARKADOS, INC., a Delaware corporation, having an address at 220 Old New Brunswick Road, Piscataway, New Jersey 08854, hereinafter called the “Tenant”.

W I T N E S S E T H :-

WHEREAS, the Landlord owns certain lands and premises in the Township of Piscataway, County of Middlesex and State of New Jersey, which lands and premises are commonly known as 220 Old New Brunswick Road, upon which there has been erected a building containing approximately 36,170 square feet, hereinafter called the “Building”; and

WHEREAS, the Landlord and Tenant have previously entered into a lease agreement dated May 2, 2006, as amended by First Amendment to Lease dated June 30, 2009, hereinafter collectively called the “Lease”, in connection with the leasing of approximately 6,600 square feet in the Building, hereinafter called the “Leased Premises”; and

- 1 - -

WHEREAS, Landlord has served a warrant of removal on Tenant, in accordance with the provisions of the aforementioned First Amendment to Lease; and

WHEREAS, Landlord has agreed to redeliver possession of the Leased Premises to Tenant, in accordance with the terms and conditions of this Second Amendment to Lease.

NOW, THEREFORE, in consideration of the sum of one ($1.00) DOLLAR and other good and valuable consideration, the parties hereto covenant and agree as follows:

1. Upon the Tenant delivering to Landlord the sum of FORTY THOUSAND AND 00/100 ($40,000.00) DOLLARS, to be applied to Tenant’s past due Base Rent and additional rent (the “Arrearages”), as shown on the aging report which is annexed hereto as Schedule “A”, Landlord hereby agrees that it shall promptly redeliver possession of the Leased Premises to Tenant.

2. Tenant hereby agrees that it shall pay to Landlord the balance of the Arrearages, all Base Rent and additional rent applicable to the month of September, 2009, and the security deposit set forth in Paragraph 7 of the aforementioned First Amendment to Lease, on or before September 30, 2009.If all of such monies are not paid to Landlord by

- 2 - -

said date, Landlord shall have the immediate right to file a complaint in the Superior Court of New Jersey for the dispossession of Tenant for non-payment of rent, without Landlord having any obligation to provide any further notice to Tenant. Landlord agrees, however, that it will not serve a warrant of removal on Tenant until after October 31, 2009, in the event that Landlord has received a judgment for possession prior to said date.

3.Landlord and Tenant hereby ratify and confirm the terms and conditions of the Lease, as amended hereby.

4.This agreement shall be binding upon the parties hereto, their heirs, successors and assigns.

IN WITNESS WHEREOF, the parties hereto have caused these presents to be executed by their proper corporate officers and caused their proper corporate seals to be hereto affixed the day and year first above written.

WITNESS:      /s/ Brian D. Fitzimmon     ATTEST:     /s/ Brian D. Fitzimmon BRIDGEVIEW PLAZA ASSOCIATES     By:  Douglas Friedrich, GP     ARKADOS, INC.     /s/ Larry Crawford, CFO, Secretary

- 3 - -

STATE OF NEW JERSEY )

)  SS.:

COUNTY OF ESSEX          )

BE IT REMEMBERED, that on this 9 day of September, 2009, before me, the subscriber, [illegible] personally appeared who, I am satisfied, is a General Partner on behalf of BRIDGEVIEW PLAZA ASSOCIATES, a New Jersey limited partnership, the Partnership mentioned in the within Instrument, and thereupon he acknowledged that he signed, sealed and delivered the same as the act and deed of the partnership,for the uses and purposes therein expressed.

Sworn and subscribed   9 day of September, 2009 THOMAS MICHAEL KURIC NOTARY PUBLIC OF NEW JERSEY ID # 2383281 Commission Expires 3/9/2014   /s/ Thomas Kuric

STATE OF NEW JERSEY )

)  SS.:

COUNTY OF ESSEX          )

BE IT REMEMBERED, that on this 9 day of September 2009, before me, the subscriber, Mary Crawford personally appeared Larry Crawford, who, I am satisfied, is the person who signed the within Instrument as CFO, Secretary of ARKADOS, INC., a Delaware corporation, the Corporation named therein, and he thereupon acknowledged that the said instrument made by the corporation and sealed with its corporate seal, was signed and sealed with the corporate seal and delivered by him as such officer, and is the voluntary act and deed of the corporation, made by virtue of authority from its Board of Directors.

Sworn and subscribed   9 day of September, 2009 /s/ Thomas M. Kuric   THOMAS MICHAEL KURIC NOTARY PUBLIC OF NEW JERSEY ID # 2383281 Commission Expires 3/9/2014

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Schedule A

COMMERCE MANAGEMENT CORP.

Aging Report

(Detailed)

as of 09/03/2009

Property :        Bridgeview Plaza

61                     Piscataway, N.J. 08854

Unit Type	Unit Reference                  Occupant                    Deposits      Number                             Name                           Held			Balance Due	AGED 1- 30 DAYS	AGED 31- 60 DAYS	AGED 61-90 DAYS	AGED OVER 90 DAYS
CUBA	4	Arkados, Inc.                   0.00		52,375.51	12,506.61	9,914.13	10,501.25	19,453.52
	Phone:	(732) 465-9300
		CHARGE CODE	CHARGE DESCRIPTION	CHARGE DATE
RTE			REALTY TAX 6/01/07-5/31/08	05/15/2009				668.45
ELE			ELECTRIC	06/01/2009				875.00
ESC			ESCALATION	06/01/2009				400.00
RNT			Monthly Rent	06/01/2009				8,387.50
ESC			ESCALATION 6/1/08-5/31/09	06/02/2009				9,122.57
LAT			LATE RENT FEE - JUNE	06/10/2009			838.75
ELE			ELECTRIC	07/01/2009			875.00
ESC			ESCALATION	07/01/2009			400.00
RNT			Monthly Rent	07/01/2009			8,387.50
ELE			ELECTRIC	08/01/2009		875.00
ESC			ESCALATION	08/01/2009		400.00
RNT			Monthly Rent	08/01/2009		8,639.13
LAT			AUGUST LATE RENT FEE	08/11/2009	863.91
INT			INTEREST ON PAST DUE ITEMS	08/21/2009	1,728.57
ELE			ELECTRIC	09/01/2009	875.00
ESC			ESCALATION	09/01/2009	400.00
RNT			Monthly Rent	09/01/2009	8,639.13

EX-99.3

EXHIBIT 99.3

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.

8% SUBORDINATED NOTE

DUE January 31, 2010

Number:    _______________________________

Principal: $_______________________________  

Original Issue Date: _________________    , 200__

Registered Holder:_________________________                                                                                                

                   (name)

Arkados Group, Inc., a Delaware corporation (the “Company”) with principal offices at 220 Old New Brunswick Road, Suite 202, Piscataway, NJ  08854, for value received, hereby promises to pay the registered holder hereof (the “Holder”) the principal sum set forth above on January 31, 2010 (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 8% per year, until such principal sum shall have become due and payable, or has been exchanged pursuant to Section 3 or converted pursuant to Section 4, below.  Interest shall be paid, on Maturity, or if the principal of the Note is earlier exchanged pursuant to Section 3 below or converted pursuant to Section 4 below, upon such exchange or conversion.  All references herein to dollar amounts refers to U.S. dollars.

By acceptance and purchase of this Note, the registered holder hereof agrees with the Company that the Note shall be subject to the following terms and conditions:

1.           Authorization of Notes.  The Company has authorized the issue and sale of a 6% Subordinated Note due January 31, 2010 (the “Note,” such term includes any notes which may be issued in exchange or in replacement thereof) in the aggregate principal amount of not more than U.S. $1,000,000.

2.           Transfer or Exchange.  Prior to due presentation to the Company for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company’s Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes.

3.Option to Exchange Principal into Equity Securities.  The Company has disclosed to Holder, and Holder acknowledges, that the Company intends to offer securities of the Company (which may consist of voting stock or other securities convertible into Common Stock or warrants to obtain the Common Stock; hereafter, collectively, “Equity Securities”) for sale to one or more investors pursuant to a private offering.  Holder further acknowledges that such offering may be made simultaneously with the offering of preferred securities of the Company to strategic investors (the “Strategic Securities”).  The Company hereby agrees not to complete such an offering of Equity Securities or Strategic Securities without first offering to Holder the opportunity to convert all or a portion of principal due on this Note to the purchase of such Equity Securities upon the same terms offered to other investors, less a discount of 33%.  The Company shall give notice to Holder prior to any such sale, which notice shall fully disclose the material terms thereof, and Holder shall have a prior right and option for 5 days following receipt of such notice to convert all or any portion of the principal due on this Note the purchase of a portion of the Equity Securities.  At the time of closing on the purchase of such Equity Securities, the Company shall pay all accrued and unpaid interest due on this Note and exchange the Equity Securities for the original executed Note, conditioned upon the Holder executing requisite subscription documents for the purchase of the Equity Securities and other documents reasonably necessary to evidence the cancellation of this Note

4.Mandatory Conversion.  Subject to the provisions of this Section 4, the Company may, at its sole election, any time until principal and interest on this Note is paid in full, upon five (5) days written notice to the holders of the Notes, to require any or all Holders of the Notes to convert outstanding principal into Equity Securities by applying such principal to the purchase price of the Equity Securities and paying all accrued and unpaid interest on the date of such conversion.

       4.1Notice.  The Company shall notify the holder of the Company's intent to effect such a conversion by giving written notice ("Notice of Mandatory Conversion") to the holders of the Notes by facsimile, original to follow by 2-day courier, before midnight, New York City time, on the business day immediately preceeding the date of such mandatory conversion.

       4.2Effect of Mandatory Conversion.  If the Company so elects, all principal due on the Notes shall be automatically converted into Equity Securities, as of the date the Notice of Mandatory Conversion.  Each holder of Notes shall hereafter promptly surrender the original executed Note in exchange for the Equity Securities and the payment of all accrued and unpaid interest at the principal office of the Company and shall thereupon be entitled to receive certificates evidencing the Equity Securities into which the principal and interest on the Notes is converted. Each holder of Notes shall be deemed to be a holder of record of the Equity Securities issuable upon such conversion as of the effective date the conversion set forth in the Notice of Mandatory Conversion, notwithstanding that the Note shall not have been surrendered to the Company, the accrued and unpaid interest shall not have been paid or that certificates evidencing Equity Securities shall not then have been actually delivered to such holder, and from and after such date this Note shall only represent the right to receive interest and the Equity Securities.

       4.3Conditions to Mandatory Conversion.  The Company may only call a for Mandatory Conversion in the event:

4.3.1   the Company, on or before the effective date of the conversion, shall have eliminated all outstanding secured debt in exchange for Common Stock (or securities convertible into Common Stock upon the authorization of new shares of common stock, hereafter referred to as “Substitute Stock”) and payment if up to the sum of $2.5 million from the proceeds of the sale of Equity Securities and Strategic Securities (“Secured Restructuring”), and

4.3.2   the aggregate debt owed to employees and unsecured creditors holding Notes shall, after giving effect to the conversion of secured debt and the issuance of common stock or Substitute Stock for such unsecured debt, be equal to or less than $$2,000,000 (“Unsecured Restructuring”), and

4.3.3   the Equity Securities are being sold for cash to investors to at a gross price equal to or less than $200,000 per the number of shares of Common Stock (or Substitute Stock) which would represent (or, in the case of the Substitute Stock automatically converted into) 1% of the shares of Common Stock outstanding after giving effect to the Secured and Unsecured Restructuring.  For example, if $5 million is invested by strategic investors in preferred and $4 mil buys 20% of the common, after the Secured and Unsecured Restructuring, $1,000,000 of Principal amount of the Notes may be converted automatically into 7.5% of the Company’s Common Stock or that amount Substitute Stock which would represent 7.5% of the Company’s Common Stock after its conversion.

5.           Restrictions on Transferability.  The Note shall not be transferred, hypothecated or assigned before satisfaction of the conditions specified in this Section 5, which conditions are intended to ensure compliance with the provisions of the Securities Act with respect to the Transfer of any Note.  Holder, by acceptance of this Note, agrees to be bound by the provisions of this Section 5.

                        5.1           Restrictive Legend.  The Holder by accepting this Note agrees that this Note may not be assigned or otherwise transferred unless and until (i) the Company has received an opinion of counsel for the Holder that such securities may be sold pursuant to an exemption from registration under the Securities Act or (ii) a registration statement relating to such securities has been filed by the Company and declared effective by the Commission.

Except as otherwise provided in this Sec­tion 5, the Note shall be stamped or otherwise imprinted with a legend in substantially the following form:

“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.”

                         5.2           Notice of Proposed Transfers.  Prior to any Transfer or attempted Transfer of any Note, the Holder shall give five (5) days’ prior written notice (a “Transfer Notice”) to the Company of Holder’s intention to effect such Transfer, describing the manner and circumstances of the proposed Transfer, and obtain from counsel to Holder an opinion that the proposed Transfer of such Note may be effected without registration under the Securities Act or state securities laws.  After the Company’s receipt of the Transfer Notice and opinion, such Holder shall thereupon be entitled to Transfer such Note, in accordance with the terms of the Transfer Notice.  Each Note issued upon such Transfer shall bear the restrictive legends set forth in Section 5.1, unless in the opinion of such counsel such legend is not required in order to ensure compliance with the Securities Act.

                         5.3           Termination of Restrictions.  Notwithstand­ing the foregoing provisions of Section 5, the restrictions imposed by this Section upon the transferability of the Notes, and the legend requirements of Section 5.1 shall terminate as to any particular Note (i) when and so long as such security shall have been effectively registered under the Securities Act and applicable state securities laws and disposed of pursuant thereto or (ii) when the Company shall have received an opinion of counsel that such shares may be transferred with­out registration thereof under the Securities Act and applicable state securities laws.  Whenever the restrictions imposed by Section 5 shall terminate as to this Note, as hereinabove provided, the Holder hereof shall be entitled to receive from the Company upon written request of the Holder, at the expense of the Company, a new Note bearing the following legend in place of the restrictive legend set forth above or the Note stamped with the following legend:

“THE RESTRICTIONS ON TRANSFERABIL­ITY OF THE WITHIN NOTE CONTAINED IN SECTION 5 HEREOF TERMINATED ON ___________, 20__, AND ARE OF NO FURTHER FORCE AND EFFECT.”

All Notes issued upon registration of transfer, division or combination of, or in substitution for, any Note or entitled to bear such legend shall have a similar legend endorsed thereon.  Whenever the restrictions imposed by this Section shall terminate as to any share of Restricted Common Stock, as hereinabove provided, the holder thereof shall be entitled to receive from the Company, at the Company’s expense, a new certificate representing such Common Stock not bearing the restrictive legends set forth in Section 5.1.

6.           Subordination. Any right of the Holder to payment of principal or interest from the Company shall be subordinated to the claims and rights of the holders of the  Senior Debt (“Senior Debt Holders”). “Senior Debt” means all Indebtedness of the Company to financial institutions or secured debt other than the Notes, whether outstanding on the date of execution of this Note or thereafter created, incurred or assumed, except (x) any such Indebtedness that by the terms of the instrument or instruments by which such Indebtedness was created, assumed or incurred expressly provides that it (i) is junior in right of payment to the Notes or (ii) ranks pari passu in right of payment with the Notes and (y) any amendments, modifications or supplements to, or any renewals, extensions, deferrals, refinancing and refunding of, any of the foregoing.  Any cash payment of principal or interest to the Holder shall be collected, enforced or received by the Holder as trustee for the Senior Debt Holders and paid over to the Senior Debt Holders. The Holder agrees that in the event of any payment of principal or interest by the Company to the Holder by reason of any receivership, insolvency or bankruptcy proceeding, or proceeding for reorganization or readjustment of the Company or its properties, or otherwise, then, in any such event, the Senior Debt Holders shall be preferred in the payment of their claims over the claim of the Holder to payment of principal or interest against the Company or its properties, and the claims of the Senior Debt Holders shall be first paid and satisfied in full before any payment or distribution of any kind or character, whether in cash or property, shall be made to the Holder. Provided, however, that this Section 8 shall not apply to any payment of principal or interest made to the Holder while the Company is solvent and not in default with respect to its Senior Debt.

7.           Replacement of Note Certificate. Upon receipt of evidence satisfactory to the Company of the certificate loss, theft, destruction or mutilation of the Note certificate and, in the case of any such loss, theft or destruction, upon delivery of a bond of indemnity satisfactory to the Company, or, in the case of any such mutilation, upon surrender and cancellation of the Note certificate, the Company will issue a new Note certificate, of like tenor, in lieu of such lost, stolen, destroyed or mutilated Note certificate.

8.           Default. If any of the following events (herein called “Events of Default”) shall occur:

(a) if the Company shall default in the payment or prepayment of any part of the principal of any of the Notes after the same shall become due and payable, whether at maturity or at a date fixed for prepayment or by acceleration or otherwise, and such default shall continue for more than 30 days; or

(b) if the Company shall default in the payment of any installment of interest on any of the Notes for more than 30 days after the same shall become due and payable; or

(c) if the Company shall make an assignment for the benefit of creditors; or

(d) if the Company shall dissolve; terminate its existence; become insolvent on a balance sheet basis; commence a voluntary case under the federal bankruptcy laws or under any other federal or state law relating to insolvency or debtor’s relief; permit the entry of a decree or order for relief against the Company in an involuntary case under the federal bankruptcy laws or under any other applicable federal or state law relating to insolvency or debtor’s relief; permit the appointment or consent to the appointment of a receiver, trustee, or custodian of the Company or of any of the Company’s property; make an assignment for the benefit of creditors; or

(e) if the Company shall default in the performance of or compliance with any agreement, condition or term contained in this Note or any of the other Notes and such default shall not have been cured within 30 days after such default; or

(f) Any of the representations or warranties made by the Company herein, in the Subscription Agreement, or in any certificate or financial or other statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note or the Subscription Agreement shall be false or misleading in any material respect at the time made;

then and in any such event the Holder of this Note shall have the option (unless the default shall have theretofore been cured) by written notice to the Company to declare the Note to be due and payable, whereupon the Note shall forthwith mature and become due and payable, at the applicable prepayment price on the date of such notice, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived, anything contained in this Note to the contrary notwithstanding. Upon the occurrence of an Event of Default, the Company shall promptly notify the Holder of this Note in writing setting out the nature of the default in reasonable detail.

9.           Remedies on Default.

9.1           Acceleration of Maturity.  If any Event of Default shall have occurred and be continuing, the Holder or Holders of at least 50.1% in aggregate principal amount of outstanding Notes may, by notice to the Company, declare the entire outstanding principal balance of the Notes, premium, if any, and all accrued and unpaid interest thereon, to be due and payable immediately, and upon any such declaration the entire outstanding principal balance of the Notes, premium, if any, and said accrued and unpaid interest shall become and be immediately due and payable, without presentment, demand, protest or other notice whatsoever, all of which are hereby expressly waived, anything in the Notes (except as set forth in Section 11 hereof) to the contrary notwithstanding.

9.2           Conduct no Waiver, Collection Expenses.  No course of dealing on the part of any Holder, nor any delay or failure on the part of any Holder to exercise any of its rights, shall operate as a waiver of such right or otherwise prejudice such Holder's rights, powers and remedies. If the Company fails to pay, when due, the principal or the premium, if any, or the interest on any Note, the Company will pay to each Holder, to the extent permitted by law, on demand, all costs and expenses incurred by such Holder in the collection of any amount due in respect of any Note hereunder, including reasonable legal fees incurred by such Holder in enforcing its rights hereunder.

9.3           Annulment of Acceleration.  If a declaration is made in accordance with Section 9.1, then and in-every such case, the Holder or Holders of at least 50.1% in aggregate principal amount of outstanding Notes may, by an instrument delivered to the Company, annul such declaration and the consequences thereof, provided that at the time such declaration is annulled:

(i)           no judgment or decree has been entered for the payment of any monies due on the Notes or pursuant to this Agreement;

(ii)           all arrears of interest on the Notes and all other sums payable on the Notes and pursuant to this Agreement (except any principal of or interest or premium on the Notes which has become due and payable by reason of such declaration) shall have been duly paid; and

(iii)           every other Event of Default shall have been duly waived or otherwise made good or cured.

10.           Amendments. With the consent of the Holders of more than 50.1% in aggregate principal amount of the Notes at the time outstanding, the Company, when authorized by a resolution of its Board of Directors, may enter into a supplementary agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Note or of any supplemental agreement or modifying in any manner the rights and obligations of the holders of Notes or Common Stock issued upon conversion of the Notes, and of the Company, provided, however, that no such supplemental agreement shall (a) extend the fixed maturity of any Note, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or alter or impair the right to convert the same into Common Stock at the rates and upon the terms provided in this Note, without the consent of the Holder of each of the Notes so affected, or (b) reduce the aforesaid percentage of Notes, the Holders of which are required to consent to any supplemental agreement, without the consent of the Holders of all Notes then outstanding.

11.           Changes, Waivers. etc.  Neither this Note nor any provisions hereof may be changed, waived, discharged or terminated orally, but only by a statement in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, except to the extent provided in Section 11 of this Note.

12.           Entire Agreement. This Note embodies the entire agreement and understanding between the Holder and the Company and supersedes all prior agreements and understandings relating to the subject matter hereof.

13.           Governing Law, Jurisdiction, etc.

(a) GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.

(b) Submission to Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of New York and of the United States of America, in each case located in the County of New York, for any action, proceeding or investigation in any court or before any governmental authority

("Litigation") arising out of or relating to the Note and the transactions contemplated thereby (and agrees not to commence any Litigation relating thereto except in such courts), and further agrees that service of any process, summons, notice or document by U.S. registered mail to its respective address set forth in the Letter Subscription Agreement shall be effective service of process for any Litigation brought against it in any such court. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any Litigation arising out of the Note or the transactions contemplated hereby in the courts of the State of New York or the United State of America, in each case located in the County of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Litigation brought in any such court has been brought in an inconvenient forum.

(c) Service of Process.  Nothing herein shall affect the right of any holder of a Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction.

(d) WAIVER OF JURY TRIAL.  THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH ANY OF THE NOTES.

(e) In the event of any dispute, question, controversy or claim arising among the parties hereto which shall arise out of or in connection with this Note, the parties shall keep the proceeding related to such controversy in strict confidence and shall not disclose the nature of said dispute, the status of the proceeding or any testimony, documents or information obtained or exchanged in the course of said proceeding without the express written consent of all parties to such dispute.

ARKADOS GROUP, INC.

By: ___________________________

       Larry Crawford, CFO

Number:  _________________________________ 

Name of Holder: ____________________________   

Principal:  $ _______________________________  

Original Issue Date: _________________________  

EX-99.4

EXHIBIT 99.4 

ARKADOS GROUP, INC.

220 Old New Brunswick Road, Suite 202

Piscataway, NJ  08854

_______________, 200__

_______________________________

_______________________________

_______________________________

_______________________________

Dear Bridge Lender:

Arkados Group, Inc., a Delaware corporation (the "Company") agrees with the undersigned as follows:

You, the undersigned, hereby agree to loan the Company the principal amount set forth on the signature page hereto (“Principal Amount”)  The loan shall be evidenced by a 8% Subordinated Note in the form annexed hereto as Exhibit A (the “Note”).   The Note is part of an authorized issue of 8% Subordinated Notes due January 31, 2010 by the Company in the aggregate principal amount of $1,000,000.

The closing of the loan shall be deemed to have occurred on the date that you have delivered cleared funds to the Company.  The Company shall deliver to you an original Note which evidences the Company’s obligation to you and which you agree to surrender when the Company’s obligations to you under the Note have been satisfied or the Note exchanged in accordance with its terms.

The Company acknowledges receipt of the sum of $______ from you on _____, 200__, in the form of (check one)1:

[  ]           personal or business check, subject to collection

[  ]           wire transfer to:

ARKADOS

Routing Number: 031201360

Account Number: 031201360

TD Bank NA

560 Route 22 East

Bridgewater, NJ 08807

SWIFT CODE: CBNAUS33

(continued on prior page)

______________________________

1 In the event of multiple purchases of Notes by a single subscriber, each advance shall be deemed a reaffirmation of the warranties by the investor and the delivery of Notes deemed a reaffirmation of warranties by the Company.

(continued from prior page)

[  ] wire transfer to a vendor of Arkados, as requested by Arkados to the following account:

Account information for third party wire and amount verified by officer of Arkados _______

                                                                                                                                     Initials

The purpose of the loan is to provide the Company with funds for working capital, including the payment of liabilities.

The Company represents and warrants to you that the issuance to you of the Note has been duly authorized by the Company's Board of Directors.  You acknowledge that no representation or warranty has been made by the Company other than those expressly set forth herein and that you have made an independent investigation of the Company’s financial situation and business prospects.

You represent and warrant to the Company that:  (i) you  are acquiring the Note for your own account, for investment and not with a view to or for sale in connection with  any  distribution thereof it being understood that the Note has not been registered under the United States Securities Act of 1933, as amended (the "Act") or under the securities laws of any state and, therefore, cannot  be sold unless they are registered under the Act and under  applicable state securities laws or unless an exemption from such registration  is available); (ii) you have reviewed reports filed by the Company on or before the date of this letter agreement with the Securities and Exchange Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934 and have not relied on any other information concerning the Company, except that contained in such reports; and (iii) you  are  an "accredited  investor" within the meaning of Regulation  D  under the  Act, have sufficient knowledge and experience  in  financial and  business matters to be capable of evaluating the merits  and risks  of your investment in the Note and are able to bear  the economic risk of your investment in the Note.

You further acknowledge that neither the Company nor anyone purporting to be acting on its behalf has made any representations to you concerning its ability to repay the Note or raise additional capital or compromise outstanding secured or unsecure debt and that the purchase of the Note is a highly risky and speculative investment.

You covenant and agree with the Company that you will not transfer, sell or otherwise dispose of the Note or any of the securities which may be issuable upon the conversion of the Note in a manner which would violate, nor without having furnished the Company an opinion of counsel reasonably satisfactory to the Company that such transfer, sale or other disposition

would not violate, the Act or applicable state securities  laws, or the rules  and regulations thereunder.  You understand that the certificates representing the Note will bear a legend to that effect and that the Company will instruct its transfer agent not to register a transfer of such securities unless the conditions specified in the legend have been satisfied.

Each of you and the Company agrees to bear its own costs and expenses in connection with this transaction.

All representations, warranties, covenants and agreements herein shall survive the Closing for a period of two years.

The above (together with Exhibit A) contains our entire agreement, supersedes all prior negotiations and oral understandings, if any, and may not be amended or supplemented except  in writing.

Please confirm that this letter sets forth our agreement by completing, signing and returning the enclosed extra copy.

Very truly yours,

ARKADOS GROUP, INC.

By: ________________________

       Larry Crawford, CFO

[ACKNOWLEDGMENT PAGE FOLLOWS]

INVESTOR SIGNATURE PAGE – ARKADOS GROUP, INC. NOTES

Accepted and Agreed to this

_____ day of ______________, 200__.

Print or Type:

____________________________________

Name of Purchaser

(Individual or Institution)

____________________________________

Name of Individual representing

Purchaser (If an Institution)

____________________________________

Title of Individual representing

Purchaser (if an Institution)

Signature by:

____________________________________

Individual Purchaser or Individual

representing Purchaser

Address: _____________________________

   ____________________________

Telephone: ___________________________

Telecopier: ___________________________

E-Mail: ______________________________

Principal Amount Purchased: $_____________  

Exhibit A