SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549









FORM
10-K




(Mark
One)




x
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the
fiscal year ended December 31, 2009




o
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 (No fee required)




For the
transition period from  ________________    to 
____________




Commission
file number l-9224




Arrow
Resources Development, Inc.


(Name
of Small Business Issuer in Its Charter)





DELAWARE
            
            56-2346563(State or Other Jurisdiction of Incorporation or Organization)
            
            (I.R.S. Employer Identification No.)





Carnegie
Hall Tower, 152 W. 57th Street,
27th Floor, New York, NY 10019


(Address
of Principal Executive Offices) (Zip Code)




212-262-2300


(Issuer’s
Telephone Number, including Area Code)




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




Title
      of Each Class
            
            Name
      of Each Exchange on Which RegisteredCommon
      stock - par value $0.00001
            
            OTC:
      Bulletin Board




Securities
registered under Section 12(g) of the Exchange Act: None




---




(Title
of Class)









(Title
of Class)




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




Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-Ko




Issuer’s
revenues for 2009, its most recent fiscal year, were $0 from continuing
operations.





The
number of freely tradable shares not held by affiliates is
98,818,007.




As of
April 13, 2010, the aggregate market value of voting stock held by
non-affiliates of the Issuer was approximately $1,976,360.









The
number of shares outstanding of each of the issuer’s classes of common equity,
as of April 13, 2010 are as follows:




Class
            
            Outstanding
      at April 13, 2010Common
      stock - par value $0.00001
            
            678,452,244




DOCUMENTS
INCORPORATED BY REFERENCE




None.














TABLE OF CONTENTS




PagePART
      IItem
      1.
                      Description
      of Business
                      1Item
      1A.
                      Risk
      Factors
                      2Item
      2.
                      Properties
                      7Item
      3.
                      Legal
      Proceedings
                      8Item
      4.
                      Submission
      of Matters to a Vote of Security Holders
                      8PART
      IIItem
      5.
                      Market
      for Common Equity and Related Stockholder Matters
                      8Item
      6.
                      Selected
      Financial DataItem
      7.
                      Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                      10Item
      7A.
                      Quantitative
      and Qualitative Disclosures About Market RiskItem
      8.
                      Financial
      Statements
                      19Item
      9.
                      Changes
      In and Disagreements with Accountants on Accounting and Financial
      Disclosure
                      19Item
      9A.
                      Controls
      and Procedures
                      19Item
      9B.
                      Other
      Information
                      19PART
      IIIItem
      10.
                      Directors,
      Executive Officers, Promoters and Control Persons; Compliance With Section
      16(a) of the Exchange Act
                      20Item
      11.
                      Executive
      Compensation
                      21Item
      12.
                      Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                      25Item
      13.
                      Certain
      Relationship and Related Transactions, and Director
      Independence
                      26Item
      14.
                      Principal
      Accountant Fees and Services
                      27Item
      15.
                      Exhibits
                      29SIGNATURES
                      31













PART
I




Forward
Looking Statements




Certain
statements in this Annual Report on Form 10-K constitutes “forward-looking
statements” relating to the Company within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements regarding future events, our
financial performance and operating results, our business strategy and our
financing plans are forward-looking statements. In some cases, you can identify
forward-looking statements by terminology, such as





·
            “may,”·
            “will,”·
            “would,”·
            “should,”·
            “could,”·
            “expect,”·
            “intend,”·
            “plan,”·
            “anticipate,”·
            “believe,”·
            “estimate,”·
            “predict,”·
            “potential”
      or·
            “continue,”




the
negative of such terms or other comparable terminology. These statements are
only predictions. Known and unknown risks, uncertainties and other factors could
cause actual results to differ materially from those contemplated by the
statements. In evaluating these statements, you should specifically consider
various factors, including the risks outlined under the Risk Factors set forth
herein. These factors may cause our actual results to differ materially from any
forward-looking statements.




1


Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. We are under no duty to update any of the forward-looking
statements after the date of this report to conform those statements to actual
results or to changes in our expectations.





Glossary





“Arrow” -
Arrow Resources Development, Inc. (also referred to as the “Company”), formerly
known as CNE Group, Inc. prior to the name change that occurred on or around
December 1, 2005.





“Arrow
Ltd.” - Arrow Resources Development, Ltd., a company organized under the laws of
Bermuda and a 100% owned subsidiary of Arrow. Arrow Ltd. was acquired by Arrow
on or around August 1, 2005.





“APR”
- Arrow Pacific Resources Group Limited, a British Virgin Islands company, is
currently the principal shareholder of the Company, owning 352,422,778 shares or
52%.





“GMPLH”
- Gerakan Masyarakat Pelestari Lingkungan Hidup, is a non-profit organization in
Indonesia founded by A. H. Moerdani and Hans Karundeng. GMPLH is an educational
organization that acts as project developer, fundraiser, and project expeditor
for agricultural and environmental projects throughout Indonesia.





“P.T.
Eucalyptus” - P.T. Eucalyptus Alam Lestari is an Indonesian registered company
owned by Hans Karundeng and is a wholly owned subsidiary of Arrow Pacific
Resources Group Limited (“APR”). This company is the Indonesian operating
company that is the interface between GMPLH and all of the operating units and
joint venture partners. P.T. Eucalyptus is responsible for the supervision of
the planning of all harvesting, land preparation, and the planning of both the
eucalyptus tree plantation and a large-scale agricultural
operation.





“Arrow
Pte.” - Arrow Pacific Resources (s) Pte. Ltd. is organized under the laws
of Singapore and is a wholly owned subsidiary of Arrow Pacific Resources Group
Limited (“APR”).





Item 1.
            Description
      of Business.




Arrow
Resources Development, Inc. (“Arrow”) was incorporated under the laws of the
State of Delaware in 1968. Unless the context requires otherwise, the term
“Company,” “our,” or “we” refers to Arrow Resources Development,
Inc.




GENERAL




The
principal business of Arrow is to provide marketing, sales, distribution,
corporate operations and corporate finance services for the commercial
exploitation of natural resources around the world.




Our
temporary corporate executive offices are located at
Carnegie Hall Tower, 152 W. 57th Street, 27th Floor, New York,
NY 10019 (212-262-2300) and our web site is www.arrowrd.com.




INTRODUCTION




We used
to be a telecommunications and recruiting company formally known as CNE Group,
Inc. We changed our name to Arrow Resources Development, Inc. on or around
December 1, 2005. The Company elected to shift its business focus from
telecommunications and recruiting to the worldwide commercial exploitation of
natural resources.




Arrow
Resources Development Inc. (herein “ARD,” “Arrow Inc.” or “the Company”) was
established in 2005, to serve as the corporate finance and management
infrastructure developer for large scale plantation/farming operations and
ethanol plants in Indonesia. These projects are first and foremost environmental
restorations and social engineering projects, being done in cooperation with the
central and local governments of Indonesia, in partnership with Gerakan
Masyarakat Pelestari Lingkungan Hidup (GMPLH), the largest nonprofit
organization in Indonesia, as well a group of Indonesian joint venture partners
that includes Arrow Pacific Resources Group Limited; a British Virgin Islands
registered company, PT Wika Realty Inc. an Indonesian publicly traded
construction and land development company and PT Mitrasarana Infrakomindo, a
public pension manager and natural resource development company. The government
of Indonesia has declared that 55,000,000 hectares (approximately 6% of the
country) to be “critical land”. Critical land is classified as land that has
been illegally harvested over last 50 years by approximately 25 million local
“farmers” who earn their living by cutting old-growth trees for their own use or
for sale, at a fraction of its value to local lumber companies. The goal of the
Arrow development team is to restore 3,000,000 hectares of this critical land in
Indonesia through the creation of eucalyptus/corn plantations, ethanol plants,
several large-scale farming (eucalyptus, corn, soy, rice, fish and chickens)
operations, and possibly several ethanol blending plants. It is anticipated that
these development will require approximately 6 - 8 years and when completed,
will create approximately 200,000 local jobs, along with many small local
business opportunities. Arrow has developed and maintains the corporate
operating structure, financial operations, sales and marketing infrastructure
and the administrative group to oversee its’ corporate citizenship programs.
Arrow has outlined the necessary public relations and communications programs to
sustain these rapidly growing operations. Arrow Resources, along with all of its
joint venture partners, are collectively referred to in this document as "the
Companies".




2




Arrow
Pacific Resources Group Limited (herein “Arrow Pacific” or “APR”), a British
Virgin Islands registered company, was founded by Hans Karundeng, an Indonesian
industrialist and financier, for the purpose of developing natural resource
assets controlled by his group of local Indonesian Companies that are developing
plantation/farming operations and ethanol production plants in Indonesia. Mr.
Karundeng is the principal stockholder of Arrow Inc., a member of the
advisory board of GMPLH and a board member of several prominent Indonesian
Companies. Arrow Pacific, through its local subsidiary Companies, has developed
and will manage these opportunities in Indonesia.





Arrow
Inc., along with its partners GMPLH and PT Eucalyptus Alam, an Indonesian
registered wholly owned subsidiary of Arrow Pacific Resources Group Limited,
have developed a synergy of agro-biotechnology and cutting edge
forestry/agricultural practices in response to the growing demand for timber and
farming products. When these practices are performed in a conscientious manner,
it provides humankind with one of the greatest sources for renewable and
ecologically sustainable resources. Paper, dimensional lumber, fiberboard,
particleboard, furniture, utensils, recreational areas, animal habitat, and
clean air are some of the many benefits that will be realized through the
implementation of these programs in Indonesia.





The
Companies are executing their plantation/farming operating plan through the
implementation of a sound land management system, promote and/or establish
infrastructural development programs and provide provisions for financial,
economic and social growth to the people in the development areas. It is
essential for these developments to take into consideration local bio-physical
environment conditions as well as the traditional and cultural beliefs of the
local villagers. In conjunction with local inhabitants, the Companies have
developed a plan that will maximize profits to the greatest potential of the
area, while increasing employment and constantly re-evaluating their
administrative and management programs. The Companies are working to achieve
superior safety performance, implement reliable harvesting, replanting and
farming processes, and become a leader in the industries of sustainable forestry
and farming as well as leaders in the development of socially conscious and
environmentally sensitive land development throughout the world.




Arrow
Pacific has entered into Marketing and Distribution Agreement with Arrow
Resources Development Ltd. (a Bermuda Limited Company), which is a wholly-owned
subsidiary of Arrow Resources Development Inc., that provides for Arrow to
receive 10% of the gross sales generated by all plantation operations from any
and all derivative products (e.g. corn, paper, pulp, chips), 5% of gross sales
generated from all ethanol plants and a 50% ownership interest in all ethanol
plants. Under this agreement, Arrow acts as collection and disbursement
consultant and agent for all operations. In the case of each plantation, Arrow
retains 10% and disburses the remaining 90% to Arrow Pacific's various business
units which becomes their gross revenues. In the case of the ethanol plants,
Arrow retains 5%, disburses all expensive tool suppliers and labor and develops
audited accounting to determine operating income for distribution on a 50-50
basis.   The Companies’ Asian offices are in Singapore, Jakarta and
Kendari Indonesia and satellite offices at each plantation or plant location.
The following is a brief description of these transactions and
relationships.





THE
COMPANIES





Arrow
Pacific, through its Indonesian operating division, PT Tiga Daun Nusantara (a
locally registered Sulawesi company) is the principal operating company for the
initial plantation and ethanol plant location in Tenggara, Sulawesi. Gerakan
Masyarakat Pelestari Lingkungan Hidup (GMPLH), a large nonprofit organization
based in Indonesia, for the development of a plantation/farming operation that
will include 3 million hectares (ha) on the islands of Kalimantan and Sulawesi
in Indonesia. PT Wika Realty Inc. and Indonesian publicly traded construction
and land development company and PT Mitrasarana Infrakomindo, a public pension
manager and natural resource development company.





This
program of reforestation is built around the development of eucalyptus and corn
plantations, the development of ethanol plants as well as farming operations
designed to create a sustainable forestry and agricultural program. This program
will include local subsistence farming operations at each plantation for the
purpose of increasing and sustaining the income for local farmers. Through the
development these subsistence farms, which will be funded by revenue from the
programs, thousands of local farmers will plant and manage corn, rice and
soybean crops for local consumption and national distribution as well as fish
farms and chicken farms for local consumption and sale throughout the
country.





Arrow
Pacific and all its subsidiary Companies in Indonesia, along with GMPLH, have
executed Agency Agreements in August 2006 with Arrow Resources Development Ltd.
(the Bermuda registered wholly-owned subsidiary of our Resource Development Inc.
herein referred to as "Arrow Ltd.") providing that the Company will advise the
Companies on matters related to structured corporate finance, financial
administration, corporate management practice, marketing and distribution and
infrastructure. The Agency Agreements are for a term of 99 years while granting
the Company 10% of gross revenue.





PT Tiga
Daun Nusantara, a wholly owned subsidiary of Arrow Pacific Resources Group
Limited, has opened its research and development office in Ujung Pandang for the
purpose of developing genetically engineered eucalyptus tree saplings and corn
seedlings to be used at the initial plantation/farming sites. By synthesizing
aspects of American-style forestry and agricultural practices with these new
advances in bio-engineering, the Company's methodology produces a significant
increase in both quantity and quality of tree and corn, production. The
accelerated growth cycle for the eucalyptus trees produced by these processes
yield a continually renewable timber resource. Makassar, formerly known as Ujung
Pandang, is the provincial capital of South Sulawesi, Indonesia. It is
anticipated that this facility will be fully operational no later than the
fourth quarter of 2010.




3





The
Companies are poised to capitalize on the increasing demand of the raw materials
for the manufacturing of paper, timber products, and agricultural products as
well as the demand for ethanol in the local market and all the regional
developing international markets, most notably China.  The region’s
rising standards of living have created a demand for larger quantities of
printed material, packaging, personal care paper products, industrial paper
supplies, corn, rice, soy and the production of energy such as ethanol. The
proximity of the Companies’ operations to these local and principal markets
enables them to supply these markets in a highly competitive manner due to
significantly reduce transportation costs.





The
Companies have two significant timing factors that enhance their competitive
advantage for the production of eucalyptus. The first of these factors is the
application of newly developed agro-biotechnology. The growth cycle of the
eucalyptus trees in the Companies plantation areas is significantly faster than
those of its competitors; 3 to 4 years, as opposed to a typical 10 to 12 years
on average. The technology also offers several other biological advantages. The
bio-engineered trees are more resistant to adverse weather and infestation, more
successful at growing in poor soil and are able to sustain growth without the
use of any toxic agro-chemicals. Several other lumbering operations in the
Pacific have been heavily scrutinized in the past for their heavy use of such
environmentally-degrading chemicals. The second factor is the proximity of the
operations to the equator. This unique geographical position provides a growing
season that lasts a full 12 months of each year, in comparison to the 7 to 8
month seasons of many of its competitors.





These
significant advantages are also applicable to the production of the company's
agricultural products, most notably corn. The climate and rainfall enable the
growth of approximately 2-3 crops of corn annually. This significant increase in
land usage lowers cost of the raw material and increases productivity while
reducing storage requirements and the amortization of fixed expenses associated
with a single crop.




The
Companies understand that any large-scale timber and agricultural operation
faces environmental and wildlife conservation concerns. In the interest of good
corporate citizenship, a plan has been developed to ensure that all operations
are sensitive to the environmental and ecological importance of transforming the
critical land into a sustainable and renewable timber resource in a responsible
manner. The Companies have consulted with their joint-venture partners GMPLH, to
develop socially sensitive and environmentally friendly programs for developing
these sustainable resources and large-scale farming operations. The Companies
have also assembled its own local team of highly qualified scientists,
bio-engineers and environmentalists for the development of its
technology Center. This team has also examined methods proposed to
establish a preserve for the relocation of wildlife, the preservation of
biodiversity, the investigation of potential medical benefit and the replanting
of several noble species.





On or
around August 1, 2005, Arrow Pacific Resources (s) Pte. Ltd. (“Arrow
Pte.”) entered into a Marketing and Distribution Agreement with Arrow Resources
Development Ltd. (“Arrow Ltd.”) (a Bermuda Limited Company), which is a
wholly-owned subsidiary of Arrow, that provided for both Companies to receive
10% of the gross sales generated by all plantation and mining operations and any
and all derivative products (e.g. corn, paper, pulp, chips). Under this
agreement, Arrow was to act as a consultant and agent for all operations. Arrow
was to retain 10% of their gross revenues.





The World
Bank and World Wildlife Federation have adopted forest management guidelines to
ensure economic, social and environmental benefits from timber and non-timber
products and the environmental services provided by forests. Most countries,
including Indonesia as of 2007, have adopted these guidelines as law in order to
promote economical development while combating the ongoing crisis of worldwide
deforestation.





It has
always been the policy of Arrow Pte to follow the international guidelines for
the harvesting of timber in virgin forests. In December 2007, Arrow Pte.
assessed that it would be unable to harvest the timber products in Papua, New
Guinea due to the fact that the widely accepted international guidelines of the
World Wildlife Federation had not been adopted by Papua, New Guinea. This fact
is adverse to the economic, social and environmental goals of Arrow Pte. because
with the amount of land that the project was allotted combined with the agreed
upon previous guidelines of the marketing and distribution agreement, yields
would be significantly reduced. Given the significant change in the economics of
the harvesting of the timber in Papua, New Guinea, Arrow Pte. has decided not to
pursue any further operations in Papua, New Guinea given that the above
restrictions cause a significant reduction in the volume of harvesting, which
results in a disproportionate cost to yield ration at the Papua, New Guinea site
which makes the project not economically feasible in the foreseeable
future.





Based on
the fact that Arrow Pte. is unable to fulfill their part of the agreement, the
Company has reached the conclusion that the marketing and distribution agreement
has no value. Therefore, the Company has fully impaired the value of the
agreement and recorded a loss on write-off of the marketing and distribution
agreement of $125,000,000 at December 31, 2007.




In April
of 2006, Arrow Ltd. entered into an agency agreement with APR to provide
marketing and distribution services for natural resource products. Arrow Ltd.
currently has an exclusive marketing and sales agreement with APR to market
corn, lumber and related products from land leased by GMPLH located in Indonesia
which is operated by APR and its subsidiaries. Under the agreement Arrow Ltd.
will receive a commission of 10% of gross sales derived from corn, lumber and
related products.





The
companies’ Asian offices are in Singapore, Jakarta and Kendari Indonesia and
their plantation/farming activities are in Indonesia. Hans Karundeng is a
director of the nonprofit organization GMPLH and is the principal stockholder of
Arrow, the principal stockholder on APR and principal stockholder of all the
Indonesian registered companies.


4


THE
ARROW COMPANIES - GENERAL





Arrow, as
part of the Management Agreement, has built and maintains all of the companies’
corporate finance activities, corporate operations structure, financial
management activities, international banking activities, supervision of all
accounting and auditing activities, corporate research and development
activities, maintenance of the companies’ global MIS, direction of all marketing
and sales activities and all the general administrative functions. Arrow has
also developed and maintained the companies’ scientific advisory team and
corporate citizenship programs. Additionally, the Company supervises all legal
and accounting activities necessary to retain its public listing.





Arrow
Pacific Resources Group Limited, a British Virgin Islands registered company,
was founded by Hans Karundeng in 2002, an Indonesian industrialist and
financier, for the purpose of developing natural resource assets controlled by a
non-profit organization through a group of Companies that are developing
plantation/farming operations in Indonesia.





Arrow
Pacific has, through their wholly-owned subsidiaries PT Tiga Daun Nusantara
(local operating company in Kendari), PT Eucalyptus Alam Lestari, PT Nusa Alam
Sejahtera , PT Sumbur Utama Alam, and PT Tunas Hamparan Hijau , (all Indonesian
registered Companies) have entered into agency agreements with Arrow Resources
Development Ltd. (a Bermuda Ltd. Company and wholly-owned subsidiary of Arrow
Resources Development, Inc.) to act as its corporate finance, financial
administration, corporate management practice, marketing and distribution and
infrastructure agent in Indonesia. These agreements provide for the Company to
receive 10% of the gross sales generated by all plantation/farming operations
and by any and all derivative products (e.g. paper, pulp,
chips).  Under this agreement, ARD acts as the collection and
disbursement agent for all operations.  ARD retains 10% of gross
revenues and disburses the remaining 90% to Arrow Pacific's various business
units which becomes their gross revenue. In the case of the ethanol plants,
Arrow collects all gross revenue from operations, retains 5% of the gross
revenue as part of its fee, then covers expenses to all suppliers through an
audited accounting system to determine net revenue for distribution on a 50-50
basis.





Arrow
Pacific Resources Group Limited operates, with its joint-venture partners, all
of the on-the-ground, day-to-day plantation operations, all infrastructural
development operations and all shipping operations as they relate to the overall
plan.  Arrow Pacific is led by a team of highly qualified
professionals with experience in the fields of plantation management, material
science and analysis, agriculture, forestry and agro-law. The team has
contracted all labor, heavy equipment, transportation and
shipping.  Several members of the team hold close affiliations with
organizations such as the Timber Association of Sabah, the National
Sub-committee on Fiscal Incentives of Forest Plantations in Malaysia and the
Scientific and Technical Committee of The Association Technique Internationale
des Bois Tepicaux.





PT Tiga
Daun Nusantara is an Indonesian registered company owned by Hans Karundeng that
is registered and licensed to operate in Kendari, Sulawesi.  This
company is the Indonesian operating company acting as the local interface
between all of the operating units and joint venture partners.  Tiga
Daun is responsible for the supervision and planning of all harvesting, land
preparation, and planning for both the eucalyptus tree plantation and a
large-scale agricultural operation. The Ministry Of Forestry in Indonesia
requires that local Companies receive operating licenses on each island. The
local Companies that will hold the licenses are P.T. Eucalyptus Alam Lestari,
which has formed PT Nusa Alam Sejahtera, PT Sumbur Utama Alam, PT Tiga Daun
Nusantara and PT Tunas Hamparan Hijau.





GMPLH is
one of the largest non-profit organizations in Indonesia.  Founded by
A. H. Moerdani and Hans Karundeng being a director, GMPLH is an educational
organization that acts as a project developer, fundraiser, and project expeditor
for agricultural and environmental projects throughout
Indonesia.  Since its inception in 1993, GMPLH has sponsored and
completed more than 25 large-scale agricultural and educational projects
resulting in the planting of more than 600 million trees throughout
Indonesia.  GMPLH has been initially granted land licenses by the
Indonesian government for more than 1.8 million hectares (ha) (3.75 million
acres) for a program that will include 3 million ha as part of large-scale
reforestation and farming efforts.





INDUSTRY





The
planet’s consumption of forestry products has more than doubled over the last 30
years as global population continues to grow. The increased demand for forestry
products has also led to the need for increased protection of forests and
wildlife, and a more public participation in forestry management. The demand for
imported raw material for China’s low-cost timber manufacturing industries is
increasing sharply and establishing a more expansive market for international
suppliers. The forestry community in the Asia-Pacific region, where the
Companies’ plantation will be located, possesses an advantage in the industry of
greater periods of harvesting and re-growth in comparison to other countries
that experience periods of dormancy. This is primarily caused by adverse weather
and seasonal conditions. This enables growers in the region to cope with the
ever shifting goals and expectations associated with the rapid evolution of
social, economic and environmental issues that impact policies, legislation, and
institutions. The increase in demand was rapidly exploited in many areas by
timbering operations that stripped forests bare with no regard for their
environmental damage, or replenishing the timber resources being consumed. This
mercenary behavior was responded to with strict and immediate regulation and
monitoring of the industry by government environmental agencies and consumer
advocacy groups on lumbering operations worldwide. Despite the increase in
demand, the shortage of suppliers who are able to meet environmental standards
has caused the forestry industry to shrink by an estimated 9.4 million ha per
annum.




5




The
forestry industry involves harvesting, silviculture (the growing and cultivation
of trees), milling, value-added processing and manufacturing. Globally, the
industry is being pressured from many directions. Governments have attempted to
improve the forestry industry with privatizing measures, which transfer the
property rights through the sale of natural forests or planned forests. Only a
limited number of countries were involved in this practice in the 1970s and
1980s, and among them were Chile and China. In New Zealand, privatization began
in the late 1980s with the sale of 550,000 ha and in 2000, was shown to have 94%
of planted forests owned privately. Between 2000 and 2002, South Africa saw the
benefits of this system and estimated that 90,000 has became privatized.
Privatization typically consists of the management of natural forest concessions
or leases, volume permits or standing timber sales, outsourcing and
community-based approaches. Global paper consumption trends continue to edge
higher, confirming its utility as a low cost, high- performance and flexible
material. Paper has been labeled by many as “essential” for development and
modern living. Global consumption has increased by at least 25% during the 20th
century and by a factor of three in the last three decades alone.





The Asian
demand for timber and pulp supply has increased due to the rapid expansion of
its economy and one of the largest population densities. These increases have
led also to the increase in usage of computers requiring more printing paper,
higher living standards, and the usage of more books, magazines and packing
boxes. These same factors also drive the increased demand for Eucalyptus Oil,
which China uses over 70% of the world’s production, and is projected to
increase as well as the demand for the wood chips, which is one of the principal
ingredients for manufacturing chipboard. Many experts believe China’s demand for
such material will continue for the next 30 years.





The
international market’s demand for timber derivative products continues to rise
as economic factors drive the consumption of such goods forward. Household
production levels directly impact the consumption levels of chipboards. A
nationwide study in China determined 80% of the finished products available to
the market are developed in household processing level mills which cannot meet
the market demand. The insufficient rate in correlation with the high demand for
timber raw material is so great that outside sources need to be employed. Aside
from the growing demand for corn products in the Asian market, Indonesia is
currently importing 1.5 million metric tons of corn annually to sustain its
ever-growing production of ethanol and demand for animal feed
products.





OPERATING
MODEL





The
Companies have developed a synergy of agro-biotechnology and cutting edge
forestry/agricultural practices in response to the growing demand for timber and
farming products. When these practices are performed in a conscientious manner,
it provides humankind with one of the greatest sources for renewable and
ecologically sustainable energy. Paper, dimensional lumber, fiberboard,
particleboard, furniture, utensils, hydrocarbon fuel, recreational areas, animal
habitat, and clean air are some of the many benefits resulting from bio-diverse
forests.





The
Companies will execute their plantation/farming operating plan through the
implementation of a sound land management system, promote and/or establish
infrastructural development programs and provide provisions for financial,
economic and social growth to the people in the development areas. It is
essential for the development to take into consideration local bio-physical
environment conditions as well as the traditional and cultural beliefs of the
local villagers. In conjunction with local inhabitants, the Companies have
developed a plan that will maximize profits to the greatest potential of the
area, while increasing employment and constantly re-examining their
administrative and management programs. The Companies will work to achieve
superior safety performance, implement reliable harvesting, replanting and
farming processes, and become a leader of the industries of sustainable forestry
and farming as well as leaders in the development of socially conscious and
environmentally sensitive land development throughout the world.




The
Companies believe the effectiveness of any forest management system hinges on
the accuracy of obtaining pre-development information. They have commissioned
qualified and highly experienced foresters, surveyors and enumerators to conduct
surveys that will map out the harvestable area before the commencement of
development activities. The data obtained from these surveys will provide a
framework for the development of the infrastructure of the plantations. Local
inhabitants will be employed to operate the plantation/farming operations as
laborers and managers. There will also be teams of trainee plantation employees,
field doctors, security personnel, cooks and other basic labor to support the
large scale of operations being undertaken.





Possessing
a strong commitment to responsible environmental management practices, the
Companies will continuously monitor and improve the environmental outcomes of
its operations. In the interest of good corporate citizenship, a plan has been
developed to ensure that all operations are sensitive to the environmental and
ecological importance of transforming the virgin forests territories into a
sustainable and renewable timber resource in a responsible manner. The Companies
have consulted with the scientific and environmental communities regarding the
establishment of a preserve for the relocation of wildlife, the preservation of
biodiversity, the investigation of potential medical benefits and the replanting
of several noble species.




APR plans
to construct a large number of roads to connect the project areas with the
proposed factory area, harbor, camp site, local inhabitant living areas, and
other major sites that require transportation to and from on a frequent basis.
Throughout this phase, inventory and tree marking will take place. The data
obtained from these surveys will provide a framework for the development of the
infrastructure of the plantations. Local inhabitants will be employed to
participate in the operations of the plantation and, in some cases as
specialized loggers. There will also be teams of back-up plantation employees,
field doctors, security personnel, cooks and other basic labor to support the
large scale of operations being undertaken. In conjunction with the local
inhabitants, equipment specialists, as well as labor force specialist from
Indonesia and Singapore, APR has developed a fully operational on-the-ground
team ready to begin the first phase.




6




The
near-equatorial position of Indonesia ensures a good supply of rainwater for the
tree crops year-round with little or no seasonal change, aiding in maintaining
the consistent growth cycle of only 3-4 years. The specific location of the
government granted timberland concessions in Indonesia enables the trees to grow
with minimal interference from open-ocean earthquakes and large storms. The
concessions are protected from such conditions by the large islands, which act
as barriers at sea. Thus, the timberlands are all located in the areas most
conducive to growth, maintenance, transportation, and sale. The areas of
Southeast Asia allow eucalyptus tree and farming production to thrive due to the
steady weather patterns and no real winter season.





PRODUCTS





The
forestland that will be the site of APR’s plantation in Indonesia are lands that
have been classified by the government as "critical land" meaning land that has
been partially harvested illegally during the past 50 years and the Companies
have commissioned physical surveys on the target sites. The majority of the
noble species and selected hardwoods have been removed by illegal logging during
the past half-century. The general composition of the remaining species included
on the development sites are primarily whole new growth bushes, heavy brush and
some small little grove saplings which all are somewhat suitable for the
manufacture of paper and paper products.





Due to
the fact that all of the plantation and plant sites are considered "critical
land," the Companies have commissioned physical surveys on the target sites. The
majority of the noble species and selected hardwoods have been removed by
illegal logging during the past half-century. The general composition of the
remaining species included on the development sites are primarily whole new
growth bushes, heavy brush and some small little grove saplings which all are
somewhat suitable for the manufacture of paper and paper products.





LEGAL




The
Company was a party to a lawsuit where the plaintiff is alleged that he was
entitled to $60,000 and 1,300,000 of common stock based upon CNE’s failure
to compensate him for services related to identifying financing for CNE,
based upon an agreement that was entered into between CNE and the plaintiff in
April 2005. On November 28, 2007, the Company settled the lawsuit with the
plaintiff. In full and final settlement of the claims asserted in the action,
the Company has paid the plaintiff $10,000 in cash and issued the plaintiff
200,000 shares of the Company’s common stock on December 21, 2007. The
settlement resulted in a loss on debt conversion of $2,000 during the year ended
December 31, 2008 because an estimated liability had been recognized prior to
2007.




In May
2006, the Company was advised that it was alleged to be in default of a
settlement agreement entered into in January of 2005 by CNE, its predecessor
company, related to the release of unrestricted, freely-tradable, non-legend
shares of stock. In August 2006, the plaintiffs, alleging the default, obtained
a judgment in the 17th Judicial Circuit Court Broward County, Florida for
approximately $1,000,000. On November 13, 2007, legal counsel engaged by
Management commenced an action on the Company’s behalf in the above Circuit
Court seeking to vacate and set aside the 2006 judgment asserting claims under
Rule 1.540(b) of the Florida Rules of Civil Procedure. Our counsel’s evaluation
is that the Company has only a limited chance of having the 2006 judgment opened
by the Court because Florida law provides very narrow grounds for opening a
judgment once a year has passed from its entry. The Courts are generally
reluctant to disturb final judgments and the Company’s grounds for opening the
judgment depend on the Court’s adopting a somewhat novel argument regarding such
matters. If, however, the Court does open the default judgment, the Company will
then have the opportunity to defend the 2006 action and, in such event, our
counsel believes that the Company has a reasonable chance of succeeding in
defending that claim, at least in part, based on the documents he has reviewed.
As of December 31, 2008, the Company has accrued $1,203,492 related to this
matter.  As of December 31, 2009, the Company has accrued $1,266,695,
including accrued interest of $213,310, related to this matter.





HUMAN
RESOURCES




As of
December 31, 2009, our workforce consists of consultants. The majority of our
consultants are professional, technical or administrative personnel who possess
training and experience in finance, information management, and business
management. We have no union contracts. We believe that our relations with our
consultants are satisfactory. In addition we rely on the personnel of APR,
described below.





APR has
already assembled the necessary senior management and field operations personnel
required to initiate the project. The initial senior staff of APR and its
supporting clerical personnel are sufficient for operations in the first five
years. The initial senior management and field operations personnel of APR is
sufficient for operations for at least three years. During the initial
three-year period, APR will conduct an executive search for additional field
operations personnel and eventually the requisite personnel for the operation of
the paper mill. APR will be responsible for staffing field and production
operations.





Since the
projects in Indonesia are first and foremost an environmental restorations and
social engineering projects, the emphasis is on maximizing the use of local
labor and job creation. APR is developing its technical/agricultural production
center on Sulawesi Island which is staffed by highly qualified Indonesian
based professionals. All manual operations will employ local resident farmers
and their families and all hiring will be coordinated by GMPLH. This approach is
designed to reengineer large-scale farming communities and redeveloped long-term
farming infrastructure.




7




The
companies have assembled, through their joint venture partners, the necessary
senior management and field operations personnel required to initiate the
project. The initial senior staff and its supporting clerical personnel are
sufficient for operations in the first five years. The initial senior management
and field operations personnel are sufficient for operations for approximately
two years. During the initial two-year period, a human resource acquisition and
benefits program will be completed and structured to grow as the projects
grow.





Since the
health of the workers is not only based on physical conditions, special
attention also must be paid to safety, adequate standards of comfort,
sanitation, nutrition and general welfare. Adequate training, which is
appropriate for job requirements and satisfactory working conditions, is viewed
by the companies as a primary and effective motivator since these considerations
not only contribute to improved safety, but they also contribute to improved
efficiency. Plantation/farming projects normally place a high priority on
landowners' participation in resource development and give employment preference
to landowners whose dedication reflects the investment they have in the success
of their local economies.




Training
personnel will be required to maintain the highest level of safety for the
workers and the environment. The workers will receive training to identify
various tree species, measurement of trees, quality criteria for harvestable
trees and field organization for the pre-harvesting inventory. Training programs
for harvesting crews will consist of harvesting safety, proper cutting and
directional felling techniques, maintenance of chainsaw and chain sharpening,
field organization of harvesting activity, use of tree location maps and
criteria for deciding whether or not to fell a marked tree. Practical training
for extraction crews will consist of field considerations for reducing the
damage to the remaining forest stand, field organization of the extraction
activities, and use of tree location/extraction maps. Training programs for farm
workers will include proper soil tilling methods, proper seeding techniques,
fertilizer techniques and management, irrigation techniques, testing and
allocations, harvesting techniques and proper use of crop rotation.





COMPETITION




APR
principal plantation operations will be located in Indonesia in close proximity
to the Asian Pacific market enabling timber to be delivered with lower shipping
costs, and at higher profit. The distance for competitors to ship their products
includes a much greater cost and longer shipping period. These near-equatorial
locations ensures a good supply of rainwater for the tree crops, which aids in
developing a consistent growth cycle of only 3-4 years. The specific location of
the government granted timberland concessions, in Indonesia, enables the trees
to grow with minimal interference from open-ocean earthquakes and large storms.
Thus, the location of this timberland makes easier to transport and sell, and
easier to maintain.





The
existing forest industry is dominated by large foreign logging companies, or
landowning companies.





Australia
currently exports approximately 6.5 million tons of woodchips annually from
ports in Tasmania, Victoria and Western Australia. Australia’s stock in
plantations has risen rapidly over the past decade. Estimates show 455,000
hectares of new eucalyptus plantations have been established over the past 7
years. The Australian market competitors have relatively high entrance costs and
higher service fess with lower potential return. Their harvesting cycles
typically take 6 years or longer and environmental risks weigh heavily on the
yield.





Brazil
has 400 million hectares of tropical forests, and 7 million hectares of exotic
plantations comprised mainly of fast growing eucalyptus. The timber from these
plantations provides raw material for charcoal, and pulp and paper production.
Brazil accounts for 60% of total charcoal production although native woods are
mostly used for timber production; with an annual consumption rate around 250
million cubic meters.





Chile has
around 5.5 million hectares of productive native forest, mainly Nothofagus
hardwood species. Timber production from native hardwood amounts to 0.35 million
m3  /year,
and nearly 75% is used to produce chips for exports to Asian countries. Pine and
eucalyptus plantations cover 1.8 million hectares, with an annual expansion rate
of 7-10%. Pinewood accounts for 78% of total plantations; eucalyptus is growing
faster and a big surplus is expected within the next decade.





DEMOGRAPHICS




The
climate of Indonesia is reported to be monsoonal in nature, characterized by
high temperatures and humidity throughout the year. However, the specific
location of the timber concessions within these countries enables the trees to
grow with minimal interference from open-ocean earthquakes and large storms.
Operations in Indonesia are located inland, not on annual flood plains, not on
islands with historically high earthquake activity and where there are active
volcanoes present.





EMPLOYEES




As of
December 31, 2009, our workforce consists of consultants. The majority of our
consultants are professional, technical or administrative personnel who possess
training and experience in finance, information management, and business
management. We have no union contracts. We believe that our relations with our
consultants are satisfactory.




8





Our
future success depends in large part on our ability to retain key technical,
marketing, and management personnel, and to attract and retain qualified
employees and consultants. Competition for such personnel is intense, and the
loss of key consultants, as well as the failure to recruit and train additional
technical personnel in a timely manner, could have a material and adverse effect
on our operating results.





Our
success also depends, to a significant extent, upon the contribution of our
executive officers and other key consultants. We have agreements with our chief
executive officer, and maintain an informal stock plan whereby key personnel can
participate in our success. All of our personnel are eligible to participate in
this plan.





Item 1A.
            Risk
      Factors.





The
following discussion highlights certain of the risks we currently
face.




The
following factors, in addition to those discussed elsewhere in this document,
should be carefully considered. Securities of the Company involve a high degree
of risk and should be regarded as speculative. In addition to matters set forth
elsewhere in this Annual Report, potential investors should carefully consider
the risk factors described below relating to the business of the
Company.




LIMITED
OPERATING HISTORY




The
success of the Company cannot be guaranteed or accurately predicted. There is no
assurance that the Company will be able to operate profitably. Such prospects
must be considered in light of the risks, expenses and difficulties frequently
encountered in the establishment of a product and service.





Arrow
began operations in approximately September, 2005, and to date has generated
$52,000 in revenues. The Company has no significant operating history. There is
no assurance that the Company will be able to operate and manage on a profitable
basis or that cash flow from operations will be sufficient to pay the operating
costs of the Company. The Company may need to raise additional capital to
finance its continued operations. The Company may seek additional financing
through debt or equity financings. There is no assurance that additional
financing will be available to the Company, or if available, that the financing
will be on terms acceptable to the Company. There is no assurance that the
Company’s estimate of its reasonably anticipated liquidity needs is accurate or
that new business developments or other unforeseen events will not occur that
will result in the need to raise additional funds. In the event that the Company
cannot raise needed capital, it will have a material adverse affect on the
Company. There is no assurance that the Company will achieve or sustain
profitability or positive cash flow from operating activities in the future or
that it will generate sufficient cash flow to service any debt
requirements.





SIGNIFICANT
CAPITAL REQUIREMENTS & DILUTION




The
Company’s capital requirements are and will continue to be significant. The
Company anticipates, based on management’s internal forecasts and assumptions
relating to its operations (including the costs associated with marketing), that
unless at least $1,500,000 is raised for working capital purposes, the Company’s
cash resources will not be sufficient to satisfy the Company’s contemplated cash
requirements and that additional financing may be needed to support the Company.
There can be no assurance that the Company will be able to obtain additional
financing on terms acceptable to the Company. To the extent that any financing
involves the sale of the Company’s equity securities, the interests of the
Company’s then existing shareholders could be substantially diluted. Dilution
will also occur when and if options to be granted to employees, consultants and
other third parties are exercised.




DEPENDENCE
ON ARROW PACIFIC RESOURCES GROUP LIMITED AND ITS OPERATING
SUBSIDIARIES




Our
revenues are currently entirely derived from sales of APR and its operating
subsidiaries products sales. APR will not be in a position to generate
sustainable timber sales until it has completed certain infrastructure
improvements in Indonesia. The infrastructure requirements will take APR a
maximum of one year to complete. Therefore, APR may not generate sustainable
sales of its products until the third quarter of 2010.





COMPETITION




The
Company anticipates competition on numerous fronts. Increased competition could
require the Company to respond to competitive pressures by establishing pricing,
marketing and other programs, or seeking out additional strategic alliances or
acquisitions, any of which could have a material adverse effect on the business,
prospects, financial condition and results of operations of the Company. The
Company could potentially have competitors with longer operating histories,
larger customer bases, greater brand recognition, and significantly greater
financial, marketing and other resources than the Company. Increased competition
may result in reduced operating margins, loss of market share, and a diminished
brand franchise, any of which would have a material adverse effect on the
Company. There is no assurance that the Company will be able to compete
successfully.




9





ABSENCE
OF DIVIDENDS & DIVIDEND POLICY





The
Company has never paid dividends on its Common Stock, but does anticipate paying
dividends on its Common Stock in the foreseeable future. The declaration and
payment of dividends by the Company are subject to the discretion of the
Company’s Board of Directors. Any determination as to the payment of dividends
in the future will depend upon results of operations, capital requirements,
restrictions in loan agreements, if any, and such other factors as the Board of
Directors may deem relevant.





OWNERSHIP
OF THE COMPANY




APR owns
52% of the Company’s stock. Hans Karundeng is the Chairman of APR. His son,
Rudolph, is a Director of the Company and is an 8% owner of the Company’s
stock.




DEPENDENCE
ON MANAGEMENT




The
success of the Company will largely be dependent upon the active participation
of its management. The Company does not currently have “Key Man” life insurance
on any of its current officers or employees, although the Company intends to
provide such insurance, based on availability of funds in the future. The
Company would pay all premiums for such “Key Man” life insurance. The time that
the officers and directors devote to the business affairs of the Company, and
the skill with which they discharge their responsibilities, will substantially
impact the Company’s success. Loss of the services of certain executive officers
of the Company could be expected to have a material adverse effect upon the
Company.





POSSIBLE
LOSS OF OR INABILITY TO ATTRACT KEY PERSONNEL




The
Company’s success depends largely on its ability to attract and retain highly
qualified managerial and industry personnel. There can be no assurance that the
Company will be successful in attracting or retaining these key personnel. The
loss of the services of key personnel could have a material adverse effect on
the Company.





GENERAL
ECONOMIC AND OTHER CONDITIONS




The
Company’s business may be adversely affected from time to time by such matters
as changes in economic, industrial and international conditions, changes in
taxes, changes in government regulations, prices and costs and other factors of
a general nature and in particular those changes which have an adverse material
effect on the natural resources industry or other industries in which the
Company becomes engaged to provide marketing, sales, distribution, corporate
operations and corporate finance services for the commercial exploitation of
natural resources around the world.





WE
MAY BE UNABLE TO CONTINUE AS A GOING CONCERN




These
consolidated financial statements are presented on the basis that the Company is
a going concern. Going concern contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a reasonable
period of time.




As shown
in the accompanying consolidated financial statements, the Company incurred a
net loss of $6,520,053 for the year ended December 31, 2009 and a net loss
during the development stage from inception in November 15, 2005 through
December 31, 2009 of $146,744,021. The Company’s operations are in the
development stage, and the Company had generated revenue of $52,000 since
inception. The Company’s existence in the current period has been dependent upon
advances from related parties and other individuals, and the sale of senior
notes payable.





We cannot
assure you when or if we will ever be able to operate on a positive cash flow
basis. If we are unable to achieve the level of revenues needed to attain a
positive cash flow, we may be required to take actions, including but not
limited to reducing our operations, seeking an acquisition and/or merging with
another entity, that could materially change and/or adversely affect our
business.





We have a
history of losses and we cannot assure you that we will be able to operate
profitably in the foreseeable future, if at all.





Our
inability to achieve or maintain profitability or positive cash flow
could:




·
            result
      in disappointing financial results,




·
            impede
      implementation of our growth
strategy,




·
            cause
      the market price of our common stock to
  decrease,




·
            impede
      our ability to procure financing on acceptable terms or at all,
      and




·
            otherwise
      adversely affect our business and financial
  condition.




10




Under
certain circumstances we could incur an impairment loss that could adversely
affect our stockholders’ equity.





We will
require financing if our revenues do not meet our projections or our expenses
are greater than we anticipate, or to finance the further development of our
business. Our inability to obtain financing, if required, would have an adverse
effect on our business.





We may
need to obtain financing if our actual costs are higher than projected or our
contemplated future revenues fall below our current expectations, in order
to




·
            finance
      more rapid expansion,




·
            increase
      marketing and sales,




·
            develop
      new or enhanced technology,




·
            respond
      to competitive pressures,




·
            establish
      strategic relationships, and/or




·
            provide
      for working capital.





If we
raise such financing by issuing equity or convertible debt securities, the
percentage ownership of our stockholders will be diluted. Any new debt or equity
securities could have rights, preferences and privileges senior to rights of our
common stock holders. We currently have no commitments for any such financing
and, accordingly, cannot assure you that such financing will be available when
and to the extent required or that, if available, it will be on terms acceptable
to us. If adequate financing is not available on acceptable terms, we may be
unable to finance the activities referred to above. In such event, our business
may be adversely affected.





Recently
enacted and proposed changes in securities laws and regulations will increase
our costs. The Sarbanes-Oxley Act of 2002 that became law in July 2002 has
required and will continue to require changes in some of our corporate
governance practices. We expect that the Sarbanes-Oxley Act will increase our
legal and financial compliance costs, and make some activities more difficult,
time consuming and/or more costly. We also expect that the Sarbanes-Oxley Act
will make it more costly to obtain director and officer liability insurance
coverage, and we may be required to accept reduced coverage or incur
substantially higher costs to obtain it. We currently do not have this coverage.
These new rules and regulations could also make it more difficult for us to
attract and retain qualified members of our board of directors, particularly to
serve on our audit committee, and qualified executive officers. In accordance
with the Sarbanes-Oxley Act, we have instituted a number of changes relating to
corporate governance practices including the certification of our consolidated
financial statements pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act
and adoption of certain internal controls. The Sarbanes-Oxley Act has provisions
that have implementation deadlines, including those related to Section 404
concerning internal control procedures. Implementation of those procedures will
require resources and a portion of our management’s time and
efforts.




Our
reported financial results may be adversely affected by changes in accounting
principles generally accepted in the United States.




We
prepare our financial statements in conformity with accounting principles
generally accepted in the United States. These accounting principles are subject
to interpretation by the Financial Accounting Standards Board, the American
Institute of Certified Public Accountants, the SEC and various bodies formed to
interpret and create appropriate accounting policies. A change in these policies
or interpretations could have a significant effect on our reported financial
results, and could affect the reporting of transactions completed before the
announcement of a change. For example, while current accounting rules allow us
to exclude the expense of employee stock options from our financial statements,
influential business policy groups, including the Financial Accounting Standards
Board, have suggested that the rules be changed to require these options to be
expensed.





Due to
the change in business activities of the Company in conjunction with the change
in control, we are no longer able to realize any benefit from net operating
losses carried forward of CNE Group, Inc. of approximately $30,000,000. The
Company currently has net operating losses of approximately $186,000 related to
development stage activity, which may be carried forward to future
periods.





Companies
generally, and our Company, specifically, rely heavily on stock options as a
major component of our employee compensation packages. If we are required to
expense options granted to our officers and employees, although our cash
position would not be affected, our income from continuing operations and our
stockholders’ equity would decrease and our stock price could be adversely
affected. In such event, we may have to decrease or eliminate option grants to
our officers and employees, which could negatively impact our ability to attract
and retain qualified employees and executive personnel. While the Company does
not currently have a stock option plan, such a plan may be established in the
future.




11





In
general, for purposes of the Code, an ownership change occurs when 5% or more
owners increase their ownership percentage by more than 50% over the lowest
percentage owned by those owners at any time during a testing period, which is
generally the three years prior to the increase in ownership by 5% or more
owners. The IRS has authority to treat warrants, options, contracts to acquire
stock, convertible debt interests and other similar interests as if they are
stock and stock as if it is not stock. In any event, it is possible that past
and/or future transactions affecting our equity could create an ownership change
and trigger this limitation on the use of our net operating loss.





RISKS
RELATED TO OUR BUSINESS




Our
business faces intense competition. If we fail to adequately meet this
competition, our business could be adversely affected.




Most of
our competitors have substantially greater financial, technical and marketing
resources; longer operating histories and greater name recognition to apply to
each of these factors, and in some cases have built significant reputations with
the customer base in the markets in which we compete. If we are unable to
successfully compete, our business, financial condition, and operating results
could be materially and adversely affected.





Because
we have fixed costs, any decline in our revenues could disproportionately and
adversely affect our financial condition and operating results.




Significant
portions of our costs are fixed, due in part to our fixed sales, engineering and
product support, and manufacturing facilities. As a result, relatively small
declines in revenue could disproportionately affect our operating results.
Changes in product demand, among other things, could adversely affect our
manufacturing capacity, which would adversely affect our business.





Our
business may suffer if we lose the services of our executive officers, or if we
cannot recruit and retain additional skilled personnel.


We depend
on the continued services and performance of Peter Frugone, our Chairman and
Chief Executive Officer, Rudolph Karundeng, one of our Directors, as well as
Senior Advisor, Hans Karundeng and his subsidiary operations for our future
success. If either Mr. Frugone or Mr. Rudolph Karundeng becomes unable
or unwilling to continue in his current position, our business and financial
conditions could be damaged. We are not the beneficiaries of any key person life
insurance covering them or any other executive.





RISKS
RELATED TO THE OWNERSHIP OF OUR COMMON STOCK





Your
ability to sell any common stock may be restricted, because there is a limited
trading market for these securities.





Although
our common stock is currently traded on the NASD OTC Bulletin Board, a liquid
market in our stock has been sporadic. Accordingly, you may not be able to sell
shares of our common stock when you want or at the price you want, if at
all.





In
addition, depending on several factors including, among others, the future
market price of our common stock, these securities are subject to the so-called
“penny stock” rules that impose additional sales practice and market making
requirements on broker-dealers who sell and/or make a market in such securities.
These factors could affect the ability or willingness of broker-dealers to sell
and/or make a market in our common stock and the ability of purchasers of our
common stock to sell their shares in the secondary market. A delisting could
also negatively affect our ability to raise capital in the future.




The
market price of our common stock may be volatile, which could adversely affect
the value of any common stock that you may own.





The
market price of our common stock may fluctuate significantly in response to the
following factors:




·
            variations
      in our quarterly operating results;




·
            our
      announcements of significant contracts, milestones or
      acquisitions;




·
            our
      relationships with other companies;




·
            our
      ability to obtain capital
commitments;




·
            additions
      or departures of our key personnel;




·
            sales
      of our common stock by others or termination of stock transfer
      restrictions;




·
            changes
      in estimates of our financial condition by securities analysts;
      and





12




·
            fluctuations
      in stock market price and volume.




The last
three factors are beyond our control.





In the
past, following periods of volatility in the market price of a company’s
securities, securities class action litigation often has been instituted against
that company. Such litigation is expensive and diverts management’s attention
and resources. Any one of the factors noted above could have an adverse affect
on the value of our common stock.





Anti-takeover
provisions of the Delaware General Corporation Law and in our Certificate of
Incorporation could discourage a merger or other type of corporate
reorganization or a change in control, even if it could be favorable to the
interests of our stockholders.





The
Delaware General Corporation Law and our Certificate of Incorporation contain
provisions that may enable our management to retain control and resist a
takeover of our Company. These provisions generally prevent us from engaging in
a broad range of business combinations with an owner of 15%, 20% in the case of
our Certificate of Incorporation, or more of our outstanding voting stock for a
period of three years from the date that this person acquires his stock. Our
Certificate of Incorporation and our By Laws also require the affirmative vote
of at least 60% or our voting stockholders to effect certain actions, including,
under certain circumstances, the removal of directors, and provide for the
election of different classes of directors with the term of each class ending at
different times. Accordingly, these provisions could discourage or make more
difficult a change in control or a merger or other type of corporate
reorganization even if it could be favorable to the interests of our
stockholders.




Our
officers and directors exercise significant control over our affairs, which
could result in their taking actions that other stockholders do not approve
of.





Our
executive officers and directors, and persons or entities affiliated with them,
currently control approximately 17% of our outstanding common stock. These
stockholders, if they act together, may be able to exercise substantial
influence over all matters requiring approval by our stockholders, including the
election of directors and approval of significant corporate transactions. This
concentration of ownership may also delay or prevent a change in control of our
Company and might affect the market price of our common stock.





We have
never paid any cash dividends on our common stock and currently intend to retain
all future earnings, if any, to invest in our business.





If our
Board issues common stock, which it can do without stockholder approval, a
purchaser of our common stock could experience substantial
dilution.





Our Board
of Directors has the authority to issue up to 1 billion shares of common stock
and 10,000,000 shares of preferred stock and to issue options and warrants to
purchase shares of our common stock without stockholder approval. In the future,
we could issue additional shares of our common stock at values substantially
below the current market price for our common stock, which could substantially
dilute the equity ownership of holders of our common stock. In addition, our
Board could issue large blocks of our common stock to prevent unwanted tender
offers or hostile takeovers without any stockholder approval. Our ability to
issue preferred stock may adversely affect the rights of common stockholders and
be used as an anti-takeover device.





Our
Certificate of Incorporation authorizes our Board of Directors to issue up to
10 million shares of preferred stock without approval from our
stockholders. Accordingly, all of our common stock will be junior to any
preferred stock issued by us, and our Board has the right, without the approval
of common stockholders, to fix the relative rights and preferences of such
preferred stock. This could affect the rights of common stockholders regarding,
among other things, voting, dividends and liquidation. We could also use an
issuance of preferred stock to deter or delay a change in control that may be
opposed by our management, even if the transaction might be favorable to the
common stockholders.





The
Company might issue options and warrants in the future. The exercise of all of
the outstanding options and warrants would dilute the then-existing
stockholders’ percentage ownership of our common stock. Any sales resulting from
the exercise of options and warrants in the public market, such as sales by the
selling stockholders pursuant to this prospectus, could adversely affect
prevailing market prices for our common stock. Moreover, our ability to obtain
additional equity capital could be adversely affected since the holders of
outstanding options and warrants may exercise them at a time when we would also
wish to enter the market to obtain capital on terms more favorable than those
provided by such options and warrants. We lack control over the timing of any
exercise or the number of shares issued or sold if exercises occur.




13





Item 2.
            Properties




Our
executive offices are located at Carnegie Hall Tower, 152 W. 57th
Street, 27th Floor,New
York, NY 10019 where we use office space, on a temporary basis, under a
management agreement with Empire Advisory, LLC.




Item 3.
            Legal
      Proceedings




The
Company was a party to a lawsuit where the plaintiff alleged that he was
entitled to $60,000 and 1,300,000 of common stock based upon CNE’s failure
to compensate him for services related to identifying financing for CNE,
based upon an agreement that was entered into between CNE and the plaintiff in
April 2005. On November 28, 2007, the Company settled the lawsuit with the
plaintiff. In full and final settlement of the claims asserted in the action,
the Company has paid the plaintiff $10,000 in cash and issued the plaintiff
200,000 shares of the Company’s common stock having a fair value of $12,000,
based on the public traded share price on December 21, 2007. The settlement
resulted in a loss on debt conversion of $2,000 during the year ended December
31, 2007 because an estimated liability had been recognized prior to
2007.




In May
2006, the Company was advised that it was alleged to be in default of a
settlement agreement entered into in January of 2005 by CNE, its predecessor
company, related to the release of unrestricted, freely-tradable, non-legend
shares of stock. In August 2006, the plaintiffs, alleging the default, obtained
a judgment in the 17th Judicial Circuit Court Broward County, Florida for
approximately $1,000,000. On November 13, 2007, legal counsel engaged by
Management commenced an action on the Company’s behalf in the above Circuit
Court seeking to vacate and set aside the 2006 judgment asserting claims under
Rule 1.540(b) of the Florida Rules of Civil Procedure. Our counsel’s evaluation
is that the Company has only a limited chance of having the 2006 judgment opened
by the Court because Florida law provides very narrow grounds for opening a
judgment once a year has passed from its entry. The Courts are generally
reluctant to disturb final judgments and the Company’s grounds for opening the
judgment depend on the Court’s adopting a somewhat novel argument regarding such
matters. If, however, the Court does open the default judgment, the Company will
then have the opportunity to defend the 2006 action and, in such event, our
counsel believes that the Company has a reasonable chance of succeeding in
defending that claim, at least in part, based on the documents he has
reviewed.  As of December 31, 2008, the Company has accrued $1,203,492
related to this matter.  As of December 31, 2009, the Company has
accrued $1,266,695, including accrued interest of $213,310, related to this
matter.





Item 4.
            Submission
      of Matters to a Vote of
Security Holders.





On
November 20, 2007, the Board of Directors approved a private placement offering
(the "Offering") approximating $2,000,000 to accredited investors at $1.00 per
share of Series A Convertible Preferred Stock. The Offering consisted of the
Company's Series A Convertible Preferred Stock that will be convertible into our
common stock. These securities were not required to be and will not be
registered under the Securities Act of 1933. Shares issued under this placement
were not sold in the United States, absent registration or an applicable
exemption from registration. As of September 30, 2009, the Company received
$355,000 from investors towards 355,000 Series A Convertible Preferred Stock
shares issuable under subscription agreements covering the placement offering.
Each Series A Convertible Preferred Stock was convertible into 20 shares of the
Company’s Common Stock. The holders of the preferred stock had no voting rights
except as was required by Delaware law, no redemption rights, and no liquidation
preferences over the Common Stock holders.  On November 3, 2009, the
355,000 Series A Convertible Preferred Stock were converted into 7,100,000
Common shares.  As of December 31, 2009, there were no Series A
Convertible Preferred Stock outstanding.





On April
20, 2008, the Board of Directors approved a private placement offering (the
"Offering") approximating $2,000,000 to accredited investors at $1.00 per share
of Series C Convertible Preferred Stock. The Offering consisted of the Company's
Series C Convertible Preferred Stock that were convertible into our common
stock. These securities were not required to be and were not registered under
the Securities Act of 1933. Shares issued under this placement were not sold in
the United States, absent registration or an applicable exemption from
registration. As of September 30, 2009, the Company received $25,000 from
investors towards 25,000 Series C Convertible Preferred Stock shares issuable
under subscription agreements covering the placement offering. Each Series C
Convertible Preferred Stock is convertible into 20 shares of the Company’s
Common Stock. The holders of the preferred stock have no voting rights except as
may be required by Delaware law, no redemption rights, and no liquidation
preferences over the Common Stock holders. On November 3, 2009, the 25,000
Series C Convertible Preferred Stock were converted into 500,000 Common
shares.  As of December 31, 2009, there was no Series C Convertible
Preferred Stock outstanding.





On
December 3, 2007, the Board of Directors approved a plan to compensate all
members of the Board of Directors at a rate of $50,000 per year and 250,000
shares of Company common stock effective January 1, 2007. This compensation plan
applies to any board member that belonged to the Board as of and subsequent to
January 1, 2007. Those board members that were only on the Board for part of the
year will received pro-rata compensation based on length of service. As of
December 31, 2009, none of the shares under this plan have been issued and the
Company has accrued $600,137 of cash and recorded additional paid-in capital of
$172,541 for stock compensation based on the fair value of 3,000,685 shares to
be issued to the members of the Board.




14




PART
II




Item 5.
            Market
      For Common Equity and Related Stockholder
  Matters.




Exchange
Listing:




Our
common stock is listed on the NASD OTC: Bulletin Board (trading symbol ARWD.OB).
The number of record holders of our common stock as of April 13, 2010 was
approximately 321.




Equity
Sale Prices:




Common
      StockHigh
      Sales Price
              
              
              Low
      Sales Price20091st
      Quarter
              
              $
              0.10
              
              
              $
              0.022nd
      Quarter
              
              
              0.08
              
              
              
              0.023rd
      Quarter
              
              
              0.09
              
              
              
              0.044th
      Quarter
              
              
              0.05
              
              
              
              0.0220081st
      Quarter
              
              $
              0.08
              
              
              $
              0.032nd
      Quarter
              
              
              0.16
              
              
              
              0.043rd
      Quarter
              
              
              0.13
              
              
              
              0.044th
      Quarter
              
              
              0.11
              
              
              
              0.04


The
number of freely tradable shares not held by affiliates is
98,818,007.




As of
April 13, 2010, the aggregate market value of voting stock held by
non-affiliates of the Issuer was approximately $1,976,360.




Dividends:




We have
not previously paid cash dividends on our common stock. The payments of future
dividends and the amount thereof will depend upon our earnings, financial
condition, capital requirements and such other factors as our Board of Directors
may consider relevant.




Item 6.
            Selected
      Financial Data.




Not
applicable.




Item 7.
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations.




GENERAL




We are a
holding company whose only operating subsidiary as of December 31, 2009 is Arrow
Ltd. The principal business of Arrow is to provide marketing, sales,
distribution, corporate operations and corporate finance services for the
commercial exploitation of natural resources around the world. Prior to November
2005, we used to be a telecommunications and recruiting company formally known
as CNE Group, Inc. The company elected to shift its business focus to the
worldwide commercial exploitation of natural resources.




ARROW
RESOURCES DEVELOPMENT, LTD.




In
August 2005, Arrow entered into an Agreement and Plan of Merger (“the
Agreement”) with its wholly-owned subsidiary, Arrow Ltd., in which Arrow
(formerly CNE) was required to issue 10 million shares of Series AAA
convertible preferred stock (“the Preferred Stock”) to Arrow Ltd.'s designees,
representing 96% of all outstanding equity of CNE on a fully diluted basis in
exchange for the Marketing and Distribution Agreement provided to the Company by
Arrow. Under the Agreement, the Company discontinued all former operations
(CareerEngine, Inc., SRC and US Commlink.) and changed its name to Arrow
Resources Development, Inc.




On
August 1, 2005, Arrow Ltd. entered into the Marketing Agreement with Arrow
Pte. and its subsidiaries in consideration for Arrow issuing a non-interest
bearing note (the “Note”) in the principal amount of $125,000,000 to Empire
Advisory, LLC, (“Empire”), acting as agent, due on or before December 31,
2005. Empire is Arrow Pte.'s merchant banker. The Note permitted the Company, as
Arrow's sole stockholder, to cause Arrow to repay the Note in cash or with
10,000,000 shares of the Company's non-voting Series AAA Preferred Stock.
However, in December 2008, Arrow Pte. assessed that it would be unable to
harvest the timber products in Papua, New Guinea due to the fact that the widely
accepted international guidelines of the World Wildlife Federation had not been
adopted by Papua, New Guinea.




This fact
is adverse to the economic, social and environmental goals of Arrow Pte. because
with the amount of land that the project was allotted combined with the agreed
upon previous guidelines of the marketing and distribution agreement, yields
would be significantly reduced. Given the significant change in the economics of
the harvesting of the timber in Papua, New Guinea, Arrow Pte. has decided not to
pursue any further operations in Papua, New Guinea given that the above
restrictions cause a significant reduction in the volume of harvesting, which
results in a disproportionate cost to yield ration at the Papua, New Guinea site
which makes the project not economically feasible in the foreseeable
future.




15





Based on
the fact that Arrow Pte. is unable to fulfill their part of the agreement, the
Company has reached the conclusion that the marketing and distribution agreement
has no value. Therefore, the Company has fully impaired the value of the
agreement and recorded a loss on write-off of the marketing and distribution
agreement of $125,000,000 at December 31, 2007. (See Note 6.)




On April
4, 2006 Arrow Resource Development Ltd. (the Company's Bermuda subsidiary)
entered into an agency agreement with APR in which the Company will provide
financial consultancy services to APR for an annual fee, payable as collected,
equal to 10% of APR's gross revenue payable commencing upon execution. The term
of the agreement is effective upon execution, shall remain in effect for
ninety-nine (99) years and shall not be terminated until the expiration of at
least ten (10) years. As of December 31, 2009, the Company has generated
$52,000 under this agreement.




CRITICAL
ACCOUNTING POLICIES AND ESTIMATES




The
preparation of financial statements in accordance with U.S. generally accepted
accounting principles requires us to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of net revenue and expenses during the
reporting period. On an ongoing basis, we evaluate our estimates, including
those related to our allowance for doubtful accounts, inventory reserves, and
goodwill and purchased intangible asset valuations, and asset impairments. We
base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities. Actual results may differ from these estimates under different
assumptions or conditions. We believe the following critical accounting
policies, among others, affect the significant judgments and estimates we use in
the preparation of our consolidated financial statements.




ALLOWANCE
FOR DOUBTFUL ACCOUNTS, REVENUE RECOGNITION




We
evaluate the collectability of our accounts receivable based on a combination of
factors. In circumstances where we are aware of a specific customer's inability
to meet its financial obligations to us, we record a specific allowance to
reduce the net receivable to the amount we reasonably believe will be collected.
For all other customers, we record allowances for doubtful accounts based on the
length of time the receivables are past due, the prevailing business environment
and our historical experience. If the financial condition of our customers were
to deteriorate or if economic conditions were to worsen, additional allowances
may be required in the future.




We
recognize product revenue when persuasive evidence of an arrangement exists, the
sales price is fixed, the service is performed or products are shipped to
customers, which is when title and risk of loss transfers to the customers, and
collectability is reasonably assured.




VALUATION
OF GOODWILL, PURCHASED INTANGIBLE ASSETS AND LONG-LIVED ASSETS




The
Company’s only intangible asset was comprised of a marketing and distribution
agreement with Arrow Pte. In accordance with SFAS 142, “Goodwill and Other
Intangible Assets” this intangible agreement is no longer amortized; instead the
intangible is tested for impairment on an annual basis. The Company assesses the
impairment of identifiable intangibles and goodwill whenever events or changes
in circumstances indicate that the carrying value may not be recoverable.
Factors the Company considers to be important which could trigger an impairment
review include the following:




·
            Significant
      inability to achieve expected projected future operating
      results;




·
            Significant
      changes in the manner in which the work is able to be performed what
      increases costs;




·
            Significant
      negative impact on the
environment.




We
perform goodwill impairment tests on an annual basis and on an interim basis if
an event or circumstance indicates that it is more likely than not that
impairment has occurred. We assess the impairment of other amortizable
intangible assets and long-lived assets whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Factors
we consider important that could trigger an impairment review include
significant underperformance to historical or projected operating results,
substantial changes in our business strategy and significant negative industry
or economic trends. If such indicators are present, we evaluate the fair value
of the goodwill. For other intangible assets and long-lived assets we determine
whether the sum of the estimated undiscounted cash flows attributable to the
assets in question is less than their caring value. If less, we recognize an
impairment loss based on the excess of the carrying amount of the assets over
their respective fair values.




Fair
value of goodwill is determined by using a valuation model based on market
capitalization. Fair value of other intangible assets and long-lived assets is
determined by future cash flows, appraisals or other methods. If the long-lived
asset determined to be impaired is to be held and used, we recognize an
impairment charge to the extent the anticipated net cash flows attributable to
the asset are less than the asset's carrying value. The fair value of the
long-lived asset then becomes the asset's new carrying value, which we
depreciate over the remaining estimated useful life of the asset.




16




RECENT
ACCOUNTING PRONOUNCEMENTS




In
January 2010, the Company adopted FASB ASU No. 2010-06, Fair Value Measurement
and Disclosures (Topic 820) Improving Disclosures about Fair Value Measurements
(“ASU 2010-06”). These standards require new disclosures on the amount and
reason for transfers in and out of Level 1 and 2 fair value measurements. The
standards also require new disclosures of activities, including purchases,
sales, issuances, and settlements within the Level 3 fair value measurements.
The standard also clarifies existing disclosure requirements on levels of
disaggregation and disclosures about inputs and valuation techniques. These new
disclosures are effective beginning with the first interim filing in 2010. The
disclosures about the roll forward of information in Level 3 are required for
the Company with its first interim filing in 2011. The Company does not believe
this standard will impact their financial statements. Other ASU’s that have been
issued or proposed by the FASB ASC that do not require adoption until a future
date and are not expected to have a material impact on the financial statements
upon adoption.





Effective
July 1, 2009, the Company adopted The “FASB Accounting Standards
Codification” and the Hierarchy of Generally Accepted Accounting Principles (ASC
105-10), (formerly SFAS No. 168, The “FASB Accounting Standards
Codification” and the Hierarchy of Generally Accepted Accounting Principles).
This standard establishes only two levels of U.S. generally accepted accounting
principles (“GAAP”), authoritative and nonauthoritative. The Financial
Accounting Standard Board (“FASB”) Accounting Standards Codification (the
“Codification”) became the source of authoritative, nongovernmental GAAP, except
for rules and interpretive releases of the SEC, which are sources of
authoritative GAAP for SEC registrants. All other non-grandfathered, non-SEC
accounting literature not included in the Codification became nonauthoritative.
The Company began using the new guidelines and numbering system prescribed by
the Codification when referring to GAAP in the third quarter of fiscal 2009. As
the Codification was not intended to change or alter existing GAAP, it did not
have any impact on the Company’s condensed consolidated financial
statements.





In June
2009, the FASB issued FASB Accounting Standards Codification No 810, Consolidation. FASB
Accounting Standards Codification No 810 improves financial reporting by
enterprises involved with variable interest entities. FASB Accounting Standards
Codification No 810 is effective as of the beginning of each reporting entity’s
first annual reporting period that begins after November 15, 2009, for interim
periods within that first annual reporting period, and for interim and annual
reporting periods thereafter. The Company is evaluating the impact the adoption
of FASB Accounting Standards Codification No 810 will have on its financial
statements.





In June
2009, the FASB issued FASB Accounting Standards Codification No 860, Transfers and Servicing .
FASB Accounting Standards Codification No 860 improves the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a transfer of
financial assets; the effects of a transfer on its financial position, financial
performance, and cash flows; and a transferor’s continuing involvement, if any,
in transferred financial assets. FASB Accounting Standards Codification No 860
is effective as of the beginning of each reporting entity’s first annual
reporting period that begins after November 15, 2009, for interim periods within
that first annual reporting period and for interim and annual reporting periods
thereafter. The Company is evaluating the impact the adoption of FASB Accounting
Standards Codification No 860 will have on its financial
statements.





Effective
for the interim reporting period ending June 30, 2009, the Company adopted two
new accounting standard updates which were intended to provide additional
application guidance and enhanced disclosures regarding fair value measurements
and impairments of securities as codified in ASC 820 “Interim Disclosures about
Fair Value of Financial Instruments”. ASC 820  requires disclosures
about fair value of financial instruments for interim reporting periods of
publicly traded companies as well as in annual financial statements. ASC 820
requires related disclosures in summarized financial information at interim
reporting periods. ASC 820 was effective for the interim reporting period ending
June 30, 2009. The adoption of ASC 820 did not have a material impact on the
Company’s condensed consolidated financial statements.





Effective
June 15, 2009, the Company adopted a new accounting standard for subsequent
events, as codified in ASC 855. The update modifies the names of the two types
of subsequent events either as recognized subsequent events (previously referred
to in practice as Type I subsequent events) or non-recognized subsequent events
(previously referred to in practice as Type II subsequent events). In addition,
the standard modifies the definition of subsequent events to refer to events or
transactions that occur after the balance sheet date, but before the financial
statements are issued (for public entities) or available to be issued (for
nonpublic entities). It also requires the disclosure of the date through which
subsequent events have been evaluated. The update did not result in significant
changes in the practice of subsequent event disclosures, and therefore the
adoption did not have any impact on our condensed consolidated financial
statements.  In accordance with ASC 855, the Company evaluated all
events or transactions that occurred after September 30, 2009 up through
November 19, 2009, the date the Company issued these condensed consolidated
financial statements.  During this period, the Company had material
subsequent events as set forth in Note 12 to these condensed consolidated
financial statements.





In
October 2008, the FASB issued FSP SFAS No. 157-3, “Determining the Fair Value of
a Financial Asset When the Market for That Asset Is Not Active”, (“FSP 157-3”),
to clarify the application of the provisions of SFAS 157 in an inactive market
and how an entity would determine fair value in an inactive market. FSP 157-3
was effective upon issuance and applies to the Company’s current financial
statements. The application of the provisions of FSP 157-3 did not materially
affect the Company’s results of operations or financial condition for the year
ended December 31, 2008.




17




In June
2008, FASB ratified Accounting Standards Codification No 815, “Determining
Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own
Stock”. ASC 815 mandates a two-step process for evaluating whether an
equity-linked financial instrument or embedded feature is indexed to the
entity's own stock. Warrants that a company issues that contain a strike price
adjustment feature, upon the adoption of ASC 815, results in the instruments no
longer being considered indexed to the company's own stock.  On
January 1, 2009, the Company adopted ASC 815 and re-evaluated its issued and
outstanding warrants that contain a strike price adjustment feature. The Company
reclassified certain warrants from equity to a derivative liability and used the
Black-Scholes valuation model to determine the fair market value of the
warrants.  Based upon the Company’s re-evaluation, ASC 815 has had no
material impact on the Company’s condensed consolidated financial
statements.





In June
2008, the FASB issued FASB Accounting Standards Codification No 260 “Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities.” Under the FSP, unvested share-based payment awards
that contain rights to receive nonforfeitable dividends (whether paid or unpaid)
are participating securities, and should be included in the two-class method of
computing EPS. The FSP is effective for fiscal years beginning after December
15, 2008, and interim periods within those years, and did not expect to have a
significant impact on the Company’s results of operations, financial condition
or cash flows.





In May
2008, the FASB issued FASB Accounting Standards Codification No 944-605, Financial Guarantee Insurance
Contracts. Diversity exists in practice in accounting for financial
guarantee insurance contracts by insurance enterprise in FASB Accounting
Standards Codification No 944-605. This results in inconsistencies in the
recognition and measurement of claim liabilities. This Statement requires that
an insurance enterprise recognize a claim liability prior to an event of default
(insured event) when there is evidence that credit deterioration has occurred in
an insured financial obligation. This Statement requires expanded disclosures
about financial guarantee insurance contracts. The accounting and disclosure
requirements of the Statement will improve the quality of information provided
to users of financial statements. The adoption of FASB Accounting Standards
Codification No 944-605 is not expected to have a material impact on the
Company’s financial position.




In April
2008, ASC issued ASC 350, “Determination of the Useful Life of Intangible
Assets". This amends the factors that should be considered in developing renewal
or extension assumptions used to determine the useful life of a recognized
intangible asset under ASC 350. The guidance is used for determining the useful
life of a recognized intangible asset shall be applied prospectively to
intangible assets acquired after adoption, and the disclosure requirements shall
be applied prospectively to all intangible assets recognized as of, and
subsequent to, adoption. The Company does not believe ASC 350 will materially
impact their financial position, results of operations or cash
flows.




ASC
470-20, “Accounting for Convertible Debt Instruments That May Be Settled in Cash
upon Conversion (Including Partial Cash Settlement)" (“ASC 470-20") requires the
issuer of certain convertible debt instruments that may be settled in cash (or
other assets) on conversion to separately account for the liability (debt) and
equity (conversion option) components of the instrument in a manner that
reflects the issuer’s non-convertible debt borrowing rate. ASC 470-20 is
effective for fiscal years beginning after December 15, 2008 on a retroactive
basis. The Company does not believe that the adoption of ASC 470-20 will have a
material effect on its financial position, results of operations or cash
flows.





In March
2008, ASC issued ASC 815, Disclosures about Derivative
Instruments and Hedging Activities”, (“ASC 815”). ASC 815 requires
enhanced disclosures about an entity’s derivative and hedging activities. These
enhanced disclosures will discuss: how and why an entity uses derivative
instruments; how derivative instruments and related hedged items are accounted
for and its related interpretations; and how derivative instruments and related
hedged items affect an entity’s financial position, financial performance, and
cash flows. ASC 815 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008. The Company does
not believe that ASC 815 will have an impact on their results of operations or
financial position.





RESULTS
OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2009 AND 2008




In
November 2005, we discontinued and disposed of our subsidiaries except for Arrow
Ltd. in conjunction with the recapitalization of the Company. The Company had no
revenue during this period as Arrow Ltd. is still in the development stage. For
the year ended December 31, 2009, we incurred consulting fees of $4,296,832, of
which $4,161,526 was related to services provided by the Management Agreement
with Empire under which Empire provides the services of Chief Executive Officer
and administrative services to the Company and consulting services provided by
Hans Karundeng and Rudolph Karundeng under Engagement and Consulting Agreements.
For the year ended December 31, 2008, we incurred consulting fees of $4,229,796
of which, $3,723,711 was related to services provided by the Management
Agreement with Empire under which Empire provides the services of Chief
Executive Officer and administrative services to the Company and consulting
services provided by Hans Karundeng and Rudolph Karundeng under Engagement and
Consulting Agreements.




REVENUES




Revenue
for the years ended December 31, 2009 was none and $52,000 for the year ended
December 31, 2008 as the Company still is in development stage.




18





COST
OF GOODS SOLD




There was
no cost of goods sold for the years ended December 31, 2009 and 2008 as the
Company still is in development stage.





OTHER
EXPENSES




Compensation,
consulting and related costs increased to $4,296,832 for the year ended
December 31, 2009 as compared to $4,229,796 for the year ended December 31,
2008, $4,229,796 for the period from inception (November 15, 2005) to December
31, 2007, and $16,481,694 during the development stage for the period from
inception (November 15, 2005) to December 31, 2009. The increase was mostly due
to consulting fees for services provided by the Management Agreement with Empire
under which Empire provides the services of Chief Executive Officer and
administrative services to the Company and consulting services provided by Hans
Karundeng and Rudolph Karundeng under Engagement and Consulting
Agreements.




General
and administrative expenses decreased to $138,665 for the year ended December
31, 2009 and $168,433 for the year ended December 31, 2008, $554,177 for the
period from inception (November 15, 2005) to December 31, 2007, and $861,275 for
the period from inception (November 15, 2005) to December 31, 2009.





Directors’
compensation decreased to $235,000 for the year ended December 31, 2009,
$277,500 for the year ended December 31, 2008 and $772,678 for the period from
inception (November 15, 2005) to December 31, 2009. The decrease was due to
a December 3, 2007 resolution to compensate all members of the Board of
Directors on an annualized basis of $50,000 in cash and 250,000 shares in the
Company’s restricted common stock, effective January 1, 2007. The change is
also due to fluctuating share prices.





Delaware
franchise taxes amount were $420 for the years ended December 31, 2009 and
2008, $185,001 for the period from inception (November 15, 2005) to December 31,
2007 and $185,841 for the period from inception (November 15, 2005) to December
31, 2009. The Company is delinquent in its filing and payment of the Delaware
Franchise Tax report and, accordingly, is not in good standing. At December 31,
2009, the Company has estimated unpaid Delaware franchise taxes for the years
ended December 31, 2009, December 31, 2008, December 31, 2007, December 31, 2006
and 2005 in the amount of $420, $420, $57,652, $57,650 and $69,699,
respectively. The Company did not file their tax returns on time due to an
administrative oversight. The Company hopes to file the delinquent tax returns
in the second quarter of 2010 and pay the amount owned in full during the third
quarter of 2010.




Total
operating expenses during the development stage decreased to $4,670,917 for the
year ended December 31, 2009 and $4,676,149 for the year ended December 31,
2008, $8,954,422 for the period from inception (November 15, 2005) to December
31, 2007, and $18,301,488 for the period from inception (November 15, 2005) to
December 31, 2009.





The
Company was a party to a lawsuit where the plaintiff alleged that he was
entitled to $60,000 and 1,300,000 of common stock based upon CNE’s failure
to compensate him for services related to identifying financing for CNE,
based upon an agreement that was entered into between CNE and the plaintiff in
April 2005. On November 28, 2007, the Company settled the lawsuit with the
plaintiff. In full and final settlement of the claims asserted in the action,
the Company has paid the plaintiff $10,000 in cash and issued the plaintiff
200,000 shares of the Company’s common stock having a fair value of $12,000,
based on the public traded share price on December 21, 2007. The settlement
resulted in a loss on debt conversion of $2,000 during the year ended December
31, 2007 because an estimated liability had been recognized prior to
2007.





In May
2006, the Company was advised that it was alleged to be in default of a
settlement agreement entered into in January of 2005 by CNE, its predecessor
company, related to the release of unrestricted, freely-tradable, non-legend
shares of stock. In August 2006, the plaintiffs, alleging the default, obtained
a judgment in the 17th Judicial Circuit Court Broward County, Florida for
approximately $1,000,000. On November 13, 2007, legal counsel engaged by
Management commenced an action on the Company’s behalf in the above Circuit
Court seeking to vacate and set aside the 2006 judgment asserting claims under
Rule 1.540(b) of the Florida Rules of Civil Procedure.  Our counsel’s
evaluation is that the Company has only a limited chance of having the 2006
judgment opened by the Court because Florida law provides very narrow grounds
for opening a judgment once a year has passed from its entry.  The
Courts are generally reluctant to disturb final judgments and the Company’s
grounds for opening the judgment depend on the Court’s adopting a somewhat novel
argument regarding such matters.  If, however, the Court does open the
default judgment, the Company will then have the opportunity to defend the 2006
action and, in such event, our counsel believes that the Company has a
reasonable chance of succeeding in defending that claim, at least in part, based
on the documents he has reviewed. As of December 31, 2008, the Company has
accrued $1,203,492 related to this matter.  As of December 31, 2009,
the Company has accrued $1,266,695, including accrued interest of $213,310,
related to this matter.




19




LIQUIDITY
AND CAPITAL RESOURCES




In
November 2005, we discontinued and disposed of our subsidiaries except for Arrow
Ltd. in conjunction with the recapitalization of the Company. The Company was
recapitalized by the conversion of $125,000,000 preferred convertible note
related to the purchase of the Marketing Agreement. As part of the
recapitalization plan, the Company settled all outstanding debt except for
$220,000. As of December 31, 2009 and December 31, 2008 the Company had $91 and
$16 of cash, respectively. We had losses of $6,520,053 for the year ended
December 31, 2009 and had zero revenue as of December 31, 2009. We had losses of
$5,360,576 for the year ended December 31, 2008 and had $52,000 revenue as of
December 31, 2008. In order for us to survive during the next twelve months we
will need to secure approximately $1,000,000 of debt or equity financing. We
expect to raise the additional financing in the future but there can be no
guarantee that we will be successful.




OFF-BALANCE
SHEET ARRANGEMENTS




At
December 31, 2009, we had no off-balance sheet arrangements.




OPERATING
ACTIVITIES




We used
$2,438,057 of cash in our operating activities during the year ended December
31, 2009. We had a net loss of $6,520,053. We had a decrease in stock-based
directors’ compensation to be issued of $35,000, accounts payable and accrued
expenses payable of $2,400,868 mostly related to compensation and management
fees, debt issue costs related to note payables of $720,000, common stock to be
issued for reset of previous subscription agreement by the Company of $44,400,
and common stock issued for debt conversion of $772,000. In addition, we had a
working capital deficiency of $18,523,033 at December 31, 2009. We did not have
any material commitments for capital expenditures as of December 31,
2009.





INFLATION




We
believe that inflation does not significantly impact our current
operations.




RECENT
TRANSACTIONS





On March
3, 2010, the Company received a $110,000 interest bearing advance from John
Marozzi. The Company will pay interest at the interest rate of 10% which shall
be payable at the time of repayment. The principal of this loan is mature and
payable not later than March 3, 2011.   The Company has the
option to repay the loan in Company stock at a price based on a 50% discount off
the market price, calculated on the average closing price five days prior to
delivery of the stock.





On March
30, 2010, the Company received a $100,000 non-interest bearing advance from John
Frugone. The principal of this loan is mature and payable no later than March
30, 2012.





MANAGEMENT




The
Company has brought together a team of management and professionals with a
balance of experience in the fields plantation management, corporate finance,
corporate management and governance, marketing and sales, law, accounting and
international marketing. The team includes directors and advisors (Hans
Karundeng and Rudolph Karundeng) who are both members of the Company team and
senior management of APR.





On
October 29, 2009, the Company approved the formation of PT Arrow Resources
Development East and PT Arrow Renewable Energy as wholly-owned Indonesian
subsidiaries. The Company authorized Peter J. Frugone as CEO to form the above
mentioned subsidiaries.





CEO-President,
Chairman and Director - Peter J. Frugone




In
addition to the traditional investment banking skills related to sourcing,
valuation and negotiation, Mr. Frugone, 59, has significant experience in
hands-on operating roles at the senior levels, as well as strategic and advisory
roles as director of and consultant to small-cap and mid-cap companies. He has
overseen the processes of strategic planning and oversight, recruitment of
management executives, assisting with follow-on capital requirements, arranging
follow-on acquisitions, and assisting with realization of value through IPO,
public sale or sale or merger of the company. Mr. Frugone is experienced in
all phases of financial analysis, corporate re-engineering and restructuring,
information technology and Internet marketing, real estate financing and
development, and commercial/residential general
construction/management.





In 1991,
Mr. Frugone founded, and has since acted as the Managing Director of,
Empire Advisory LLC (formerly Electra Capital Corporation), and a boutique
consulting and investment bank specializing in small and medium sized
transactions ($1 million to $10 million). Empire has provided financial
consulting and investing banking services to over 300 clients, which has
resulted in the completion of more than 100 debt and equity placements with a
total value of $250 million.




20




From 1972
until 1989 Mr. Frugone was the CEO of Citadel Construction and Financial
Corporations. He started Citadel as a small home improvement company and
expanded to all phases of general construction, project management, and real
estate development with 1988 annual sales of $25 million. During that period
Citadel completed development projects of $105 million and construction projects
of over $400 million. Mr. Frugone started his career as an executive
trainee with Marine Midland Bank in 1967, rising to the position of Corporate
Trust Officer in charge of bond and coupon auditing. From 1969 to 1971
Mr. Frugone was a “baby bond” trader for Merrill Lynch Pierce Fenner and
Smith, then with Loeb Rhodes and Company and with Pershing and
Company.





Director
- John E. McConnaughy, Jr.




John E.
McConnaughy, Jr., 80, is Chairman and Chief Executive Officer of JEMC
Corporation, a personal holding company he founded in 1985. He was Chairman and
CEO of Peabody International Corp. from 1969 and in addition Chairman and CEO of
GEO International Corp. when it was spun off in 1981. He retired from the former
in February 1986 and the latter in October 1992.





At the
start of his tenure with Peabody International Corp., the Company had sales of
$23 million. During the next 11 years, he built sales to $85 million and ranked
8th of the Fortune 500 Companies in growth of earnings per share. He was named
outstanding Chief Executive Officer for the Environmental Control industry for
the years 1975, 1976 and 1978 by Financial World magazine.





Prior to
joining Peabody in 1969, Mr. McConnaughy served as Vice President of
European Consumer Products with the Singer Company. He was responsible for
operations in 16 countries and sales of $400 million. He had previously been
President of the Singer Company of Canada, Limited. Earlier, he held management
positions at Westinghouse Electric Corp. in its consumer group and portable
appliance divisions.





Mr. McConnaughy
served on the board of Fortune Natural Resources Corporation from 2000 through
January 30, 2004. On June 1, 2004, Fortune filed from protection under
Chapter 11 of the Federal Bankruptcy law in the United States Bankruptcy Court
for the Eastern District of Louisiana, Case No. 04-14112. The case is still
pending.





A
graduate of Denison University with a B.A. in Economics,
Mr. McConnaughy earned his M.B.A. in Marketing and Finance at Harvard’s
Graduate School of Business Administration. Mr. McConnaughy has been a
Director of Oxigene, Inc., Varsity Brands, Inc., Texstar Corporation, MAI
Corporation, Pets Choice Ltd., Akzona Corp., First Bank Corp. (New Haven),
Beringer Co., Inc., the Pullman Co., Moore McCormack Resources, Peabody
International Corp., DeVlieg Bullard, Inc., Mego Financial Corp., Trasact
International, Inc. and RateXchange, who changed their name to MCF Corporation.
Mr. McConnaughy currently serves on the boards of five other public
companies (Wave Systems, Inc., Allis-Chalmers Energy Inc., Overhill Farms inc.,
Consumer Portfolio Services, Inc. and Levcor International, Inc.)





He is
Chairman of the Board of Trustees and Executive Committee of the
Strang Cancer Prevention Center and is Chairman Emeritus of the
Harlem School of the Arts.




Director
- Rudolph Karundeng




Mr. Karundeng,
30, has assisted Hans Karundeng, helping start, maintain and oversee the
operations at a senior level of numerous projects throughout the world since
2000. His primary role in most of these projects was the acquisition of capital
through banking means as well as financial analysis of projects and transforming
their structure in order to be viable for funding by banks.





Since
receiving his degree in Economics from UCLA, Rudolph Karundeng has been Director
in numerous corporations throughout the world including Golden Summit Inc. a
small-cap company lender and loan facilitator, Du Motier International
Corporation, a note structure developer as well as a bank loan facilitation
consultant. During his tenure as a Director for these companies he has been
involved in facilitating the loans for 25 Clients, which had a loan range from
$100 Million to $1.8 Billion for various projects including mining,
manufacturing, and marketing.





Mr. Karundeng
is intimately involved with all the processes, equipment, and day to day
operations of each project in order to better help in cost and budget analysis
for each project. Through his family’s earlier background of mining and forestry
he has developed a strong base of knowledge for the day-to-day operations as
well as development, marketing and all forms of operations for coal mining, oil
refining, gas mining, and forestry. Another product of his tenure as Director of
these companies is Mr. Karundeng’s has developed his knowledge in Note
Structures as well as the laws that pertain to them in many areas of the world
including but not limited to United States, Europe, China, Singapore, and
Indonesia. He has facilitated the sale, usage, and the acquisition of Notes
throughout the world utilizing his many banking relationships throughout the
world to assist companies in moving a project forward.




21





Director
- James L. Rothenberg




Mr.
Rothenberg is an attorney who is licensed to practice in the State of New
York.  He is also licensed to practice before the federal courts in the
Southern and Eastern Districts of New York.  Since 1990, Mr. Rothenberg has
served as a case consultant and expert witness in securities litigation and
arbitration, criminal defense and employment matters.  He is also a
consultant and a lecturer in securities market structure, exchange specialists
and NASD market makers.  From 1996 through 2003, Mr. Rothenberg served as
counsel to Bear Wagner Specialists LLC, members of the New York Stock
Exchange.  He is currently a member of the Federal Regulation of Securities
Committee, Litigation Committee and Broker-Dealer Subcommittee. From 1970
through 1973, Mr. Rothenberg was employed by the Securities and Exchange
Commission as an enforcement attorney in Washington DC and from 1973
through 1975 he was Chief Counsel and Manager of the Market Surveillance
Division of the New York Stock Exchange.  From 1975 through 1985, Mr.
Rothenberg was a principal of Rothenberg Stuart Co., specialists on the New York
Stock Exchange.  Effective close of business December 31, 2009, James
Rothenberg resigned from the Board of Directors.





Senior
Advisor - Hans Karundeng




Mr. Hans
Karundeng, 59, has been involved in a wide variety of business ventures
throughout his life. His first business activity was operating a bakery which
supplied bread to the city as well as neighboring cities and to this day is
still well known throughout Java, Indonesia. After selling his shares in the
business, he became involved in Timber and timber related products with the
company that has now become one of the largest paper and paper related products
manufacturer and supplier in the world, Asian Pulp and Paper. Mr. Karundeng
during this time, opened a company named P.T. Akal Rasa, which helped develop
low-income housing for an underdeveloped area in Indonesia.





Mr. Karundeng
then moved on and started a mid cap firm that built, maintained and sold real
estate. A by-product of this company was starting a Corporation Consultant
company with a large Engineering consultant arm which later became the 4th
largest in Indonesia. During the time of this company, Mr. Hans Karundeng
acquired the licensing right to repair and maintain the turbines for select Oil
companies in Indonesia, PLN (Electric company of Indonesia) and Telkom
(Tele-Communication company of Indonesia). Diversifying his portfolio he went
into Small saving and Loans, owning shares in a number of these
facilities.





Mr. Karundeng
has diversified his operations to include Sulfur Mining, Orange Plantation,
Shrimp Farming and Sand mining, as well as owning and operating an Air Cargo
company specializing in exporting Seafood to Japan and Hong Kong. During this
period he also had shares in a company that maintained 300,000 ha of Kasava for
animal feed for exportation.


During
the time of the expansion of his holdings, Mr. Karundeng also went into
larger dealings on the international level. Helped obtain large quantities of
Rice Donations to the Indonesian government from Thailand and Vietnam, and paved
the way for larger loan from the World Bank for Indonesia to help the
underdeveloped areas of Indonesia.





After
leaving Indonesia he became involved in the opening of the Indonesian Exim Bank
in NY, where he first started his international consultancy firm, which helped
his numerous clients achieve the level of competence in order to receive bank
loans either through corporate restructuring, cost analysis, or note
structuring.




Item
      7A.
            Quantitative
      and Qualitative Disclosures About Market
Risk.





We
conduct no hedging activity. We have no derivative contracts.





Item 8.
            Financial
      Statements.




Our
financial statements to be filed hereunder follow, beginning with page
F-1.




Item 9.
            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure





There
have been no disagreements concerning any matter of accounting principle or
financial statement disclosure between the Company and its independent auditor,
KBL LLP.




22





Item 9A.
            Controls
      and Procedures




Evaluation
of Disclosure Controls and Procedures





The
Company's Chief Executive Officer and acting Chief Financial Officer, who is the
same person, has evaluated the effectiveness of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) as of the fiscal period ending December 31, 2009 covered by this
amended Annual Report on Form 10-K. Based upon such evaluation, the Chief
Executive Officer and acting Chief Financial Officer has concluded that, as of
the end of such period, the Company's disclosure controls and procedures were
not effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange
Act. This conclusion by the Company’s Chief Executive Officer and acting Chief
Financial Officer does not relate to reporting periods after December 31,
2009.





Management's
Report on Internal Control Over Financial Reporting





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange
Act) of the Company. Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the United States of
America.





The
Company's internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the United States of
America, and that receipts and expenditures of the Company are being made only
in accordance with authorizations of management and directors of the Company;
and (iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Company's assets that
could have a material effect on the financial statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.





Management,
under the supervision of the Company's Chief Executive Officer and acting Chief
Financial Officer, conducted an evaluation of the effectiveness of internal
control over financial reporting based on the framework in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on this evaluation, management concluded that
the Company's internal control over financial reporting was not effective as of
December 31, 2009 under the criteria set forth in the in Internal
Control—Integrated Framework.




A
material weakness is a deficiency, or combination of deficiencies, in internal
control over financial reporting such that there is a reasonable possibility
that a material misstatement of the Company's annual or interim financial
statements will not be prevented or detected on a timely basis. Management has
determined that material weaknesses exist due to a lack of segregation of
duties, resulting from the Company's limited resources.




This
annual report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the SEC that permit us to provide
only management's report in this amended Annual Report on Form
10-K.




Changes
in Internal Control Over Financial Reporting





No change
in the Company's internal control over financial reporting occurred during the
quarter ended December 31, 2009, that materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.





Item 9B.
            Other
      Information.




N/A




Part
III




Item 10.
            Directors,
      Executive Officers, Promoters and Control Persons; Compliance With
      Section 16 (a) of the Exchange
Act.




The
directors and executive officers of the Company are set forth below. All
directors hold office until the next annual meeting of stockholders, or until
their death, resignation, retirement, removal, disqualification, and until their
successors have been elected and qualified. Vacancies in the existing board are
filled by a majority vote of the remaining directors.




23





The
directors and executive officers of the Registrant as of December 31, 2009 were
as follows:


Name
      and Address
              
              Position
              
              TenurePeter
      J. Frugone
              
              Chairman,
      Chief Executive Officer and
              2005
      to Present124
      West 79th Street, Apt 14B
              
              DirectorNew
      York, NYRudolph
      Karundeng
              
              Director
              
              2005
      to Present19
      Taman SerasiBotanic
      Garden View #01-25John
      E. McConnaughy Jr.
              
              Director
              
              2005
      to Present637
      Valley RoadNew
      Canaan Ct.James
      Rothenberg
              
              Director
              
              10/15/2007152
      W. 57th Street, 27th Floor,
              
              
              
              toNew
      York, NY 10019
              
              
              
              12/31/2009
  BUSINESS
EXPERIENCE




PETER J.
FRUGONE. In addition to the traditional investment banking skills related to
sourcing, valuation and negotiation, Mr. Frugone, has significant
experience in hands-on operating roles at the senior levels, as well as
strategic and advisory roles as director of and consultant to small-cap and
mid-cap companies. He has overseen the processes of strategic planning and
oversight, recruitment of management executives, assisting with follow-on
capital requirements, arranging follow-on acquisitions, and assisting with
realization of value through IPO, public sale or sale or merger of the company.
Mr. Frugone is experienced in all phases of financial analysis, corporate
re-engineering and restructuring, information technology and Internet marketing,
real estate financing and development, and commercial/residential general
construction/management. In 1991, Mr. Frugone founded, and has since acted as
the Managing Director of, Empire Advisory LLC (formerly Electra Capital
Corporation), a boutique consulting and investment bank specializing in small
and medium sized transactions ($1 million to $10 million). Empire has provided
financial consulting and investing banking services to over 300 clients which
has resulted in the completion of more than 100 debt and equity placements with
a total value of $250 million. From 1972 until 1989 Mr. Frugone was the CEO of
Citadel Construction and Financial Corporations. He started Citadel as a small
home improvement company and expanded to all phases of general construction,
project management, and real estate development with 1988 annual sales of $25
million. During that period Citadel completed development projects of $105
million and construction projects of over $400 million. Mr. Frugone started his
career as an executive trainee with Marine Midland Bank in 1967, rising to the
position of Corporate Trust Officer in charge of bond and coupon auditing. From
1969 to 1971 Mr. Frugone was a "baby bond" trader for Merrill Lynch Pierce
Fenner and Smith, then with Loeb Rhodes and Company and with Pershing and
Company.





RUDOLPH
KARUNDENG. Mr. Karundeng has assisted Hans Karundeng, helping start,
maintain and oversee the operations at a senior level of numerous projects
throughout the world since 2000. His primary role in most of these projects was
the acquisition of capital through banking means as well as financial analysis
of projects and transforming their structure in order to be viable for funding
by banks Since receiving his degree in Economics from UCLA, Rudolph Karundeng
has been Director in numerous corporations throughout the world including Golden
Summit Inc. a small-cap company lender and loan facilitator, Du Motier
International Corporation, a note structure developer as well as a bank loan
facilitation consultant. During his tenure as a Director for these companies he
has been involved in facilitating the loans for 25 Clients, which had a loan
range from $100 Million to $1.8 Billion for various projects including mining,
manufacturing, and marketing. Mr. Karundeng is intimately involved with all
the processes, equipment, and day to day operations of each project in order to
better help in cost and budget analysis for each project. Through his family’s
earlier background of mining and forestry he has developed a strong base of
knowledge for the day-to-day operations as well as development, marketing and
all forms of operations for coal mining, oil refining, gas mining, and forestry.
Another product of his tenure as Director of these companies is
Mr. Karundeng’s has developed his knowledge in Note Structures as well as
the laws that pertain to them in many areas of the world including but not
limited to United States, Europe, China, Singapore, and Indonesia. He has
facilitated the sale, usage, and the acquisition of Notes throughout the world
utilizing his many banking relationships throughout the world to assist
companies in moving a project forward.




JOHN E.
MCCONNAUGHY, JR. Mr. McConnaughy is Chairman and Chief Executive Officer of
JEMC Corporation. He was Chairman and CEO of Peabody International Corp. from
1969 and in addition Chairman and CEO of GEO International Corp. when it was
spun off in 1981. He retired from the former in February 1986 and the latter in
October 1992. Prior to joining Peabody in 1969, Mr. McConnaughy served as
Vice President of European Consumer Products with the Singer Company. He was
responsible for operations in 16 countries and sales of $400 million. He had
previously been President of the Singer Company of Canada, Limited. Earlier, he
held management positions at Westinghouse Electric Corp. in its consumer group
and portable appliance divisions. Mr. McConnaughy currently serves on the boards
of five other public companies Allis-Chalmers Energy Inc.,(ASY,) Wave Systems
Corp. (WAVX), Arrow Resources Development, Inc, (OTC:BB ARWD) Levcor
International, Inc. (LEVC.OB) and Kinetitec Corporation. Mr. McConnaughy has
been a Director of Oxigene, Inc., Varsity Brands, Inc., Texstar Corporation, MAI
Corporation, Pets Choice Ltd., Akzona Corp., First Bank Corp. (New Haven),
Beringer Co., Inc., the Pullman Co., Moore McCormack Resources, Peabody
International Corp., DeVlieg Bullard, Inc., Mego Financial Corp., Trasact
International, Inc. and RateXchange, who changed their name to MCF Corporation.
and Fortune Natural Resources Corporation from 2000 through January 30,
2004.





JAMES L.
ROTHENBERG. Mr. Rothenberg is an attorney who is licensed to practice in the
State of New York.  He is also licensed to practice before the federal
courts in the Southern and Eastern Districts of New York.  Since 1990, Mr.
Rothenberg has served as a case consultant and expert witness in securities
litigation and arbitration, criminal defense and employment matters.  He is
also a consultant and a lecturer in securities market structure, exchange
specialists and NASD market makers.  From 1996 through 2003, Mr. Rothenberg
served as counsel to Bear Wagner Specialists LLC, members of the New York Stock
Exchange.  He is currently a member of the Federal Regulation of Securities
Committee, Litigation Committee and Broker-Dealer Subcommittee. From 1970
through 1973, Mr. Rothenberg was employed by the Securities and Exchange
Commission as an enforcement attorney in Washington DC and from 1973
through 1975 he was Chief Counsel and Manager of the Market Surveillance
Division of the New York Stock Exchange.  From 1975 through 1985, Mr.
Rothenberg was a principal of Rothenberg Stuart Co., specialists on the New York
Stock Exchange.  Effective close of business December 31, 2009, James
Rothenberg resigned from the Board of Directors.




24





Audit
Committee Financial Expert




The Board
of Directors has determined that Mr. McConnaughy is an “audit committee
financial expert” (as defined in Item 401(e)(2) of Regulation S-B).
Mr. McConnaughy is independent as that term is used in
Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.





Compliance
with Section 16 (a) of the Exchange Act.




Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires the Company’s
directors, executive officers and holders of more than 10% of the Common Stock
to file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of the Common Stock. Based solely upon a
review of Forms 3, 4 and 5 furnished to the Company with respect to the year
ended December 31, 2009, to the best of the Company’s knowledge, the Company’s
directors, executive officers and holders of more than 10% of its Common Stock
timely filed the reports required by Section 16(a).





Code
of Ethics




The
Company has adopted a written Code of Ethics that applies to the Company’s
principal executive officer, principal financial officer, principal accounting
officer or controller and any persons performing similar functions. The Company
will provide a copy of its Code of Ethics to any person without charge upon
written request addressed to Arrow Resources Development, Inc. 152 W. 57th
Street, 27th Floor, New York, NY 10019, Attention: Shareholder
Relations.




25





Item 11.
            Executive
      Compensation.




The
following table sets forth the salaries of the Company’s executive officers for
the fiscal years ending December 31, 2009 and December 31, 2008.




Long-Term
      CompensationAnnual
      Compensation
                
                
                
                
                
                
                Number
      ofOther
                
                
                
                Restricted
                
                
                Restricted
                
                
                
                SecuritiesAnnual
                
                
                
                Stock
                
                
                Restricted
                
                
                
                Underlying
                
                
                
                LTIP
                
                
                
                All
      otherName
      and Principal
                
                
                
                
                Salary
                
                
                
                Bonus
                
                
                
                Compensation
                
                
                
                Award(s)
                
                
                Stock
                
                
                
                Options/
                
                
                
                Payouts
                
                
                
                CompensationPosition
                
                Year
                
                
                ($)
                
                
                
                ($)
                
                
                
                ($)
                
                
                
                ($)
                
                
                Award(s)
                
                
                
                SARs
      (#)
                
                
                
                ($)
                
                
                
                ($)Peter
      J. Frugone
                
                2009(1)
                
                $
                -
                
                
                $
                -
                
                
                $
                50,000
                
                
                $
                -
                
                
                
                
                
                
                -
                
                
                $
                -
                
                
                $
                8,750
                (1)Chairman,
      CEO and Director
                
                2008
                
                
                -
                
                
                
                -
                
                
                
                50,000
                
                
                
                -
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                19,375Rudolph
      Karundeng
                
                2009(2)
                
                
                -
                
                
                
                -
                
                
                
                50,000
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                8,750
                (2)Director
                
                2008
                
                
                -
                
                
                
                -
                
                
                
                50,000
                
                
                
                -
                
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                19,375John
      E. McConnaughy, Jr.
                
                2009(3)
                
                
                -
                
                
                
                -
                
                
                
                50,000
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                8,750
                (3)Director
                
                2008
                
                
                -
                
                
                
                -
                
                
                
                50,000
                
                
                
                -
                
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                19,375James
      Rothenberg
                
                2009(4)
                
                
                -
                
                
                
                -
                
                
                
                50,000
                
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                8,750
                (4)Director
                
                2008
                
                
                -
                
                
                
                -
                
                
                
                50,000
                
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                19,375







(1)
                As
      part of Chairman's compensation that was approved by the Board of Director
      on December 3, 2007, Mr. Frugone is entitled to 750,000 shares of the
      Company's Common Stock which has fair market value of $43,125. At December
      31, 2009, none of these shares were issued.(2)
                As
      part of director's compensation that was approved by the Board of Director
      on December 3, 2007, Mr. Karundeng is entitled to 750,000 shares of the
      Company's Common Stock which has fair market value of $43,125. At December
      31, 2009, none of these shares were issued.(3)
                As
      part of director's compensation that was approved by the Board of Director
      on December 3, 2007, Mr. McConnaughy is entitled to 750,000 shares of the
      Company's Common Stock which has fair market value of $43,125. At December
      31, 2009, none of these shares were issued.(4)
                As
      part of director's compensation that was approved by the Board of Director
      on December 3, 2007, Mr. Rothenberg is entitled to 552,740 shares of the
      Company's Common Stock which has fair market value of $31,239. At December
      31, 2009, none of these shares were issued.  Effective close of
      business December 31, 2009, Mr. Rothenburg resigned from the Board of
      Directors


26




Item 12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.




As of
April 13, 2010, there were 678,452,244 shares of the Company’s $0.00001 par
value per share common stock outstanding. The following table sets forth the
name, address, number of shares beneficially owned, and the percentage of the
Company's total outstanding common stock shares owned by: (i) each of the
Company's Officers and Directors; (ii) the Company's Officers and Directors as a
group; and (iii) other shareholders of 5% or more of the Registrant's total
outstanding common stock shares.




Name
      and Address of Beneficial Owner (1)
                
                Company
      Position
                
                Number
      of Shares Owned
                
                
                Percent
      of ClassPeter
      J. Frugone(2)
                
                Chairman,
      Chief Executive Officer and Director
                
                
                750,000
                
                
                
                0.1
                %Rudolph
      Karundeng(3)
                
                Director
                
                
                52,750,000
                
                
                
                7.8
                %John
      E. McConnaughy Jr.(4)
                
                Director
                
                
                11,405,000
                
                
                
                1.7
                %James
      Rothenberg(3)
                
                Director
                
                
                552,740
                
                
                
                0.1
                %John
      Allen(6)
                
                Former
      Director (1/1/07 - 2/28/07)
                
                
                39,726
                
                
                
                0.0
                %Robert
      Levinson(7)
                
                Former
      Director (2/26/07 - 10/15/07)
                
                
                158,219
                
                
                
                0.0
                %Arrow
      Pacific Resources Group Limited(8)
                
                
                
                
                352,422,778
                
                
                
                51.9
                %AIS
      International Holdings Ltd.(9)
                
                
                
                
                55,000,000
                
                
                
                8.1
                %World
      Ocean Development Corp.(10)
                
                
                
                
                35,000,000
                
                
                
                5.2
                %Officers
      and Directors as a Group (4 persons)
                
                
                
                
                65,457,740
                
                
                
                9.6
                %
  
 (1)
                As
      used in this table, a beneficial owner of a security includes any person
      who, directly or indirectly, through contract, arrangement, understanding,
      relationship or otherwise has or shares (a) the power to vote, or direct
      the voting of, such secrity or (b) investment power which includes the
      power to dispose, or to direct the disposition of, such security. In
      addition, a person is deemed to be the beneficial owner of a security if
      that person has the right to acquire beneficial ownership of such
      security.(2)
                Mr.
      Frugone's address is 124 West 79th Street, Apt 1, New York, NY. Mr.
      Frugone is entitled to 750,000 common shares related to directors'
      compensation, none of which were issued as of December 31,
      2009.(3)
                Mr.
      Karundeng's address is 19 Taman Serasi, Botanic Garden View #01-25. Mr.
      Karundeng is entitled to 750,000 common shares related to directors'
      compensation, none of which were issued as of December 31,
      2009.  Mr. Karungdeng also holds 52,000,000 shares of the
      Company's restricted shares, all of which are not exercisable as of
      December 31, 2009.(4)
                Mr.
      McConnaughy's address is 637 Valley Road, New Canaan Ct. Mr. McConnaughy
      is entitled to 750,000 common shares related to directors' compensation,
      none of which were issued as of December 31, 2009.  Mr.
      McConnaughy also holds 10,655,000 shares of the Company's restricted
      shares, all of which are not exercisable as of December 31,
      2009.(5)
                Mr.
      Rothenberg is entitled to 552,740 common shares related to directors'
      compensation, none of which were issued as of December 31,
      2009.  Effective close of business December 31, 2009, Mr.
      Rothenberg resigned from the board of directors.(6)
                Mr.
      Allen is entitled to 39,726 common shares related to directors'
      compensation, none of which were issued as of December 31,
      2009.(7)
                Mr.
      Levinson is entitled to 158,219 common shares related to directors'
      compensation, none of which were issued as of December 31,
      2009.(8)
                Arrow
      Pacific Resources Group Limited's address is 19 Taman Serasi, Botanic
      Garden View #01-25. Arrow Pacific Resources Group Limited currently holds
      349,370,000 shares of the Company's restricted shares, all of which are
      not exercisable as of December 31, 2009.(9)
                AIS
      International Holdings Ltd. currently holds 55,000,000 shares of the
      Company's restricted shares, all of which are not exercisable as of
      December 31, 2009.(10)
                World
      Ocean Development Corp. currently holds 35,000,000 shares of the Company's
      restricted shares, all of which are not exercisable as of December 31,
      2009.


27




Item 13.
            Certain
      Relationships and Related
Transactions.





Other
than as listed below, we have not been a party to any transaction, proposed
transaction, or series of transactions in which the amount involved exceeds
$60,000, and in which, to our knowledge, any of our directors, officers, five
percent beneficial security holder, or any member of the immediate family of the
foregoing persons has had or will have a direct or indirect material
interest.





Item 14.
            Principal
      Accountant fees and Services.




Audit
Fees




Audit
fees for 2009 and 2008 incurred to KBL, LLP were $70,212 and $78,991. All
services provided by independent accountants were approved by the audit
committee.  Audit Fees consist of fees billed for professional services
rendered for the audit of the Company’s annual statements, for review of interim
consolidated financial statements included in quarterly reports and services
that are normally provided by KBL LLP in connection with statutory and
regulatory filings or engagements.





Audit
Related Fees


The
Company did not incur audit related fees from KBL LLP in 2009 and 2008. 
Audit-Related Fees consist of fees billed for assurance and related services
that are reasonably related to the performance of the audit or review of the
Company’s consolidated financial statements and are not reported under “Audit
Fees.”





Tax
Fees




The
Company did not incur tax fees from KBL LLP in 2009 and 2008.  Tax Fees
consist of fees billed for professional services rendered for tax
compliance.  These services include assistance regarding federal, state and
local tax compliance.





All Other
Fees




There
were no other fees for professional services rendered to the Company during the
fiscal years 2009 and 2008, other than the services reported above.




Item 15.
            Exhibits.





The
Company hereby furnishes the exhibits listed on the attached exhibit index.
Exhibits, which are incorporated herein by reference, may be inspected and
copied at the public reference facilities maintained by the SEC at Room 1024,
Washington, D.C. 20549. Copies of such material may be obtained by mail
from the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The SEC also
maintains a website that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC at
the address http://www.sec.gov.




28


SIGNATURES




In
accordance with Section 13(a) or 15(d) of the Exchange Act, the registrant
has duly caused this amendment to its Form 10-K annual report to be signed on
its behalf by the undersigned, thereunto duly authorized.




ARROW
      RESOURCES DEVELOPMENT, INC.Dated:
      April 15, 2010
              By:
              /
      S/ PETER J. FRUGONEPeter
      J. FrugonePresident
      and Chief Executive OfficerDated:
      April 15, 2010
              By:
              /
      S/ PETER J. FRUGONEPeter
      J. FrugonePrincipal
      Accounting Officer




In
accordance with the Exchange Act, this amendment to the Form 10-K annual report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.





Signatures
            
            Title
            
            Date/
      S/    PETER J. FRUGONE
            
            President
      and Chief Executive Officer and
            
            April
      15, 2010Peter J. Frugone
            
            Director
      (principal executive officer)/
      S/    PETER J. FRUGONE
            
            Principal
      Accounting Officer (principal
            
            April
      15, 2010Peter J.
      Frugone
            
            financial
      and accounting officer)/
      S/    JOHN E. McCONNAUGHY , JR .
            
            Director
            
            April
      15, 2010John
      E. McConnaughy, Jr.




29




ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 INDEX
TO CONSOLIDATED AUDITED FINANCIAL STATEMENTS
 FOR
THE YEAR ENDED DECEMBER 31, 2009
  Report
      of Independent Registered Public Accounting Firm
                
                
                F-1Consolidated
      financial statements:Consolidated
      Balance Sheets (At December 31, 2009 and 2008)
                
                
                F-2Consolidated
      Statements of Operations (For the year ended December 31, 2009, December
      31, 2008, the period from inception November 15, 2005 to December 31, 2007
      and the period from inception November 15, 2005 to December 31,
      2009)
                
                
                F-3Consolidated
      Statements of Changes in Stockholders' (Deficit) Equity (For the years
      ended December 31, 2009 and 2008) and the period from inception November
      15, 2005 to December 31, 2009)
                
                
                F-4Consolidated
      Statements of Cash Flows (For the year ended December 31, 2009, December
      31, 2008, the period  from inception November 15, 2005 to
      December 31, 2007 and the period from inception November 15, 2005 to
      December 31, 2009)
                
                
                F-5
      - F- 6Notes
      to the consolidated financial statements
                
                
                F-7 - F-27
  
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Board of Directors and Stockholders
 Arrow
Resources Development, Inc.
 New York,
New York
  We have
audited the accompanying consolidated balance sheet of Arrow Resources
Development, Inc. and Subsidiaries (a development stage company) (“the Company”)
as of December 31, 2009 and 2008, and the related consolidated statements of
operations, cash flows, and changes in stockholders’ (deficit) equity, for the
year ended December 31, 2009, and for the period from inception (November 15,
2005) to December 31, 2009. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audit.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Arrow Resources Development,
Inc. and Subsidiaries as of December 31, 2009 and 2008, and the results of its
operations and its cash flows during the development stage for the year ended
December 31, 2009, and for the period from inception (November 15, 2005) to
December 31, 2009 in conformity with accounting principles generally accepted in
the United States.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 and 6 to
the consolidated financial statements, the Company has suffered recurring losses
from operations, and is dependent upon shareholders to provide sufficient
working capital to maintain continuity. These circumstances create substantial
doubt about the Company’s ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
  KBL,
LLP
 Certified
Public Accountants and Advisors
 April 15,
2010
  F-1
  ARROW
      RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 
 (A
      DEVELOPMENT STAGE COMPANY)
 Consolidated
Balance Sheets (during the development stage)
  December
      31, 2009
                            
                            
                            December
      31, 2008ASSETSCurrent:Cash
                            
                            $
                            91
                            
                            
                            $
                            16Total
      current assets
                            
                            
                            91
                            
                            
                            
                            16Total
      assets
                            
                            $
                            91
                            
                            
                            $
                            16LIABILITIES
      AND STOCKHOLDERS’ (DEFICIT)Current:Accounts
      and accrued expenses payable, including $6,446,791 and $5,019,628 due to
      Company shareholders and directors, respectively
                            
                            $
                            7,765,910
                            
                            
                            $
                            5,587,742Estimated
      liability for legal judgment obtained by predecessor entity
      shareholder
                            
                            
                            1,266,695
                            
                            
                            
                            1,203,492Due
      to related parties
                            
                            
                            7,401,519
                            
                            
                            
                            5,890,687Notes
      payable, including accrued interest of $152,500 and $20,000 at December
      31, 2009 and December 31, 2008, respectively
                            
                            
                            2,089,000
                            
                            
                            
                            1,228,000Total
      liabilities
                            
                            
                            18,523,124
                            
                            
                            
                            13,909,921Commitments
      and contingencies
                            
                            
                            -
                            
                            
                            
                            -STOCKHOLDERS’
      (DEFICIT)Preferred
      stock, $0.00001 par value, 6 million shares authorized, no shares issued
      or outstanding at December 31, 2009 and December 31, 2008
                            
                            
                            -
                            
                            
                            
                            -Preferred
      stock Series A, $0.00001 par value, 2 million shares authorized, none and
      355,000 shares to be issued at December 31, 2009 and December 31, 2008,
      respectively
                            
                            
                            -
                            
                            
                            
                            355,000Preferred
      stock Series C, $0.00001 par value, 2 million shares authorized, none and
      25,000 shares to be issued at December 31, 2009 and December 31, 2008,
      respectively
                            
                            
                            -
                            
                            
                            
                            25,000Common
      stock to be issued, $0.00001 par value, 32,804,684 and 12,194,685 shares
      to be issued at December 31, 2009 and December 31, 2008,
      respectively
                            
                            
                            328
                            
                            
                            
                            122Common
      stock, $0.00001 par value, 1 billion shares authorized, 678,452,244 and
      655,243,240 issued and outstanding at December 31, 2009 and December 31,
      2008, respectively
                            
                            
                            6,785
                            
                            
                            
                            6,552Additional
      paid-in capital
                            
                            
                            128,213,875
                            
                            
                            
                            125,927,389Accumulated
      deficit
                            
                            
                            (146,744,021
                            )
                            
                            
                            (140,223,968
                            )Total
      stockholders’ (deficit)
                            
                            
                            (18,523,033
                            )
                            
                            
                            (13,909,905
                            )Total
      liabilities and stockholders’ (deficit)
                            
                            $
                            91
                            
                            
                            $
                            16
 See accompanying notes to the
consolidated financial statements.


F-2
  ARROW
      RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 
 (A
      DEVELOPMENT STAGE COMPANY)
 
 Consolidated
      Statement of Operations (During the Development
  Stage)
 For
      the Year Ended December 31, 2009
                
                
                For
      the Year Ended December 31, 2008
                
                
                Accumulated
      During the Development Stage for the Period From Inception (November 15,
      2005) to December 31, 2007
                
                
                Accumulated
      During the Development Stage for the Period From Inception (November 15,
      2005) to December 31, 2009Revenue
                
                $
                -
                
                
                $
                52,000
                
                
                $
                $ -
                
                
                $
                52,000Operating
      expenses:Consulting
      fees and services, including $4,161,526, $3,723,711, $7,555,470 and
      $15,440,707 incurred to related parties, respectively
                
                
                4,296,832
                
                
                
                4,229,796
                
                
                
                7,955,066
                
                
                
                16,481,694General
      and administrative
                
                
                138,665
                
                
                
                168,433
                
                
                
                554,177
                
                
                
                861,275Directors'
      compensation
                
                
                235,000
                
                
                
                277,500
                
                
                
                260,178
                
                
                
                772,678Delaware
      franchise taxes
                
                
                420
                
                
                
                420
                
                
                
                185,001
                
                
                
                185,841Total
      operating expenses
                
                
                4,670,917
                
                
                
                4,676,149
                
                
                
                8,954,422
                
                
                
                18,301,488Loss
      from operations during thedevelopment
      stage
                
                
                (4,670,917
                )
                
                
                (4,624,149
                )
                
                
                (8,954,422
                )
                
                
                (18,249,488
                )Other
      income (expense):Income
      from spin-off
                
                
                52,491
                
                
                
                -
                
                
                
                -
                
                
                
                52,491Income
      from forgiveness of debt
                
                
                5,000
                
                
                
                -
                
                
                
                -
                
                
                
                5,000Gain
      on write off of liabilities associated with predecessor entity not to be
      paid
                
                
                -
                
                
                
                -
                
                
                
                395,667
                
                
                
                395,667Loss
      on legal judgement obtained by predecessor entity
    shareholder
                
                
                (63,203
                )
                
                
                (150,107
                )
                
                
                (1,053,385
                )
                
                
                (1,266,695
                )Penalty
      for default of notes payable
                
                
                (578,000
                )
                
                
                -
                
                
                
                -
                
                
                
                (578,000
                )Loss
      on write-off of marketing agreement
                
                
                -
                
                
                
                -
                
                
                
                (125,000,000
                )
                
                
                (125,000,000
                )Loss
      on settlement of predecessor entity stockholder litigation
                
                
                -
                
                
                
                -
                
                
                
                (2,000
                )
                
                
                (2,000
                )Loss
      on debt conversion
                
                
                (250,000
                )
                
                
                -
                
                
                
                -
                
                
                
                (250,000
                )Expenses
      incurred as part of recapitalization transaction
                
                
                -
                
                
                
                -
                
                
                
                (249,252
                )
                
                
                (249,252
                )Debt
      issue costs including interest expense, of which $800,000, $536,320, none
      and $1,336,320 is to be satisfied in Company Common Stock and none,
      $32,000, none, and $32,000 incurred to related parties
                
                
                (1,015,424
                )
                
                
                (586,320
                )
                
                
                -
                
                
                
                (1,601,744
                )(1,849,136
                )
                
                
                (736,427
                )
                
                
                (125,908,970
                )
                
                
                (128,494,533
                )Net
      loss
                
                $
                (6,520,053
                )
                
                $
                (5,360,576
                )
                
                $
                (134,863,392
                )
                
                $
                (146,744,021
                )Basic
      and diluted net loss per weighted-average shares common stock
      outstanding
                
                $
                (0.010
                )
                
                $
                (0.008
                )
                
                $
                $ (0.214
                )
                
                $
                (0.232
                )Weighted-average
      number of shares of common stock outstanding
                
                
                662,865,179
                
                
                
                650,970,699
                
                
                
                631,654,538
                
                
                
                633,667,055
  See
accompanying notes to the consolidated financial statements.
  F-3
  ARROW
      RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 
 (A
      DEVELOPMENT STAGE COMPANY)
 
 Consolidated
      Statement of Changes in Stockholders' (Deficit) Equity (During the
      Development Stage)
 Series
      A Convertible Preferred Stock
                
                
                Series
      C Convertible Preferred Stock
                
                
                Common
      Stock
                
                
                Common
      StockShares
      to be issued
                
                
                Amount
                
                
                Shares
      to be issued
                
                
                Amount
                
                
                Shares
      to be issued
                
                
                
                Amount
                
                
                Shares
      issued
                
                
                AmountBalance,
      November 14, 2005 pursuant to recapitalization transaction
                
                
                --
                
                
                $
                --
                
                
                
                --
                
                
                $
                --
                
                
                
                --
                
                
                
                $
                --
                
                
                
                25,543,240
                
                
                $
                255Common
      stock conversion and settlement of senior note pursuant to
      recapitalization transaction
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                
                --
                
                
                
                624,000,000
                
                
                
                6,240Net
      loss for the period from November 15, 2005 to December 31,
      2005
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                
                --
                
                
                
                --
                
                
                
                --Balance,
      December 31, 2005
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                
                $
                -
                
                
                
                649,543,240
                
                
                $
                6,495Common
      stock to be issued for cash received by Company
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                985,000
                
                
                
                
                10
                
                
                
                --
                
                
                
                --Net
      loss for the year
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                
                --
                
                
                
                --
                
                
                
                --Balance,
      December 31, 2006
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                $
                -
                
                
                
                985,000
                
                
                
                $
                10
                
                
                
                649,543,240
                
                
                $
                6,495Common
      stock to be issued for cash received by Company
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                500,000
                
                
                
                
                5
                
                
                
                --
                
                
                
                --Series
      A Convertible Preferred Stock to be issued for cash received by
      Company
                
                
                280,000
                
                
                
                280,000
                
                
                
                -
                
                
                
                -
                
                
                
                --
                
                
                
                
                --
                
                
                
                --
                
                
                
                --Common
      stock issued in settlement of predecesor entity stockholder
      litigation
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                -
                
                
                
                
                -
                
                
                
                200,000
                
                
                
                2Common
      stock to be issued for directors' compensation
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                1,000,685
                
                
                
                
                10
                
                
                
                --
                
                
                
                --Net
      loss for the year
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                
                --
                
                
                
                --
                
                
                
                --Balance,
      December 31, 2007
                
                
                280,000
                
                
                $
                280,000
                
                
                
                -
                
                
                $
                -
                
                
                
                2,485,685
                
                
                
                $
                25
                
                
                
                649,743,240
                
                
                $
                6,497Series
      A Convertible Preferred Stock to be issued for cash received by
      Company
                
                
                75,000
                
                
                
                75,000
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                
                --
                
                
                
                --
                
                
                
                --Series
      C Convertible Preferred Stock to be issued for cash received by
      Company
                
                
                --
                
                
                
                --
                
                
                
                25,000
                
                
                
                25,000
                
                
                
                --
                
                
                
                
                --
                
                
                
                --
                
                
                
                --Common
      Stock issued and to be issued for cash received by Company
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                305,000
                
                
                
                
                
                3
                
                
                
                250,000
                
                
                
                3Common
      stock to be issued for directors' compensation
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                1,000,000
                
                
                
                
                
                10
                
                
                
                --
                
                
                
                --Debt
      issue costs to be satisfied in Company Common Stock
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                4,704,000
                
                
                
                
                
                47
                
                
                
                3,000,000
                
                
                
                30Common
      stock to be issued for purchase of common stock
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                1,000,000
                
                
                
                
                
                10
                
                
                
                --
                
                
                
                --Common
      stock to be issued for consulting and marketing services
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                2,700,000
                
                
                
                
                
                27
                
                
                
                --
                
                
                
                --Common
      stock issued for consulting and marketing services
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                
                
                --
                
                
                
                2,250,000
                
                
                
                23Net
      loss for twelve months ended December 31, 2008
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                
                
                --
                
                
                
                --
                
                
                
                --Balance,
      December 31, 2008
                
                
                355,000
                
                
                $
                355,000
                
                
                
                25,000
                
                
                $
                25,000
                
                
                
                12,194,685
                
                
                
                
                $
                122
                
                
                
                655,243,240
                
                
                $
                6,552Series
      A Convertible Preferred Stock converted into common stock
                
                
                (355,000
                )
                
                
                (355,000
                )
                
                
                -
                
                
                
                -
                
                
                
                --
                
                
                
                
                
                --
                
                
                
                7,100,000
                
                
                
                71Series
      C Convertible Preferred Stock converted into common stock
                
                
                -
                
                
                
                -
                
                
                
                (25,000
                )
                
                
                (25,000
                )
                
                
                --
                
                
                
                
                
                --
                
                
                
                500,000
                
                
                
                5Common
      Stock to be issued for cash received by Company
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                2,500,000
                
                
                
                
                
                25
                
                
                
                --
                
                
                
                --Common
      stock to be issued for directors' compensation
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                1,000,000
                
                
                
                
                
                10
                
                
                
                --
                
                
                
                --Debt
      issue costs to be satisfied in Company Common Stock
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                16,000,000
                
                
                
                
                
                160
                
                
                
                --
                
                
                
                --Debt
      issue costs satisfied in Company Common Stock
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                -
                
                
                
                
                
                -
                
                
                
                1,000,000
                
                
                
                10Common
      stock issued for reset of previous subscription agreement
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                
                
                --
                
                
                
                138,095
                
                
                
                2Common
      stock to be issued for reset of previous subscription
      agreement
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                1,109,999
                
                
                
                
                
                11
                
                
                
                -
                
                
                
                -Common
      stock issued for debt conversion
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                -
                
                
                
                
                
                -
                
                
                
                14,470,909
                
                
                
                145Net
      loss for the year ended December 31, 2009
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                
                
                --
                
                
                
                --
                
                
                
                --Balance,
      December 31, 2009
                
                
                0
                
                
                $
                0
                
                
                
                0
                
                
                $
                0
                
                
                
                32,804,684
                
                
                
                
                $
                328
                
                
                
                678,452,244
                
                
                $
                6,785
  See
accompanying notes to the consolidated financial statements.
  F-4
 
  ARROW
      RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 
 (A
      DEVELOPMENT STAGE COMPANY)
 
 Consolidated
      Statement of Changes in Stockholders' (Deficit) Equity (During the
      Development Stage)
 Additional
                
                
                Accumulated
                
                
                TotalPaid-in Capital
                
                
                DeficitBalance,
      November 14, 2005 pursuant to recapitalization transaction
                
                $
                (2,674,761
                )
                
                $
                --
                
                
                $
                (2,674,506
                )Common
      stock conversion and settlement of senior note pursuant to
      recapitalization transaction
                
                
                125,907,967
                
                
                
                --
                
                
                
                125,914,207Net
      loss for the period from November 15, 2005 to December 31,
      2005
                
                
                --
                
                
                
                (1,272,258
                )
                
                
                (1,272,258
                )Balance,
      December 31, 2005
                
                $
                123,233,206
                
                
                $
                (1,272,258
                )
                
                $
                121,967,443Common
      stock to be issued for cash received by Company
                
                
                984,990
                
                
                
                --
                
                
                
                985,000Net
      loss for the year
                
                
                --
                
                
                
                (3,514,445
                )
                
                
                (3,514,445
                )Balance,
      December 31, 2006
                
                $
                124,218,196
                
                
                $
                (4,786,703
                )
                
                $
                119,437,998Common
      stock to be issued for cash received by Company
                
                
                499,995
                
                
                
                --
                
                
                
                500,000Series
      A Convertible Preferred Stock to be issued for cash received by
      Company
                
                
                --
                
                
                
                --
                
                
                
                280,000Common
      stock issued in settlement of predecesor entity stockholder
      litigation
                
                
                11,998
                
                
                
                --
                
                
                
                12,000Common
      stock to be issued for directors' compensation
                
                
                60,031
                
                
                
                --
                
                
                
                60,041Net
      loss for the year
                
                
                --
                
                
                
                (130,076,689
                )
                
                
                (130,076,689
                )Balance,
      December 31, 2007
                
                $
                124,790,220
                
                
                $
                (134,863,392
                )
                
                $
                (9,786,650
                )Series
      A Convertible Preferred Stock to be issued for cash received by
      Company
                
                
                --
                
                
                
                --
                
                
                
                75,000Series
      C Convertible Preferred Stock to be issued for cash received by
      Company
                
                
                --
                
                
                
                --
                
                
                
                25,000Common
      Stock issued and to be issued for cash received by Company
                
                
                104,996
                
                
                
                --
                
                
                
                105,002Common
      stock to be issued for directors' compensation
                
                
                77,490
                
                
                
                --
                
                
                
                77,500Debt
      issue costs to be satisfied in Company Common Stock
                
                
                536,243
                
                
                
                --
                
                
                
                536,320Common
      stock to be issued for purchase of common stock
                
                
                49,990
                
                
                
                --
                
                
                
                50,000Common
      stock to be issued for consulting and marketing services
                
                
                245,969
                
                
                
                --
                
                
                
                245,996Common
      stock issued for consulting and marketing services
                
                
                122,481
                
                
                
                --
                
                
                
                122,504Net
      loss for twelve months ended December 31, 2008
                
                
                --
                
                
                
                (5,360,576
                )
                
                
                (5,360,576
                )Balance,
      December 31, 2008
                
                $
                125,927,389
                
                
                $
                (140,223,968
                )
                
                $
                (13,909,905
                )Series
      A Convertible Preferred Stock converted into common stock
                
                
                354,929
                
                
                
                --
                
                
                
                -Series
      C Convertible Preferred Stock converted into common stock
                
                
                24,995
                
                
                
                --
                
                
                
                -Common
      Stock to be issued for cash received by Company
                
                
                249,975
                
                
                
                --
                
                
                
                250,000Common
      stock to be issued for directors' compensation
                
                
                34,990
                
                
                
                --
                
                
                
                35,000Debt
      issue costs to be satisfied in Company Common Stock
                
                
                719,840
                
                
                
                --
                
                
                
                720,000Debt
      issue costs satisfied in Company Common Stock
                
                
                79,990
                
                
                
                --
                
                
                
                80,000Common
      stock issued for reset of previous subscription agreement
                
                
                5,523
                
                
                
                --
                
                
                
                5,525Common
      stock to be issued for reset of previous subscription
      agreement
                
                
                44,389
                
                
                
                --
                
                
                
                44,400Common
      stock issued for debt conversion
                
                
                771,855
                
                
                
                --
                
                
                
                772,000Net
      loss for the year ended December 31, 2009
                
                
                --
                
                
                
                (6,520,053
                )
                
                
                (6,520,053
                )Balance,
      December 31, 2009
                
                $
                128,213,875
                
                
                $
                (146,744,021
                )
                
                $
                (18,523,033
                )
 See
accompanying notes to the consolidated financial statements.
  F-5
  ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES
  (A
      DEVELOPMENT STAGE COMPANY)
 
 Consolidated
      Statement of Cash Flows (During the Development
  Stage)
 For
      the Year Ended December 31, 2009
                
                
                For
      the Year Ended December 31, 2008
                
                
                Accumulated
      During the Development Stage for the Period From Inception (November 15,
      2005) to December 31, 2007
                
                
                Accumulated
      During the Development Stage for the Period From Inception (November 15,
      2005) to December 31, 2009Net
      loss
                
                $
                (6,520,053
                )
                
                $
                (5,360,576
                )
                
                $
                (134,863,392
                )
                
                $
                (146,744,021
                )Adjustments
      to reconcile net loss to net cash (used in) operating
      activities:Net
      non-cash change in stockholders’ equity due to recapitalization
      transaction
                
                
                -
                
                
                
                -
                
                
                
                1,264,217
                
                
                
                1,264,217Loss
      on write-off of marketing and distribution agreement
                
                
                -
                
                
                
                -
                
                
                
                125,000,000
                
                
                
                125,000,000Common
      stock issued for reset of previous scubscription agreement
                
                
                5,525
                
                
                
                -
                
                
                
                -
                
                
                
                5,525Common
      stock to be issued for reset of previous scubscription
      agreement
                
                
                44,400
                
                
                
                -
                
                
                
                -
                
                
                
                44,400Debt
      issue costs to be satisfied in Company Common Stock
                
                
                720,000
                
                
                
                536,320
                
                
                
                -
                
                
                
                1,256,320Debt
      issue costs satisfied in Company Common Stock
                
                
                80,000
                
                
                
                -
                
                
                
                -
                
                
                
                80,000Common
      stock issued for debt conversion
                
                
                772,000
                
                
                
                -
                
                
                
                -
                
                
                
                772,000Common
      stock issued for conversion of due to Related party
                
                
                (39,000
                )
                
                
                
                
                
                
                
                
                
                
                (39,000
                )Debt
      issue costs paid in cash
                
                
                -
                
                
                
                50,000
                
                
                
                -
                
                
                
                50,000Common
      stock issued for marketing services
                
                
                -
                
                
                
                122,500
                
                
                
                -
                
                
                
                122,500Common
      stock to be issued for consulting services
                
                
                -
                
                
                
                246,007
                
                
                
                -
                
                
                
                246,007Stock-based
      directors' compensation to be issued
                
                
                35,000
                
                
                
                77,500
                
                
                
                60,041
                
                
                
                172,541Changes
      in operating asset and liabilities:Increase
      in accounts and accrued expenses payable
                
                
                2,400,868
                
                
                
                1,822,620
                
                
                
                2,848,562
                
                
                
                7,072,050Estimated
      liability for legal judgement obtained by predecessor entity
      shareholder
                
                
                63,203
                
                
                
                150,107
                
                
                
                1,053,385
                
                
                
                1,266,695Net
      cash (used in) operating activities
                
                
                (2,438,057
                )
                
                
                (2,355,522
                )
                
                
                (4,637,187
                )
                
                
                (9,430,766
                )Cash
      flows from investing activities:Cash
      acquired as part of merger transaction
                
                
                -
                
                
                
                -
                
                
                
                39,576
                
                
                
                39,576Advances
      to related party
                
                
                (210,700
                )
                
                
                (320,000
                )
                
                
                (369,575
                )
                
                
                (900,275
                )Net
      cash (used in) investing activities
                
                
                (210,700
                )
                
                
                (320,000
                )
                
                
                (329,999
                )
                
                
                (860,699
                )Cash
      flows from financing activities:Proceeds
      of issuance of  note payable
                
                
                861,000
                
                
                
                983,000
                
                
                
                25,000
                
                
                
                1,869,000Proceeds
      of loans received from related parties
                
                
                30,000
                
                
                
                670,000
                
                
                
                1,175,000
                
                
                
                1,875,000Repayment
      towards loan from related party
                
                
                (5,000
                )
                
                
                (88,000
                )
                
                
                (86,425
                )
                
                
                (179,425
                )Net
      increase in due to related parties attributed to operating expenses paid
      on the Company’s behalf by the related party
                
                
                1,512,832
                
                
                
                904,496
                
                
                
                2,027,653
                
                
                
                4,444,981Net
      increase in investments/capital contributed
                
                
                250,000
                
                
                
                205,002
                
                
                
                1,776,998
                
                
                
                2,232,000Advances
      from senior advisor
                
                
                -
                
                
                
                -
                
                
                
                50,000
                
                
                
                50,000Net
      cash provided by financing activities
                
                
                2,648,832
                
                
                
                2,674,498
                
                
                
                4,968,226
                
                
                
                10,291,556Net
      change in cash
                
                
                75
                
                
                
                (1,024
                )
                
                
                1,040
                
                
                
                91Cash
      balance at beginning of period
                
                
                16
                
                
                
                1,040
                
                
                
                -
                
                
                
                -Cash
      balance at end of period
                
                $
                91
                
                
                
                16
                
                
                $
                1,040
                
                
                $
                91Supplemental
      disclosures of cash flow information:Cash
      paid during the period for:Income
      taxes
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Interest
      expense
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Non-cash
      investing and financing activities:Non-cash
      purchase of marketing and distribution agreement
                
                $
                -
                
                
                $
                -
                
                
                $
                125,000,000
                
                
                $
                125,000,000Settlement
      of senior note payable through issuance of convertible preferred
      stock
                
                $
                -
                
                
                $
                -
                
                
                $
                125,000,000
                
                
                $
                125,000,000Non-cash
      acquisition of accrued expenses in recapitalization
                
                $
                -
                
                
                $
                -
                
                
                $
                421,041
                
                
                $
                421,041Non-cash
      acquisition of notes payable in recapitalization
                
                $
                -
                
                
                $
                -
                
                
                $
                220,000
                
                
                $
                220,000
 
 See
accompanying notes to the consolidated financial statements.
  F-6
  ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES
  (A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE
      1 - NATURE OF BUSINESS /
ORGANIZATION
  Business
Description
  Arrow
Resources Development, Inc. and Subsidiaries (“the Company”), was subject to a
change of control transaction that was accounted for as a recapitalization of
CNE Group, Inc. (“CNE”) in November 2005. Arrow Resources Development, Ltd.,
(“Arrow Ltd.”) the Company’s wholly-owned subsidiary, was incorporated in
Bermuda in May 2005. Arrow Ltd. provides marketing and distribution services for
natural resource products. .
  In April
of 2006, Arrow Ltd. entered into an agency agreement with APR to provides
marketing and distribution services for timber and natural resource products and
currently has an exclusive marketing and sales agreement with APR to market
lumber and related plantation products from land leased by GMPLH which is
operated by APR and it's subsidiaries, located in Indonesia. Under the agreement
Arrow Ltd. will receive a commission of 10% of gross sales derived from lumber
and plantation related products. The consideration to be paid to APR will be in
the form of a to-be-determined amount of the Company's common stock, subject to
the approval of the Board of Directors.
  As of
December 31, 2005, the Company also had a wholly-owned subsidiary, Career
Engine, Inc. (“Career Engine”) for which operations were discontinued prior to
the recapitalization transaction. The net assets of Career Engine had no value
as of December 31, 2005.
  NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
 
 Going-Concern
Status:
 
 These
consolidated financial statements are presented on the basis that the Company is
a going concern. Going concern contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a reasonable
period of time.
 
 As
shown in the accompanying consolidated financial statements, the Company
incurred a net loss of $6,520,053 for the year ended December 31, 2009, and a
net loss during the development stage from inception in November 15, 2005
through December 31, 2009 of $146,744,021. The Company’s operations are in the
development stage, and the Company has substantially not generated any revenue
since inception. The Company’s existence in the current period has been
dependent upon advances from related parties and other individuals, and proceeds
from the issuance of senior notes payable.
 
 One of
the principal reasons for the Company’s substantial doubt regarding its ability
to continue as a going concern involves the fact that as of December 31, 2007,
the Company’s principal asset, a marketing and distribution intangible asset in
the amount of $125,000,000 was written off as impaired as discussed in Note 6
due to the fact that environment laws affecting timber harvesting have become
more restrictive in Papua New Guinea.
 
 The
condensed consolidated financial statements do not include any adjustments
relating to the carrying amounts of recorded assets or the carrying amounts and
classification of recorded liabilities that may be required should the Company
be unable to continue as a going concern.
 
 Principles
of consolidation:
  The
accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Arrow. All significant inter-company
balances and transactions have been eliminated.
  Development
Stage Company:
  The accompanying financial statements have been prepared in
accordance with the FASB Accounting Standards Codification No 915, Development Stage
Entities. A development stage enterprise is one in which planned and
principal operations have not commenced or, if its operations have commenced,
there has been no significant revenue there from.  Development-stage
companies report cumulative costs from the enterprise’s
inception.
 
 F-7
  ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES
  (A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  (CONTINUED)
 
 Income
taxes:
  The
Company follows FASB Accounting Standards Codification No 740, Income Taxes. Deferred tax
assets or liabilities are recorded to reflect the future tax consequences of
temporary differences between the financial reporting basis of assets and
liabilities and their tax basis at each year-end. These amounts are adjusted, as
appropriate, to reflect enacted changes in tax rates expected to be in effect
when the temporary differences reverse.
  The
Company records deferred tax assets and liabilities based on the differences
between the financial statement and tax bases of assets and liabilities and on
operating loss carryforwards using enacted tax rates in effect for the year in
which the differences are expected to reverse. A valuation allowance is provided
when it is more likely than not that some portion or all of a deferred tax asset
will not be realized.
  Fair
value of financial instruments:
  For
financial statement purposes, financial instruments include cash, accounts and
accrued expenses payable, and amounts due to Empire Advisory, LLC (“Empire”) (as
discussed in Notes 5 and 7) for which the carrying amounts approximated fair
value because of their short maturity.
  Use of
estimates:
  The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results may differ
from those estimates.
 
 Loss per
share:
 
 The Company complies with the requirements of the FASB Accounting
Standard Codification No 260, Earnings Per Share. FASB No.
260 specifies the compilation, presentation and disclosure requirements for
earning per share for entities with publicly held common stock or potentially
common stock. Net loss per common share, basic and diluted, is determined by
dividing the net loss by the weighted average number of common shares
outstanding.  Net loss per common share, basic and diluted, is
determined by dividing the net loss by the weighted average number of common
shares outstanding.
 
 Net loss
per diluted common share does not include potential common shares derived from
stock options and warrants because they are anti-dilutive for the period from
November 15, 2005 to December 31, 2007 and for the years ended December 31, 2009
and 2008. As of December 31, 2009, there are no dilutive equity instruments
outstanding.
 
 Acquired
intangibles:
 
 Intangible
assets are comprised of an exclusive sales and marketing agreement. In
accordance with FASB Accounting Standard Codification No 350, Intangibles-Goodwill and
Other, the Company assesses the impairment of identifiable intangibles
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. Factors the Company considers to be important which could
trigger an impairment review include the following:
  1.
              Significant
      underperformance relative to expected historical or projected future
      operating results;
  2.
              Significant
      changes in the manner of use of the acquired assets or the strategy for
      the overall business; and
  3.
              Significant
      negative industry or economic
trends.
  F-8
  ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES
  (A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  (CONTINUED)
 
 When the
Company determines that the carrying value of intangibles may not be recoverable
based upon the existence of one or more of the above indicators of impairment
and the carrying value of the asset cannot be recovered from projected
undiscounted cash flows, the Company records an impairment charge. The Company
measures any impairment based on a projected discounted cash flow method using a
discount rate determined by management to be commensurate with the risk inherent
in the current business model. Significant management judgment is required in
determining whether an indicator of impairment exists and in projecting cash
flows.
 
 The sales
and marketing agreement was to be amortized over 99 years, utilizing the
straight-line method. Amortization expense had not been recorded since the
acquisition occurred as the company had not yet made any sales.
 
 The value
of the agreement was assessed to be fully impaired by the Company and it
recorded a loss on the write off of the Marketing and Distribution agreement of
$125,000,000 at December 31, 2007 (See Note 6).
 
 Consideration
of Other Comprehensive Income Items:
 
 FASB Accounting Standard Codification No 220, Comprehensive Income,
requires companies to present comprehensive income (consisting primarily of net
income plus other direct equity changes and credits) and its components as part
of the basic financial statements. For the period from inception (November 15,
2005) to December 31, 2009, the Company’s consolidated financial statements do
not contain any changes in equity that are required to be reported separately in
comprehensive income.
 
 Stock
Based Compensation
 
 The
Company applies ASC 718-10 and ASC 505-50 (formerly SFAS 123R) in accounting for
stock options issued to employees. For stock options and warrants issued to
non-employees, the Company applies the same standard, which requires the
recognition of compensation cost based upon the fair value of stock options at
the grant date using the Black-Scholes option pricing model.
  Recent
Accounting Pronouncements:
 
 In
January 2010, the Company adopted FASB ASU No. 2010-06, Fair Value Measurement
and Disclosures (Topic 820) - Improving Disclosures about Fair Value
Measurements (“ASU 2010-06”). These standards require new disclosures on the
amount and reason for transfers in and out of Level 1 and 2 fair value
measurements. The standards also require new disclosures of activities,
including purchases, sales, issuances, and settlements within the Level 3 fair
value measurements. The standard also clarifies existing disclosure requirements
on levels of disaggregation and disclosures about inputs and valuation
techniques. These new disclosures are effective beginning with the first interim
filing in 2010. The disclosures about the roll forward of information in Level 3
are required for the Company with its first interim filing in 2011. The Company
does not believe this standard will impact their financial statements. Other
ASU’s that have been issued or proposed by the FASB ASC that do not require
adoption until a future date and are not expected to have a material impact on
the financial statements upon adoption.
 
 Effective
July 1, 2009, the Company adopted The “FASB Accounting Standards
Codification” and the Hierarchy of Generally Accepted Accounting Principles (ASC
105-10), (formerly SFAS No. 168, The “FASB Accounting Standards
Codification” and the Hierarchy of Generally Accepted Accounting Principles).
This standard establishes only two levels of U.S. generally accepted accounting
principles (“GAAP”), authoritative and nonauthoritative. The Financial
Accounting Standard Board (“FASB”) Accounting Standards Codification (the
“Codification”) became the source of authoritative, nongovernmental GAAP, except
for rules and interpretive releases of the SEC, which are sources of
authoritative GAAP for SEC registrants. All other non-grandfathered, non-SEC
accounting literature not included in the Codification became nonauthoritative.
The Company began using the new guidelines and numbering system prescribed by
the Codification when referring to GAAP in the third quarter of fiscal 2009. As
the Codification was not intended to change or alter existing GAAP, it did not
have any impact on the Company’s condensed consolidated financial
statements.
  In June
2009, the FASB issued FASB Accounting Standards Codification No 810, Consolidation. FASB
Accounting Standards Codification No 810 improves financial reporting by
enterprises involved with variable interest entities. FASB Accounting Standards
Codification No 810 is effective as of the beginning of each reporting entity’s
first annual reporting period that begins after November 15, 2009, for interim
periods within that first annual reporting period, and for interim and annual
reporting periods thereafter. The Company is evaluating the impact the adoption
of FASB Accounting Standards Codification No 810 will have on its financial
statements.
 
 In June
2009, the FASB issued FASB Accounting Standards Codification No 860, Transfers and Servicing. FASB
Accounting Standards Codification No 860 improves the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a transfer of
financial assets; the effects of a transfer on its financial position, financial
performance, and cash flows; and a transferor’s continuing involvement, if any,
in transferred financial assets. FASB Accounting Standards Codification No 860
is effective as of the beginning of each reporting entity’s first annual
reporting period that begins after November 15, 2009, for interim periods within
that first annual reporting period and for interim and annual reporting periods
thereafter. The Company is evaluating the impact the adoption of FASB Accounting
Standards Codification No 860 will have on its financial
statements.
  Effective
for the interim reporting period ending June 30, 2009, the Company adopted two
new accounting standard updates which were intended to provide additional
application guidance and enhanced disclosures regarding fair value measurements
and impairments of securities as codified in ASC 820 “Interim Disclosures about
Fair Value of Financial Instruments”. ASC 820  requires disclosures
about fair value of financial instruments for interim reporting periods of
publicly traded companies as well as in annual financial statements. ASC 820
requires related disclosures in summarized financial information at interim
reporting periods. ASC 820 was effective for the interim reporting period ending
June 30, 2009. The adoption of ASC 820 did not have a material impact on the
Company’s condensed consolidated financial statements.
 
 F-9
  ARROW
      RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 
 (A
      DEVELOPMENT STAGE COMPANY)
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  (CONTINUED)
 
 Effective
June 15, 2009, the Company adopted a new accounting standard for subsequent
events, as codified in ASC 855. The update modifies the names of the two types
of subsequent events either as recognized subsequent events (previously referred
to in practice as Type I subsequent events) or non-recognized subsequent events
(previously referred to in practice as Type II subsequent events). In addition,
the standard modifies the definition of subsequent events to refer to events or
transactions that occur after the balance sheet date, but before the financial
statements are issued (for public entities) or available to be issued (for
nonpublic entities). It also requires the disclosure of the date through which
subsequent events have been evaluated. The update did not result in significant
changes in the practice of subsequent event disclosures, and therefore the
adoption did not have any impact on our condensed consolidated financial
statements.  In accordance with ASC 855, the Company evaluated all
events or transactions that occurred after September 30, 2009 up through
November 19, 2009, the date the Company issued these condensed consolidated
financial statements.  During this period, the Company had material
subsequent events as set forth in Note 12 to these condensed consolidated
financial statements.
 
 In June
2008, the FASB ratified ASC 815-40-25 (formerly EITF Issue No. 07-05,
“Determining Whether an Instrument (or Embedded Feature) is Indexed to an
Entity's Own Stock”). ASC 815-40-25 mandates a two-step process for evaluating
whether an equity-linked financial instrument or embedded feature is indexed to
the entity's own stock. Warrants that a company issues that contain a strike
price adjustment feature, upon the adoption of ASC 815-40-25, results in the
instruments no longer being considered indexed to the company's own stock. 
On January 1, 2009, the Company adopted ASC 815-40-25 and re-evaluated its
issued and outstanding warrants that contain a strike price adjustment feature.
The Company reclassified certain warrants from equity to a derivative liability
and used the Black-Scholes valuation model to determine the fair market value of
the warrants.  Based upon the Company’s re-evaluation, ASC 815-40-25 has
had no material impact on the Company’s condensed consolidated financial
statements.
 
 In June
2008, the FASB issued FASB Accounting Standards Codification No 260 “Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities.” Under the FSP, unvested share-based payment awards
that contain rights to receive nonforfeitable dividends (whether paid or unpaid)
are participating securities, and should be included in the two-class method of
computing EPS. The FSP is effective for fiscal years beginning after December
15, 2008, and interim periods within those years, and did not expect to have a
significant impact on the Company’s results of operations, financial condition
or cash flows.
 
 In May
2008, the FASB issued FASB Accounting Standards Codification No 944-605, Financial Guarantee Insurance
Contracts. Diversity exists in practice in accounting for financial
guarantee insurance contracts by insurance enterprise in FASB Accounting
Standards Codification No 944-605. This results in inconsistencies in the
recognition and measurement of claim liabilities. This Statement requires that
an insurance enterprise recognize a claim liability prior to an event of default
(insured event) when there is evidence that credit deterioration has occurred in
an insured financial obligation. This Statement requires expanded disclosures
about financial guarantee insurance contracts. The accounting and disclosure
requirements of the Statement will improve the quality of information provided
to users of financial statements. The adoption of FASB Accounting Standards
Codification No 944-605 is not expected to have a material impact on the
Company’s financial position.
  In April 2008, ASC issued ASC 350, “Determination of the Useful
Life of Intangible Assets". This amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under ASC 350. The guidance is used for
determining the useful life of a recognized intangible asset shall be applied
prospectively to intangible assets acquired after adoption, and the disclosure
requirements shall be applied prospectively to all intangible assets recognized
as of, and subsequent to, adoption. The Company does not believe ASC 350 will
materially impact their financial position, results of operations or cash
flows.
  ASC
470-20, “Accounting for Convertible Debt Instruments That May Be Settled in Cash
upon Conversion (Including Partial Cash Settlement)" (“ASC 470-20") requires the
issuer of certain convertible debt instruments that may be settled in cash (or
other assets) on conversion to separately account for the liability (debt) and
equity (conversion option) components of the instrument in a manner that
reflects the issuer’s non-convertible debt borrowing rate. ASC 470-20 is
effective for fiscal years beginning after December 15, 2008 on a retroactive
basis. The Company does not believe that the adoption of ASC 470-20 will have a
material effect on its financial position, results of operations or cash
flows.
 
 In March
2008, ASC issued ASC 815, Disclosures about Derivative
Instruments and Hedging Activities”, (“ASC 815”). ASC 815 requires
enhanced disclosures about an entity’s derivative and hedging activities. These
enhanced disclosures will discuss: how and why an entity uses derivative
instruments; how derivative instruments and related hedged items are accounted
for and its related interpretations; and how derivative instruments and related
hedged items affect an entity’s financial position, financial performance, and
cash flows. ASC 815 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008. The Company does
not believe that ASC 815 will have an impact on their results of operations or
financial position.
  F-10
  ARROW
      RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 
 (A
      DEVELOPMENT STAGE COMPANY)
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  (CONTINUED)
 
 In
December 2007, the FASB issued FASB Accounting Standards Codification No
810-10-65, “Noncontrolling Interests in Consolidated Financial Statements - an
amendment of ARB No. 51”.  FASB Accounting Standards Codification No
810-10-65 requires that the ownership interests in subsidiaries held by parties
other than the parent be clearly identified, labeled, and presented in the
consolidated statement of financial position within equity, in the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest on the face of the consolidated statement of income, and that entities
provide sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. 
FASB Accounting Standards Codification No 810-10-65 is effective for fiscal
years, beginning on or after December 15, 2008 and cannot be applied
earlier.
  In
December 2007, the Company adopted ASC 805,Business Combinations (“ASC
805”). ASC 805 retains the fundamental requirements that the acquisition method
of accounting be used for all business combinations and for an acquirer to be
identified for each business combination. ASC 805 defines the acquirer as the
entity that obtains control of one or more businesses in the business
combination and establishes the acquisition date as the date that the acquirer
achieves control.  ASC 805 will require an entity to record separately
from the business combination the direct costs, where previously these costs
were included in the total allocated cost of
the acquisition.  ASC 805 will require an entity to recognize the
assets acquired, liabilities assumed, and any non-controlling interest in the
acquired at the acquisition date, at their fair values as of that
date.  ASC 805 will require an entity to recognize as an asset or
liability at fair value for certain contingencies, either contractual or
non-contractual, if certain criteria are met.  Finally, ASC 805 will
require an entity to recognize contingent consideration at the date of
acquisition, based on the fair value at that date.  This will be
effective for business combinations completed on or after the first annual
reporting period beginning on or after December 15, 2008.  Early
adoption is not permitted and the ASC is be applied prospectively
only.  Upon adoption of this ASC, there would be no impact to the
Company’s results of operations and financial condition for acquisitions
previously completed.  The adoption of ASC 805 is not expected to have
a material effect on the Company’s financial position, results of operations or
cash flows.
  The
Company does not anticipate that the adoption of FASB Accounting Standards
Codification No 805 and FASB Accounting Standards Codification No 810-10-65 will
have an impact on the Company's overall results of operations or financial
position, unless the Company makes a business acquisition in which there is a
non-controlling interest.
 
 In
February 2007, ASC issued 825-10, The Fair Value Option for Financial
Assets and Financial Liabilities – Including an amendment of ASC 320-10,
(“ASC 825-10”) which permits entities to choose to measure many financial
instruments and certain other items at fair value at specified election dates. A
business entity is required to report unrealized gains and losses on items for
which the fair value option has been elected in earnings at each subsequent
reporting date. This statement is expected to expand the use of fair value
measurement. ASC 825-10 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal
years. The Company does not expect that the adoption of FASB Accounting
Standards Codification No 825 will have a material effect on the Company's
consolidated financial statements.
 
 In
September 2006, the FASB issued ASC 820. ASC 820 defines fair value, establishes
a framework for measuring fair value under GAAP and expands disclosures about
fair value measurements.  ASC 820 applies under other accounting
pronouncements that require or permit fair value
measurements.  Accordingly, ASC 820 does not require any new fair
value measurements.  However, for some entities, the application of ASC 820
will change current practice.  The changes to current practice resulting
from the application of ASC 820 relate to the definition of fair value, the
methods used to measure fair value and the expanded disclosures about fair value
measurements.  The provisions of ASC 820 are effective as of January 1,
2008, with the cumulative effect of the change in accounting principle recorded
as an adjustment to opening retained earnings.  However, delayed
application of this statement is permitted for nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually),
until fiscal years beginning after November 15, 2008, and interim periods within
those fiscal years.  The Company adopted ASC 820 effective January 1, 2008
for financial assets and the adoption did not have a significant effect on its
financial statements.  The Company has adopted the remaining provisions of
ASC 820 beginning in 2009. The adoption of SFAS No. 157 did not have a material
impact on the Company’s consolidated results of operations or financial
condition.
 
 F-11
  ARROW
      RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 
 (A
      DEVELOPMENT STAGE COMPANY)
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 3 -
AGREEMENT AND PLAN OF MERGER BETWEEN ARROW RESOURCES DEVELOPMENT, LTD. AND CNE
GROUP, INC..
  In August
2005, the Company entered into an Agreement and Plan of Merger (“the Agreement”)
with CNE Group, Inc. (“CNE”) under which, CNE was required to issue 10 million
shares of Series AAA convertible preferred stock (“the Preferred Stock”) to the
Company, representing 96% of all outstanding equity of CNE on a fully diluted
basis for the Marketing and Distribution Agreement provided to the Company,
Empire, as agent. Under the Agreement, the Company changed its name to Arrow
Resources Development, Inc. and divested all operations not related to Arrow
Ltd. The Preferred Stock contained certain liquidation preferences and each
share of the Preferred Stock was convertible to 62.4 shares of common
stock.
  The
transaction was consummated upon the issuance of the Preferred Stock on November
14, 2005, which was used to settle the senior secured note payable for
$125,000,000 and $1,161,000 of cash advances from Empire. The Preferred Stock
was subsequently converted to common stock on December 2, 2005, for a total of
approximately 649 million shares of common stock outstanding. This was recorded
as a change of control transaction that was accounted for as a recapitalization
of CNE.
  The
operations of the Company’s wholly-owned subsidiary, Career Engine, Inc. were
discontinued prior to the recapitalization transaction. The net assets of Career
Engine had no value as of December 31, 2005.
  During
the period from November 15, 2005 to December 31, 2005, the Company incurred
$249,252 of expenses incurred as part of recapitalization
transaction.
  F-12
  ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES
  (A
      DEVELOPMENT STAGE COMPANY)
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
      4 - INCOME TAXES
  In August
2005, the Company entered into an Agreement and Plan of Merger (“the Agreement”)
with CNE Group, Inc. (“CNE”). Under the Agreement, the Company changed its name
to Arrow Resources Development, Inc. and divested all operations not related to
Arrow Ltd. The transaction was consummated upon the issuance of the Preferred
Stock on November 14, 2005. (See Note 3 for a detailed description of the
transaction.)
 
 Consequently,
as of November 14, 2005 the predecessor CNE entity had a net operating loss
carryforward available to reduce future taxable income for federal and state
income tax purposes of the successor entity of approximately zero, because those
losses arose from the predecessor CNE exiting previous business lines that had
generated operating losses.
 
 For tax
purposes, all expenses incurred by the re-named entity now known as Arrow
Resources Development, Inc. after November 14, 2005 have been capitalized as
start up costs in accordance with Internal Revenue Code Section (“IRC”) No. 195.
Pursuant to IRC 195, the Company will be able to deduct these costs by
amortizing them over a period of 15 years for tax purposes once the Company
commences operations. Accordingly for tax purposes none of the Company’s post
November 14, 2005 losses are as yet reportable in Company income tax returns to
be filed for either the year ended December 31, 2005, 2006, 2007 or
2008.
  The
significant components of the Company’s deferred tax assets are as
follows:
 
 Net
      operating loss carryforward
                
                $
                63,186Differences
      resulting from use of cash basis for tax purposes
                
                
                -Total
      deferred tax assets
                
                
                63,186Less
      valuation allowance
                
                
                (63,186
                )Net
      deferred tax assets
                
                $
                —The
      net operating losses expire as follows:December
      31, 2026
                
                $
                127,349December
      31, 2027
                
                
                57,652December
      31, 2028
                
                
                420December
      31, 2029
                
                
                420Net
      Operating Loss Carryover
                
                $
                185,841
  Reconciliation
      of net loss for income tax purposes to net loss per financial statement
      purposes:
  Costs
      capitalized under IRC Section 195 which will be amortizable over 15 years
      for tax purposes once the Company commences operations
                
                $
                146,558,180Delaware
      franchise taxes deductible on Company's tax return
                
                
                185,841Net
      loss for the period from inception (November 15, 2005) to December 31,
      2009
                
                $
                146,744,021
  F-13
  ARROW
      RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 
 (A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE
      5 - NOTES PAYABLE
  As of
December 31, 2009 and 2008, the Company had notes payable outstanding as
follows:
 
 December
      31,
                
                December
      31,Holder
                
                Terms
                
                2009
                
                2008Barry
      Blank (1)
                
                Due
      on demand, 10% interest
                
                $
                200,000
                
                $
                200,000Accrued
      interest (1)
                
                
                
                
                50,000
                
                
                20,000H.
      Lawrence Logan
                
                Due
      on demand, non-interest bearing
                25,000
                
                
                25,000John
      Marozzi (2)
                
                Due
      on demand, non-interest bearing
                265,500
                
                
                150,000James
      R. McConnaughy (3)
                
                Due
      on demand, non-interest bearing
                53,000
                
                
                53,000Christopher
      T. Joffe (4)
                
                Due
      on demand, non-interest bearing
                63,000
                
                
                63,000John
      E. McConnaughy III (5)
                
                Due
      on demand, non-interest bearing
                -
                
                
                12,000Frank
      Ciolli (6)
                
                Due
      on demand, non-interest bearing
                550,000
                
                
                550,000John
      Frugone (7)
                
                Due
      on demand, non-interest bearing
                155,000
                
                
                100,000Money
      Info LLC (8)
                
                Due
      on demand, non-interest bearing
                -
                
                
                5,000Scott
      Neff (9)
                
                Due
      on demand, non-interest bearing
                50,000
                
                
                50,000Cliff
      Miller (10)
                
                Due
      on 10/11/09, interest bearing
                
                
                450,000
                
                
                -Accrued
      interest (10)
                
                
                
                
                100,000
                
                
                -Butler
      Ventures (11)
                
                Due
      on demand, non-interest bearing
                -
                
                
                -John
      McConnaughy (12)
                
                Due
      on demand, 10% interest
                
                
                25,000
                
                
                -Accrued
      interest (12)
                
                
                
                
                2,500
                
                
                -Greg
      and Lori Popke (13)
                
                Due
      on 12/11/09
                
                
                100,000
                
                
                -Total
                
                
                
                $
                2,089,000
                
                $
                1,228,000
  (1)
              The
      Company has a note payable outstanding for $200,000, plus $20,000 in
      accrued interest. Although the predecessor company (CNE) reserved 456,740
      shares of its common stock to retire this debt pursuant to a settlement
      agreement, the stock cannot be issued until the party to whom the note was
      assigned by its original holder emerges from bankruptcy or reorganization.
      In March 2010, the noteholder emerged from bankruptcy and the note was
      settled. During the year ended December 31, 2009, an additional
      $30,000 in interest expense was recorded for a total of $50,000
      accrued interest outstanding on the
note.
 
 (2)
              On
      March 31, 2008, the Company received a $150,000 non-interest bearing
      advance from John Marozzi, which is due on demand. As payment for his
      services, the Company will repay the full amount of the note plus
      1,000,000 shares of unregistered restricted common stock. The Company
      recorded $40,000 of debt issue costs related to the 1,000,000 shares of
      common stock that are now issuable John Marozzi as of March 31, 2008 (See
      Note 8). On May 5, 2008, John Marozzi received repayment of $50,000 from
      the Company. On October 13, 2008, the Company received  a
      $50,000 interest bearing advance from John Marozzi.  The Company was
      to repay the full amount of the October 31, 2008 $50,000 note in cash
      within 60 calendar days from the date the note was executed plus
      interest paid in the form of 1,000,000 shares of unregistered Company
      common stock.  The Company recorded $60,000 of debt issue costs
      related to the 1,000,000 shares of common stock that are now issuable John
      Marozzi as of December 31, 2008 (See Note 5 On March 5, 2009, the Company
      received $50,000 interest bearing advance from John Marozzi. The
      Company is to repay the full amount of the March 5, 2009 $50,000 note in
      cash within 60 calendar days from the date the note was executed plus
      interest paid in the form of 1,000,000 shares of unregistered Company
      common stock.  This leaves a balance of $200,000 unpaid
      principal as of June 30, 2009.  On August 12, 2009, the Company
      and John Marozzi entered into a six month extension for the Senior Note
      and Purchase Agreement for the amount of $200,000.  The
      principal amount was payable on February 5, 2010.  On April 17,
      2009, the Company received a $12,500 non-interest bearing advance from
      John Marozzi. The Company is to repay the full amount of the April
      17, 2009 $ 12,500 note in cash within 60 calendar days from the date the
      note was executed. On May 8, 2009, the Company received a $ 20,000 non-
      interest bearing advance from John Marozzi.  On August 13, 2009, the
      Company and John Marozzi entered into a six month extension for the Senior
      Note and Purchase Agreement for the amount of $32,500. The principal
      amount was payable on February 5, 2010.  On August 7, 2009, the
      Company received a $33,000 non-interest bearing advance from John Marozzi.
      In repayment, the Company will repay the full amount of the note in cash
      within 60 calendar days from the date the note is executed. On November 5,
      2009, the Company entered into a thirty day loan extension agreement with
      John Marozzi for the $33,000 loan to the Company. The principal amount and
      interest was payable on December 5, 2009. This leaves a total balance of
      $265,500 unpaid principal as of December 31, 2009. The balance of $265,500
      note payable is currently in default.
  (3)
              On
      April 24, 2008, the Company received a $38,000 non-interest bearing
      advance from James R. McConnaughy, which is due on demand. In repayment,
      the Company will repay the full amount of the note plus 304,000 shares of
      the Company’s unregistered restricted common stock. The Company recorded
      $24,320 in debt issue costs related to the 304,000 shares of common stock
      that are issuable to James R. McConnaughy as of December 31, 2008. On
      December 23, 2008, the Company received $15,000 non-interest bearing
      advance from James R. McConnaughy, which is due on demand. James
      McConnaughy is a relative of John E. McConnaughy Jr., a Company Director
      discussed in Note 7 [3].
 
 (4)
              On
      April 24, 2008, the Company received a $38,000 non-interest bearing
      advance from Christopher T. Joffe, which is due on demand. In repayment,
      the Company will repay the full amount of the note plus 304,000 shares of
      the Company’s unregistered restricted common stock. The Company recorded
      $24,320 in debt issue costs related to the 304,000 shares of common stock
      that are issuable to Christopher T. Joffe as of December 31, 2008. On June
      13, 2008, the Company received $25,000 non-interest bearing advance from
      Christopher T. Joffe, which is due on demand. In repayment, the Company
      will repay the full amount of the note.(5)
              On
      April 25, 2008, the Company received $12,000 non-interest bearing advance
      from John E. McConnaughy III, which was due on demand. In repayment, the
      Company will repay the full amount of the note plus 96,000 shares of the
      Company’s unregistered restricted common stock. The Company recorded
      $7,680 in debt issue costs related to the 96,000 shares of common stock
      that are issuable to John E. McConnaughy III as of December 31,
      2008.  As of December 31, 2009, John E. McConnaughy III assigned
      the $12,000 advance to John McConnaughy,
Jr.
  F-14
  ARROW
      RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 
 (A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE 5 -
NOTES PAYABLE (CONTINUED)
  (6)
              On
      April 30, 2008, the Company received a $500,000 non-interest bearing
      advance from Frank Ciolli. In repayment, the Company promised to pay Frank
      Ciolli the principal sum of $550,000 on or before October 31,
      2008.  On October 31, 2008, the Company entered into a 60 day
      loan extension with Frank Ciolli.  In payment, the Company
      issued 1,000,000 shares of the Company’s unregistered restricted common
      stock to Frank Ciolli and 1,000,000 shares of the Company’s unregistered
      restricted common stock to Donna Alferi on behalf of Michael Alferi as
      designated by Frank Ciolli.  The Company recorded $100,000 and
      $100,000, respectively, in debt issue costs related to the 1,000,000 and
      1,000,000, respectively, of shares of common stock that were issued to
      Frank Ciolli and Donna Alferi as of December 31, 2008.  On
      January 15, 2009, the Company entered into the thirty-one day extension
      from December 31, 2008 for the Convertible Loan Agreement and Convertible
      Note with Frank Ciolli for the loan amount of $550,000 dated as of April
      30, 2008. The Company issued 500,000 shares of restricted, unregistered
      common stock each for Michael Alferi and Frank Ciolli, which resulted in
      Company debt issue costs of $80,000 as of September 30,
      2009.  On August 12, 2009, the Company and Frank Ciolli entered
      into a six month extension for the Senior Note and Purchase Agreement for
      the principal sum of $550,000. The principal amount was payable on
      February 12, 2010.  The balance of $550,000 note payable is
      currently in default.
 
 (7)
              On
      September 10, 2008, the Company received a $100,000 non-interest bearing
      advance from John Frugone, which is due on demand. In repayment, the
      Company will repay the full amount of the note in cash over two years from
      the date the note is executed.  On February 25, 2009, the
      Company received a $30,000 non-interest bearing advance from John Frugone,
      which is due on demand. In repayment, the Company will repay the full
      amount of the note in cash over two years from the date the note is
      executed.   On July 30, 2009, the Company repaid $75,000 to John
      Frugone as a partial payment on the outstanding balance. On November 6,
      2009, the Company received a $100,000 non-interest bearing advance from
      John Frugone. The Company will repay the loan amount in cash over two
      years from the date the note is executed.  This leaves a balance
      of $155,000 unpaid principal as of December 31, 2009. John Frugone is a
      relative of Peter Frugone, the Company’s CEO and also a Company
      Director.
 
 (8)
              On
      October 30, 2008, the Company received a $2,500 non-interest bearing
      advance from Money Info, LLC.  On December 23, 2008, the Company
      received $2,500 non-interest bearing advance from Money Info,
      LLC.  On January 21, 2009, the Company repaid the full amount of
      both notes in cash.  On January 15, 2009, the Company received a
      $5,000 non-interest bearing advance from Money Info, LLC.  In
      repayment, the Company will repay the full amount of the note in cash
      within 60 calendar days from the date the note is executed. As of December
      31, 2009, the note was written off.(9)
              On
      October 13, 2008, the Company received a $50,000 interest bearing advance
      from Scott Neff, the Company was to repay the full amount of the note in
      cash within 60 calendar days from the date the note is executed plus
      interest expense paid in the form of 1,000,000 shares of Company common
      stock.  During the period ended December 31, 2008, the Company
      recorded $60,000 in debt issue costs related to the 1,000,000 shares of
      common stock that are issuable to Scott Neff as of December 31, 2008. On
      August 12, 2009, the Company and Scott Neff entered into a six month
      extension for the Senior Note and Purchase Agreement for the principal sum
      of $50,000. The principal amount was payable on February 5, 2010. The note
      is currently in default.
  (10)
              On
      June 29, 2009, the Company received a $100,000 interest bearing advance
      from Cliff Miller. In repayment, the Company will repay the full amount of
      the note in cash not later than July 29, 2009. During the period ended
      September 30, 2009, the Company recorded $70,000 in debt issue costs
      related to the 1,000,000 shares of restricted common stock that are
      issuable to Cliff Miller for interest expense as of July 29,
      2009.  On July 30, 2009, the Company received a $100,000
      interest bearing advance from Cliff Miller. In repayment, the Company will
      repay the full amount of the note in cash not later than August 30, 2009.
      During the period ended September 30, 2009, the Company recorded $60,000
      in debt issue costs related to the 1,000,000 shares of restricted common
      stock that are issuable to Cliff Miller for interest expense as of August
      30, 2009.  On August 11, 2009, the Company received a $250,000
      interest bearing advance from Cliff Miller. In repayment, the Company will
      repay the full amount of the note in cash not later than October 11, 2009.
      The Company shall pay interest in the form of 10,000,000 shares of the
      Company’s restricted stock and a $100,000 cash payment due at maturity.
      During the year ended December 31, 2009, the Company recorded accrued
      interest of $100,000 and debt issue costs of $400,000 for interest
      expense.  On November 11, 2009, the Company entered into a
      thirty day loan extension agreement with Cliff Miller for the $100,000
      loan on June 29, 2009, the $100,000 loan on July 30, 2009 and the $250,000
      loan on August 11, 2009. In consideration of the extending the term of the
      loan, the Company will issue 2,000,000 shares of the Company’s common
      stock on January 4, 2010.  During the year ended December 31,
      2009, the Company recorded debt issue costs of $60,000 related to the
      2,000,000 shares for interest expense.  The total unpaid
      principal balance of $450,000 is in default.  As of December 31,
      2009, the Company accrued a $476,000 default penalty in interest
      expense.
  (11)
              On
      December 14, 2005 Empire entered into a non interest bearing note
      agreement with Butler Ventures for $250,000. The cash from this note was
      invested in the Company. On June 17, 2009, the Company assumed the non
      interest bearing note from Empire for $250,000 to Butler Ventures. In
      repayment, the Company will repay the full amount of the note not later
      than July 29, 2009. On July 14, 2009, the Company issued 9,690,909 shares
      of common stock to Butler Ventures, LLC with a market value on the date of
      issuance of $533,000 in full settlement of the
  $250,000.
  F-15
  ARROW
      RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 
 (A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE 5 -
NOTES PAYABLE (CONTINUED)
  (12)
              On
      June 2, 2009, the Company received a $25,000 10% interest bearing advance
      from John E. McConnaughy Jr. In repayment, the Company will repay the full
      amount of the note and accrued interest in cash by September 1, 2009. On
      November 5, 2009, the Company entered into a thirty day loan extension
      agreement with John E. McConnaughy Jr. for this $25,000 loan. The
      principal amount and interest was  payable on December 5, 2009
      and the loan is currently in
default.
  (13)
              On
      July 20, 2009, the Company received a $100,000 interest bearing advance
      from Greg and Lori Popke. In repayment, the Company will repay the full
      amount of the note in cash not later than September 19, 2009. During the
      period ended September 30, 2009, the Company recorded $60,000 in debt
      issue costs related to the 1,000,000 shares of restricted common stock
      that are issuable to Greg and Lori Popke for interest expense as of
      September 19, 2009. On November 12, 2009, the Company entered into a
      thirty day loan extension agreement with Greg Popkes to extend this
      $100,000 loan. The principal amount was  payable on December 11,
      2009 and the loan is currently in default.  As of December 31,
      2009, the Company accrued a $102,000 default penalty in interest
      expense.
 
 NOTE 6 -
IMPAIRMENT OF MARKETING AND DISTRIBUTION AGREEMENT AND RELATED SENIOR NOTE
PAYABLE DUE TO EMPIRE ADVISORY, LLC
  As
discussed in Note 1, in August 2005, the Company executed a marketing and
distribution agreement with Arrow Pte. This agreement was valued at fair value
as determined based on an independent appraisal, which approximates the market
value of 96% of the CNE public stock issued in settlement of the
note.
  The
marketing and distribution agreement would have been amortized over the
remainder of 99 years (the life of the agreement) once the Company commenced
sales. As of December 31, 2005, the Company had recorded a $125,000,000
amortizable intangible asset for this agreement and corresponding credits to
common stock and additional paid-in capital in conjunction with the stock
settlement of the senior secured note payable to Empire Advisory, LLC and
related cash advances in the same aggregate amount. The senior secured note
payable was non-interest bearing and was repaid in the form of the preferred
stock, which was subsequently converted to common stock (See Note 3). Any
preferred stock issued under the senior secured note payable is considered
restricted as to the sale thereof under SEC Rule 144 as unregistered
securities.
  NOTE 6 -
IMPAIRMENT OF MARKETING AND DISTRIBUTION AGREEMENT AND RELATED SENIOR NOTE
PAYABLE DUE TO EMPIRE ADVISORY, LLC (CONTINUED)
 
 The
Company’s only intangible asset was comprised of this marketing and distribution
agreement with Arrow Pte. In accordance with SFAS 142, “Goodwill and Other
Intangible Assets” this intangible agreement is no longer amortized; instead the
intangible is tested for impairment on an annual basis. The Company assesses the
impairment of identifiable intangibles and goodwill whenever events or changes
in circumstances indicate that the carrying value may not be recoverable.
Factors the Company considers to be important which could trigger an impairment
review include the following:
 
 ·
              Significant
      inability to achieve expected projected future operating
      results;
 
 
 ·
              Significant
      changes in the manner in which the work is able to be performed what
      increases costs;
 
 
 ·
              Significant
      negative impact on the environment.
 
 We
perform goodwill impairment tests on an annual basis and on an interim basis if
an event or circumstance indicates that it is more likely than not that
impairment has occurred. We assess the impairment of other amortizable
intangible assets and long-lived assets whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Factors
we consider important that could trigger an impairment review include
significant underperformance to historical or projected operating results,
substantial changes in our business strategy and significant negative industry
or economic trends.
 
 The World
Bank and World Wildlife Federation have adopted forest management guidelines to
ensure economic, social and environmental benefits from timber and non-timber
products and the environmental services provided by forests. Most countries,
including Indonesia as of 2007, have adopted these guidelines as law in order to
promote economical development while combating the ongoing crisis of worldwide
deforestation.
  It has
always been the policy of Arrow Pte to follow the international guidelines for
the harvesting of timber in virgin forests. In December 2007, Arrow Pte.
assessed that it would be unable to harvest the timber products in Papua, New
Guinea due to the fact that the widely accepted international guidelines of the
World Wildlife Federation had not been adopted by Papua, New Guinea. This fact
is adverse to the economic, social and environmental goals of Arrow Pte. because
with the amount of land that the project was allotted combined with the agreed
upon previous guidelines of the marketing and distribution agreement, yields
would be significantly reduced. Given the significant change in the economics of
the harvesting of the timber in Papua, New Guinea, Arrow Pte. has decided not to
pursue any further operations in Papua, New Guinea given that the above
restrictions cause a significant reduction in the volume of harvesting, which
results in a disproportionate cost to yield ration at the Papua, New Guinea site
which makes the project not economically feasible in the foreseeable
future.
 
 Based on
the fact that Arrow Pte. is unable to fulfill their part of the agreement, the
Company has reached the conclusion that the marketing and distribution agreement
has no value. Therefore, the Company has fully impaired the value of the
agreement and recorded a loss on write-off of the marketing and distribution
agreement of $125,000,000 at December 31, 2007.
 
 F-16
  ARROW
      RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 
 (A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
 
 NOTE
      7 - RELATED PARTY TRANSACTIONS
  [1] Management Agreement with
Empire Advisory, LLC
  Effective
August 1, 2005, the Company entered into a Management Agreement with Empire
Advisory, LLC (“Empire”) under which Empire provides chief executive officer and
administrative services to the Company in exchange for a) an annual fee of
$300,000 for overhead expenses, b) $25,000 per month for rent, c) $1,000,000 per
annum (subject to increases in subsequent years) for executive services, and d)
a one-time fee of $150,000 for execution of the proposed transaction. In
addition, the Board authorized a one-time payment of $500,000 to Empire upon
closing the transaction.
 
 As of
December 31, 2009 and December 31, 2008, the Company had short-term borrowings
of $5,472,111 and $3,933,679, respectively, due to Empire, consisting of cash
advances to the Company and working capital raised by Empire, as agent, on
behalf of the Company.  These amounts are non-interest bearing and due on
demand.
  Peter
Frugone is a member of the Board of Directors of the Company and is the owner of
Empire. Empire, as agent, was the holder of the $125 million senior secured note
payable settled in December 2005.
  Consulting
fees and services charged in the Statement of Operations for the years ended
December 31, 2009 and 2008 incurred to Empire totaled $2,661,526 and $2,223,711,
respectively. Consulting fees and services charged to the Statement of
Operations for the year ended December 31, 2009, December 31, 2008 and for the
period from inception November 15, 2005 to December 31, 2009 incurred to Empire
totaled $4,296,832, $4,229,796 and $16,481,694, respectively.
  During
the year ended December 31, 2009, the Company also incurred Director’s
compensation expense of $58,750 to Mr. Frugone, consisting of cash compensation
of $50,000 and stock based compensation of $8,750 based upon the Company’s share
trading price on the date of the grant.  During the year ended
December 31, 2008, the Company also incurred Director’s compensation expense of
$69,375 to Mr. Frugone, consisting of cash compensation of $50,000 and stock
based compensation of $19,375 based upon the Company’s share trading price on
the date of the grant of December 3, 2008. At December 31, 2009 the Company is
obligated to issue 750,000 Common Stock shares to him, and “Accounts payable and
accrued liabilities” includes $150,000 due to him for the cash based portion of
his 2009, 2008 and 2007 director’s compensation (See Note 7[4]).
 
 During
the years ended December 31, 2009 and 2008, the Company made cash payments of
$992,570 and $1,187,707, respectively, to Empire under the
agreement.
  [2] Engagement and Consulting
Agreements entered into with individuals affiliated with Arrow PNG:
  Consulting
fees and services charged in the Statement of Operations for the year ended
December 31, 2009 and December 31, 2008 incurred to Hans Karundeng and Rudolph
Karundeng under Engagement and Consulting Agreements totaled $1,500,000 and
$1,500,000, respectively. In addition, as of December 31, 2009 and 2008 the
Company owed them a total of $6,146,791 and $4,819,491, respectively. These
agreements are discussed in detail in Note 11.
 
 During
the year ended December 31, 2009, the Company also incurred Director’s
compensation expense $58,750 to Rudolph Karundeng, consisting of cash
compensation of $8,750 and stock based compensation of $50,000 based upon the
Company’s share trading price on the date of the grant. During the year ended
December 31, 2008, the Company also incurred Director’s compensation expense of
$69,375 to Rudolph Karundeng, consisting of cash compensation of $19,375 and
stock based compensation of $50,000 based upon the Company’s share trading price
on the date of the grant of December 31, 2008. At December 31, 2009 the Company
is obligated to issue 750,000 Common Stock shares to him, and “Accounts payable
and accrued liabilities” includes $150,000 due to him for the cash based portion
of his 2009, 2008 and 2007 director’s compensation (See Note 7[4]).
 
 F-17
  ARROW
      RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 
 (A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE
      7 - RELATED PARTY TRANSACTIONS
(CONTINUED)
 
 [3] Non-Interest Bearing
Advance Received from Company Director:
  In July
2006, the Company received a $150,000 non-interest bearing advance from John E.
McConnaughy, Jr., a Director of the Company, which is due on demand. This note
was repaid in October 2006.  Also, in October 2006, the Company
received an additional $200,000 non-interest bearing advance from Mr.
McConnaughy, Jr. which is also due on demand.  Of this amount, $25,000
was repaid in March 2007 and $88,000 in April and May 2008, leaving a balance
due of $87,000 on this note.  In February and March 2007, the Company
received an additional $200,000 non-interest bearing advance from John E.
McConnaughy, Jr., which is due on demand. In May and June 2007, the Company
received an additional $250,000 non-interest bearing advance from John E.
McConnaughy, Jr., which is due on demand. In July 2007, the Company received
$250,000 of additional non-interest bearing advances from John E. McConnaughy,
Jr., which is due on demand. In August 2007, the Company received a $50,000
non-interest bearing advance from John E.McConnaughy, Jr., which is due on
demand. In October 2007 the Company received a $200,000 non-interest bearing
advance from John E. McConnaughy, Jr., which is due on demand. In December 2007
the Company received a $250,000 non-interest bearing advance from John E.
McConnaughy, Jr., which is due on demand. In March 2008, the Company received an
additional $110,000 non-interest bearing advance from John E. McConnaughy, Jr.
In May and June 2008, the Company received $75,000 non-interest bearing advance
from John E. McConnaughy, Jr, which is due on demand. In July 2008, the Company
received $90,000 non-interest bearing advance from John E. McConnaughy, Jr,
which is due on demand.
  In August
2008, the Company received $240,000 non-interest bearing advance from John E.
McConnaughy, Jr, which is due on demand. In September 2008, the Company received
$90,000 non-interest bearing advance from John E. McConnaughy, Jr, which is due
on demand. In October 2008, the Company received $50,000 non-interest bearing
advance from John E. McConnaughy, Jr, which is due on demand. In November 2008,
the Company received $10,000 non-interest bearing advance from John E.
McConnaughy, Jr, which is due on demand. In December 2008, the Company received
$5,000 non-interest bearing advance from John E. McConnaughy, Jr, which is due
on demand. On January 15, 2009, the Company received a $5,000 non-interest
bearing advance from John E. McConnaughy Jr. In repayment, the Company will
repay the full amount of the note in cash over two years from the date the note
is executed. On January 27, 2009, the Company repaid $5,000 to John E.
McConnaughy, Jr against the outstanding balance owed to him.  On
September 28, 2009, John E. McConnaughy, Jr. converted $9,000 of non-interest
bearing advance owed to him by the Company into 180,000 shares of restricted,
unregistered common stock at $0.05 per share into the name of Roberta Konrad. On
September 28, 2009, John E. McConnaughy, Jr. converted $30,000 of non-interest
bearing advance owed to him by the Company into 600,000 shares of restricted,
unregistered common stock at $0.05 per share into the name of Jacqueline
Rowen.  As of December 31, 2009, John E. McConnaughy III assigned a
$12,000 advance to John McConnaughy, Jr.  As of December 31, 2009 and
December 31, 2008, the Company had $1,955,000 and $1,957,000, respectively, left
to be repaid to Mr. McConnaughy, which is included in “Due to Related
Parties.”
 
 On June
2, 2009, the Company received a $25,000 10% interest bearing advance from John
E. McConnaughy Jr. In repayment, the Company will repay the full amount of the
note and accrued interest in cash by September 1, 2009. As of December 31, 2009,
the outstanding principal and accrued interest of $2,500 has been included in
“Notes Payable”. On November 5, 2009, the Company entered into a thirty day loan
extension agreement with John E. McConnaughy Jr. for this $25,000 loan. The
principal amount and interest was payable on December 5, 2009. This note is
currently in default.
 
 During
the year ended December 31, 2009, the Company also incurred Director’s
compensation expense $58,750 to Mr. McConnaughy, consisting of cash compensation
of $50,000 and stock based compensation of $8,750 based upon the Company’s share
trading price on the date of the grant. During the year ended December 31, 2008,
the Company also incurred Director’s compensation expense $69,375 to Mr.
McConnaughy, consisting of cash compensation of $50,000 and stock based
compensation of $19,375 based upon the Company’s share trading price on the date
of the grant of December 31, 2008. At December 31, 2009 the Company is obligated
to issue 750,000 Common Stock shares to him, and “Accounts payable and accrued
liabilities” includes $150,000 due to him for the cash based portion of his
2009, 2008 and 2007 director’s compensation (See Note 7[4]).
 
 [4] Directors’
Compensation:
 
 On
December 3, 2007, the Board of Directors approved a plan to compensate all
members of the Board of Directors at a rate of $50,000 per year and 250,000
shares of Company common stock effective January 1, 2007. This compensation plan
applies to any board member that belonged to the Board as of and subsequent to
January 1, 2007. Those board members that were only on the Board for part of the
year will received pro-rata compensation based on length of service. As of
December 31, 2009 and December 31, 2008, none of the shares under this plan have
been issued and the Company has an accrued liability of $600,137 and $400,137,
respectively,  of cash-based compensation and recorded additional
paid-in capital through those dates of $172,541 and $137,541,respectively, for
stock-based compensation based on the fair value of 3,000,685 and 2,000,685
shares to be issued to the members of the Board, respectively.
  F-18
  ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES
  (A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE
      8 – STOCKHOLDER’S EQUITY
  Arrow
Ltd. was incorporated in May 2005 as a Bermuda corporation. Upon incorporation,
1,200,000 shares of $.01 par value common stock were authorized and issued to
CNE.
 
 On
November 14, 2005, the Company increased its authorized shares to 1 billion and
reduced the par value of its common stock to $0.00001 per share, resulting in a
common stock conversion rate of 1 to 62.4.
  On
November 14, 2005, the Company completed a reverse merger with CNE Group, Inc.
by acquiring 96% of the outstanding shares of CNE’s common stock in the form of
convertible preferred stock issued in settlement of the senior note
payable.
  During
2005, CNE divested or discontinued all of its subsidiaries in preparation for
the reverse merger transaction. Accordingly, the results of operations for the
divested or discontinued subsidiaries are not included in the consolidated
results presented herein. In conjunction with the divestitures, CNE repurchased
and retired all preferred stock and made certain payments to related
parties.
  In
conjunction with the reverse merger transaction, the Company retired 1,238,656
shares of Treasury Stock.
  On August
2, 2006, the Company entered into a stock purchase agreement with APR wherein
APR agreed to purchase up to an aggregate amount of 15,000,000 shares of common
stock in the Company for $1.00 per share, making this a capital contribution of
$15,000,000 in total. The stock will be delivered at the time the Company files
for registration. During the third and fourth quarters of 2006, the Company
received a total of $985,000 in capital contribution towards the stock purchase
agreement with APR to purchase up to an aggregate amount of 15,000,000 shares of
common stock in the Company for $1.00 per share. During the year ended December
31, 2007, the Company received an additional $500,000 in capital contribution
towards the stock purchase agreement with APR to purchase up to an aggregate
amount of 15,000,000 shares of common stock in the Company for $1.00 per share.
(See Note 10 [5] - Stock Purchase Agreement.)
  On
November 20, 2007, the Board of Directors approved a private placement offering
(the "Offering") approximating $2,000,000 to accredited investors at $1.00 per
share of Series A Convertible Preferred Stock. The Offering will consist of the
Company's Series A Convertible Preferred Stock that will be convertible into our
common stock. These securities are not required to be and will not be registered
under the Securities Act of 1933. Shares issued under this placement will not be
sold in the United States, absent registration or an applicable exemption from
registration. As of December 31, 2009, the Company had received $355,000 from
investors towards 355,000 Series A Convertible Preferred Stock shares issuable
under subscription agreements covering the placement offering. Each Series A
Convertible Preferred Stock is convertible into 20 shares of the Company’s
Common Stock. The holders of the preferred stock have no voting rights except as
may be required by Delaware law, no redemption rights, and no liquidation
preferences over the Common Stock holders.  On November 3, 2009, the
355,000 Series A Convertible Preferred Stock were converted into 7,100,000
Common shares.  As of December 31, 2009, there were no Series A
Convertible Preferred Stock outstanding.
 
 On
December 3, 2007, the Board of Directors approved a plan to compensate all
members of the Board of Directors at a rate of $50,000 per year and 250,000
shares of Company common stock effective January 1, 2007. This compensation plan
applies to any board member that belonged to the Board as of and subsequent to
January 1, 2007. Those board members that were only on the Board for part of the
year will received pro-rata compensation based on length of service. As of
December 31, 2009 and December 31, 2008, none of the shares under this plan had
been issued and the Company has accrued $600,137 and $400,137 of cash-based
compensation and recorded additional paid-in capital of $172,541 and $137,541
for stock compensation based on the fair value of 3,000,685 shares and 2,000,685
to be issued to the members of the Board.
 
 On
February 1, 2008, the Company entered into Independent Contractor Agreement with
Charles A. Moskowitz of MoneyInfo. Inc. to provide consulting services to the
Company in the lumber market development, ethanol market development, and
compilation of market prices associated with lumber and ethanol and development
of a database for the ongoing analysis of these markets. The term of this
agreement was February 1, 2008 through July 31, 2008. As payment for the
Consultant’s services, the Company will issue 2,600,000 shares of common stock
to Charles A. Moskowitz. During the year ended December 31, 2008, the Company
recorded consulting fees and services of $208,000 related to the 2,600,000
shares of common stock that are now issuable to Charles A. Moskowitz. As of
December 31, 2009, none of these shares have been issued to Charles A.
Moskowitz.
 
 F-19
  ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES
  (A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE
      8 - STOCKHOLDER’S EQUITY
(CONTINUED)
  On March
13, 2008, the Company and Micro-Cap Review, Inc. (“Micro-Cap”) executed an
Advertising Agreement wherein the Company will pay Micro-Cap Review, Inc.
1,000,000 of restricted common shares to display advertisements and advertorial
in the Micro-cap Review magazine and on http://www.microcapreview.com website on
a rotating basis. The services began on March 13, 2008 and expired on June 30,
2008.  On April 29, 2008, the Company issued 1,000,000 shares of
unregistered restricted common stock to Micro-Cap Review, Inc.  The
Company recorded a marketing expense of $70,000 in consulting fees and services
related to the issuance of the 1,000,000 shares of common stock as of December
31, 2008.
 
 On March
15, 2008, the Company and Seapotter Corporation (“Seapotter”) executed a
Consulting Agreement wherein Seapotter would provide information technology
support from March 15, 2008 to July 15, 2008 in exchange for $9,000 per month
and 250,000 shares of common stock.  On April 29, 2008, the Company
issued 250,000 shares of unregistered restricted common stock to Charles Potter
per the Consulting Agreement entered into by the Company on March 15,
2008.  The Company recorded consulting fees and services of $17,500
related to the 250,000 shares of common stock that were issued to Seapotter on
April 29, 2008.
 
 On April
30, 2008, the Company entered into Independent Contractor Agreement with Ciolli
Management Consulting, Inc. to provide advisory services in the land
development, construction management, equipment acquisition and project
management industries. As payment for the Consultant’s services, the Company
will issue a one-time, non-refundable fee of 1,000,000 unrestricted shares of
common stock.  As of December 31, 2008, the Company has expensed
$60,000 for  the 1,000,000 shares of common stock that were issued to
Ciolli Management Consulting, Inc. as of December 31, 2008.
 
 On April
30, 2008, the Company received a $500,000 non-interest bearing advance from
Frank Ciolli. In repayment, the Company promises to pay Frank Ciolli the
principal sum of $550,000 on or before October 31, 2008 On January 15, 2009, the
Company entered into the thirty-one day extension December 31, 2008 for the
Convertible Loan Agreement and Convertible Note with Frank Ciolli for the loan
amount of $550,000 dated as of April 30, 2008. The Company issued 500,000 shares
of restricted, unregistered common stock each for Michael Alferi and Frank
Ciolli, which resulted in Company debt issue costs of $80,000 as of June 30,
2009. ).  On August 12, 2009, the Company and Frank Ciolli entered into a
six month extension for the Senior Note and Purchase Agreement for the principal
sum of $550,000. The principal amount was payable on February 12,
2010.  The note is currently in default.
 On
March 31, 2008, the Company received a $150,000 non-interest bearing advance
from John Marozzi, which is due on demand. As payment for his services, the
Company will repay the full amount of the note plus 1,000,000 shares of
unregistered restricted common stock. The Company recorded $40,000 of debt issue
costs related to the 1,000,000 shares of common stock that are now issuable John
Marozzi as of March 31, 2008 (See Note 5). On May 5, 2008, John Marozzi received
repayment of $50,000 from the Company. On October 13, 2008, the Company received
a $50,000 interest bearing advance from John Marozzi.  The Company was
to  repay the full amount of the note in cash within 60 calendar days
from the date the note is executed plus interest expense paid in the form of
1,000,000 shares of unregistered Company common stock.  The Company
recorded $60,000 of debt issue costs related to the 1,000,000 shares of common
stock that were issuable John Marozzi as of December 31, 2008 (See Note
5).  On March 5, 2009, the Company received another $50,000 interest
bearing advance from John Marozzi.  The Company is to repay the full
amount of the March 5, 2009 $50,000 note in cash within 60 calendar days from
the date the note was executed plus interest paid in the form of 1,000,000
shares of unregistered Company common stock.  The Company recorded
$70,000 of debt issue costs related to the 1,000,000 shares of common stock that
are now issuable John Marozzi as of June 30, 2009 (See Note 5).  On
August 12, 2009, the Company and John Marozzi entered into a six month extension
for the Senior Note and Purchase Agreement for the amount of $200,000. The
principal amount is now payable on February 5, 2010. On April 17, 2009, the
Company received a $12,500 non-interest bearing advance from John
Marozzi. The Company is to repay the full amount of the April 17, 2009 $
12,500 note in cash within 60 calendar days from the date the note was executed.
On May 8, 2009, the Company received a $ 20,000 non- interest bearing advance
from John Marozzi. The Company is to repay the full amount of the May 8, 2009
$20,000 note in cash within 30 calendar days from the date the note was
executed.  On August 13, 2009, the Company and John Marozzi entered
into a six month extension for the Senior Note and Purchase Agreement for the
amount of $32,500. The principal amount is now payable on February 5,
2010.  On August 7, 2009, the Company received a $33,000 non-interest
bearing advance from John Marozzi. In repayment, the Company will repay the full
amount of the note in cash within 60 calendar days from the date the note is
executed. On November 5, 2009, the Company entered into a thirty day loan
extension agreement with John Marozzi for $33,000 loan to the Company. The
principal amount and interest was payable on December 5, 2009. This leaves a
total unpaid principal balance of $265,500 as of December 31, 2009 and currently
this note is in default.
  On April
8, 2008, the Company received a $50,000 non-interest bearing advance from Barry
Weintraub, which was due on demand. In repayment, the Company repaid the full
amount of the note on April 30, 2008 and is obligated to issue 2,000,000 shares
of the Company’s unregistered restricted common stock to Barry
Weintraub.  The Company recorded $120,000 in debt issue costs related
to the 2,000,000 shares of common stock that were issuable to Barry Weintraub as
of December 31, 2008 (See Note 5).
  F-20
  ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES
  (A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE
      8 - STOCKHOLDER’S EQUITY
(CONTINUED)
 
 On April
24, 2008, the Company received a $38,000 non-interest bearing advance from
Christopher T. Joffe, which is due on demand. In repayment, the Company will
repay the full amount of the note plus 304,000 shares of the Company’s
unregistered restricted common stock. The Company recorded $24,320 in debt issue
costs related to the 304,000 shares of common stock that are issuable to
Christopher T. Joffe as of December 31, 2008 (See Note 5).
 
 On April
24, 2008, the Company received another $38,000 non-interest bearing advance from
James R. McConnaughy, which is due on demand. In repayment, the Company will
repay the full amount of the note plus 304,000 shares of the Company’s
unregistered restricted common stock.  The Company recorded $24,320 in
debt issue costs related to the 304,000 shares of common stock that are issuable
to James R. McConnaughy as of December 31, 2008 (See Note 5).
 
 On April
25, 2008, the Company received a $12,000 non-interest bearing advance from John
E. McConnaughy, III, which is due on demand. In repayment, the Company will
repay the full amount of the note plus 96,000 shares of unregistered restricted
common stock.  The Company recorded $7,680 in debt issue costs related
to the 96,000 shares of common stock that are issuable to John E. McConnaughy,
III as of December 31, 2008 (See Note 5).  As of December 31, 2009,
John E. McConnaughy III assigned a $12,000 advance to John McConnaughy,
Jr.
 
 On May
15, 2008, the Board of Directors approved a private placement offering (the
"Offering") approximating $2,000,000 to accredited investors at $1.00 per share
of Series C Convertible Preferred Stock. The Offering will consist of the
Company's Series C Convertible Preferred Stock that will be convertible into our
common stock. These securities are not required to be and will not be registered
under the Securities Act of 1933. Shares issued under this placement will not be
sold in the United States, absent registration or an applicable exemption from
registration.  As of September 30, 2009, the Company received $25,000
from investors towards the fulfillment of the financing agreement.  On
November 3, 2009, the 25,000 Series C Convertible Preferred Stock were converted
into 500,000 Common shares.  As of December 31, 2009, there were no
Series C Convertible Preferred Stock outstanding.
 
 Also on
May 15, 2008, the Board of Directors approved the issuance of 50,000 shares of
unregistered restricted common stock to Sheerin Alli and 50,000 shares of
unregistered restricted common stock to Lori McGrath for consulting services
provided.  As of September 30, 2008, the Company has not yet issued
these shares.  The Company recorded $6,500 and $6,500, respectively,
in consulting fees related to the 100,000 shares of common stock that are
issuable to Sheerin Alli and Lori McGrath as of September 30, 2008.
 
 On June
24, 2008, Arrow Resources Development, Inc. entered into a Subscription
Agreement with Timothy J. LoBello (“Purchaser”) in which the Purchaser
subscribed for and agreed to purchase 1,000,000 shares of the Company’s common
stock on June 13, 2008 for the purchase price of $50,000 ($0.05 per
share).  As of December 31, 2009, the Company has not yet issued these
shares to the Purchaser.  On the date of the purchase, the fair value
of these shares was $140,000.  As of December 31, 2008, the Company
recorded 49,990 to Additional Paid-in Capital to be issued related to this
transaction.
 
 On
October 13, 2008, the Company received a $50,000 interest bearing advance from
Scott Neff. The Company was to repay the full amount of the note in cash within
60 calendar days from the date the note is executed plus interest expense paid
in the form of 1,000,000 shares of unregistered Company common
stock.  The Company recorded $60,000 in costs related to the 1,000,000
shares of common stock that are issuable to Scott Neff as of December 31,
2008.  On August 12, 2009, the Company and Scott Neff entered into a
six month extension for the Senior Note and Purchase Agreement for the principal
sum of $50,000. The principal amount was he note is currently in
default.
 
 On
October 29, 2008, the Company entered into a Subscription Agreement with James
Fuchs by which he purchased 250,000 shares of common stock in the amount of
$0.10 per share for total of $25,000. On November 24, 2008, the Company issued
250,000 shares of restricted, unregistered common stock to James
Fuchs.
  F-21
  ARROW
      RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES(A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE
      8 - STOCKHOLDER’S EQUITY
(CONTINUED)
 
 On
October 31, 2008, the Company entered into a 60 day loan extension with Frank
Ciolli related to the $550,000 in principal loan incurred by the Company on
April 30, 2008.  The Company issued 1,000,000 shares of the Company’s
unregistered restricted common stock to Frank Ciolli and 1,000,000 shares of the
Company’s unregistered restricted common stock to Donna Alferi on behalf of
Michael Alferi as Frank Ciolli’s designee.  The Company recorded
$200,000 in debt issue costs related to the 1,000,000 and 1,000,000,
respectively, of shares of common stock that were issued to Frank Ciolli and
Donna Alferi as of December 31, 2008 (See Note 5).  On August 12,
2009, the Company and Frank Ciolli entered into a six month extension for the
Senior Note and Purchase Agreement for the principal sum of $550,000. The
principal amount was payable on February 12, 2010.  The note is
currently in default.
 
 On
November 14, 2008, the Company entered into a Subscription Agreement with Peter
Benolie Lane, Jacques Benolie Lane, and Christopher Benoliel Lane for the
purchase of 250,000 shares of common stock in the amount of $0.10 per share for
total of $25,000.
 
 On
December 11, 2008, the Company received $55,000 from Han Karundeng and Arrow
Pacific Resources Group Limited for the purchase of 55,000 shares of common
stock at $1.00 per share pursuant to the Stock Purchase Agreement that was
executed on August 2, 2006.
 
 On
January 15, 2009, the Company entered into a stock purchase agreement with APR
wherein APR agreed to purchase up to an aggregate amount of 15,000,000 shares of
common stock in the Company for $.10 per share.  On January 15, 2009,
the Company received $85,000 from Hans Karundeng and Arrow Pacific Resources
Group Limited for the purchase of 850,000 shares of common stock at $.10 per
share pursuant to the APR to purchase up to an aggregate amount of 15,000,000
shares of common stock in the Company for $.10 per share.  On January
20, 2009, the Company received $165,000 from Hans Karundeng and Arrow Pacific
Resources Group Limited for the purchase of 1,650,000 shares of common stock at
$.10 per share pursuant to the APR to purchase up to an aggregate amount of
15,000,000 shares of common stock in the Company for $.10 per
share.  (See Note 10 [5] - Stock Purchase Agreement.)
 
 On
December 14, 2005 Empire entered into a non interest bearing note agreement with
Butler Ventures for $250,000. The cash from this note was invested in the
Company. On June 17, 2009, the Company assumed the non interest bearing note
from Empire for $250,000 to Butler Ventures. In repayment, the Company will
repay the full amount of the note not later than July 29, 2009. On July 14,
2009, the Company issued 9,690,909 shares of common stock to Butler Ventures,
LLC with a market value on the date of issuance of $533,000 in full settlement
of the $250,000 note payable.
 
 On June
29, 2009, the Company received a $100,000 interest bearing advance from Cliff
Miller. In repayment, the Company will repay the full amount of the note in cash
not later than July 29, 2009. During the period ended September 30, 2009, the
Company recorded $70,000 in debt issue costs related to the 1,000,000 shares of
restricted common stock that are issuable to Cliff Miller for interest expense
as of July 29, 2009.  On July 30, 2009, the Company received a
$100,000 interest bearing advance from Cliff Miller. In repayment, the Company
will repay the full amount of the note in cash not later than August 30, 2009.
During the period ended September 30, 2009, the Company recorded $60,000 in debt
issue costs related to the 1,000,000 shares of restricted common stock that are
issuable to Cliff Miller for interest expense as of August 30,
2009.  On August 11, 2009, the Company received a $250,000 interest
bearing advance from Cliff Miller. In repayment, the Company will repay the full
amount of the note in cash not later than October 11, 2009. The Company shall
pay interest in the form of 10,000,000 shares of the Company’s restricted stock
and a $100,000 cash payment due at maturity. During the period ended September
30, 2009, the Company recorded accrued interest of $81,967 and debt issue costs
of $327,869 for interest expense.  On November 11, 2009, the Company
entered into a thirty day loan extension agreement with Cliff Miller for the
$100,000 loan on June 29, 2009, the $100,000 loan on July 30, 2009 and the
$250,000 loan on August 11, 2009. In consideration of the extending the term of
the loan, the Company will issue 2,000,000 shares of the Company’s common stock
on January 4, 2010.  During the year ended December 31, 2009, the
Company recorded debt issue costs of $60,000 related to the 2,000,000 shares for
interest expense.  The total unpaid principal balance of $450,000 was
payable on December 11, 2009.  The total unpaid principal balance of
$450,000 is in default.  As of December 31, 2009, the Company accrued
a $476,000 default penalty in interest expense.
 
 On July
20, 2009, the Company received a $100,000 interest bearing advance from Greg and
Lori Popke. In repayment, the Company will repay the full amount of the note in
cash not later than September 19, 2009. During the period ended September 30,
2009, the Company recorded $60,000 in debt issue costs related to the 1,000,000
shares of restricted common stock that are issuable to Greg and Lori Popke for
interest expense as of September 19, 2009. On November 12, 2009, the Company
entered into a thirty day loan extension agreement with Greg Popkes to extend
this $100,000 loan.  The principal amount was payable on December 11,
2009 and the loan is currently in default.  As of December 31, 2009,
the Company accrued a $102,000 default penalty in interest expense.
 
 On
September 28, 2009, John E. McConnaughy, Jr. converted $9,000 of non-interest
bearing advance owed to him by the Company into 180,000 shares of restricted,
unregistered common stock at $0.05 per share into the name of Roberta Konrad. On
September 28, 2009, John E. McConnaughy, Jr. converted $30,000 of non-interest
bearing advance owed to him by the Company into 600,000 shares of restricted,
unregistered common stock at $0.05 per share into the name of Jacqueline
Rowen.
  F-22
 ARROW
      RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES(A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE
      8 - STOCKHOLDER’S EQUITY
(CONTINUED)
 On
November 3, 2009, Hans Karundeng converted $100,000 of non-interest bearing
advance owed to him by the Company into 2,000,000 shares of common
stock.
 
 On
November 3, 2009, Empire converted $100,000 of non-interest bearing advance owed
to them by the Company into 2,000,000 shares of common stock.
  Reset of 2005 Subscription
Agreement
 
 On
February 5, 2009 the Company agreed to issue 1,248,094 shares of common stock to
certain investors as settlement for the reset of their August 3, 2005
subscription agreements.  As of December 31, 2009, 138,095 shares had
been issued.
 
 NOTE 9 -
GAIN ON WRITE OFF OF PREDECESSOR ENTITY LIABILITIES
  During
the fourth quarter of 2006, the Company wrote off accounts payable and accrued
expenses in the amount of $395,667 associated with CNE, the predecessor entity
in the reverse merger transaction, which will not be paid. This resulted in the
recognition of a gain reflected in the Statement of Operations for the year
ended December 31, 2006 in the same amount.
 
 NOTE 10 -
COMMITMENTS AND OTHER MATTERS
  [1] Engagement and Consulting
Agreements entered into with individuals affiliated with APR
  Effective
May 20, 2005, the Company entered into an Engagement Agreement with Hans
Karundeng for business and financial consulting services for fees of $1,000,000
per annum. The term of the agreement is five years. Payments under the agreement
are subject to the Company’s cash flow.
 
 Effective
August 1, 2005, the Company entered into a Consulting Agreement with Rudolph
Karundeng for his services as Chairman of the Board of the Company for fees of
$1,000,000 per annum. The term of the agreement was five years. Rudolph
Karundeng is a son of Hans Karundeng. However, on May 1, 2006, the Company
accepted the resignation of Rudolph Karundeng as Chairman of the Board, but he
continues to be a director of the Company. Peter Frugone has been elected as
Chairman of the Board until his successor is duly qualified and elected.
Subsequent to his resignation, it was agreed that Rudolph Karundeng’s annual
salary is to be $500,000 as a director.
 
 During
the year ended December 31, 2009, the Company made cash payments to Hans
Karundeng of $122,700 under his agreement. During the year ended December 31,
2009, the Company made no cash payments to Rudolph Karundeng under his
agreement. During the year ended December 31, 2008, the Company made cash
payments to Hans Karundeng of $320,000 under his agreement. During the year
ended December 31, 2008, the Company made no cash payments to Rudolph Karundeng
under his agreement. During the year ended December 31, 2007, the Company
received additional advances of $100,000 from Hans Karundeng under his agreement
and made cash payments to him of $556,000. During the year ended December 31,
2007, the Company made cash payments of $7,000 to Rudolph Karundeng under his
agreement. During the year ended December 31, 2006, the Company received
additional advances of $61,787 from Hans Karundeng under his agreement. During
the year ended December 31, 2006, the Company made cash payments of $62,174 to
Rudolph Karundeng under his agreement. During the period from November 15, 2005
to December 31, 2007, the Company made cash payments to Hans Karundeng and
Rudolph Karundeng of $563,000 under the agreements.
  [2] Management Agreement with
Empire Advisory, LLC
  Effective
August 1, 2005, the Company entered into a Management Agreement with Empire
Advisory, LLC (“Empire”) under which Empire provides chief executive officer and
administrative services to the Company in exchange for a) an annual fee of
$300,000 for overhead expenses, b) $25,000 per month for reimbursable expenses,
c) $1,000,000 per annum (subject to increases in subsequent years) for executive
services, and d) a one-time fee of $150,000 for execution of the proposed
transaction.
  During
the year ended December 31, 2009, the Company made cash payment of $992,570 to
Empire under the agreement. During the year ended December 31, 2008, the Company
made cash payments of $1,319,216 to Empire under the agreement. During the year
ended December 31, 2007, the Company made cash payments of $1,140,529 to Empire
under the agreement. During the year ended December 31, 2006, the Company made
cash payments of $562,454 to Empire under the agreement. During the period from
November 15, 2005 to December 31, 2005, the Company made cash payments of
approximately $364,000 to Empire under this agreement.
  F-23
  ARROW
      RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES(A
      DEVELOPMENT STAGE COMPANY)
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
      10 - COMMITMENTS AND OTHER MATTERS
(CONTINUED)
  [3] Litigation- predecessor
entity stock holders
 
 The
Company was a party to a lawsuit where the plaintiff alleged that he was
entitled to $60,000 and 1,300,000 of common stock based upon CNE’s failure
to compensate him for services related to identifying financing for CNE,
based upon an agreement that was entered into between CNE and the plaintiff in
April 2005. On November 28, 2007, the Company settled the lawsuit with the
plaintiff. In full and final settlement of the claims asserted in the action,
the Company has paid the plaintiff $10,000 in cash and issued the plaintiff
200,000 shares of the Company’s common stock having a fair value of $12,000,
based on the public traded share price on December 21, 2007. The settlement
resulted in a loss on debt conversion of $2,000 during the year ended December
31, 2008 because an estimated liability had been recognized prior to
2007.
  In May
2006, the Company was advised that it was alleged to be in default of a
settlement agreement entered into in January of 2005 by CNE, its predecessor
company, related to the release of unrestricted, freely-tradable, non-legend
shares of stock. In August 2006, the plaintiffs, alleging the default, obtained
a judgment in the 17th Judicial Circuit Court Broward County, Florida for
approximately $1,000,000. On November 13, 2007, legal counsel engaged by
Management commenced an action on the Company’s behalf in the above Circuit
Court seeking to vacate and set aside the 2006 judgment asserting claims under
Rule 1.540(b) of the Florida Rules of Civil Procedure. Our counsel’s evaluation
was that the Company had only a limited chance of having the 2006 judgment
opened by the Court because Florida law provides very narrow grounds for opening
a judgment once a year has passed from its entry. The Courts are generally
reluctant to disturb final judgments and the Company’s grounds for opening the
judgment depend on the Court’s adopting a somewhat novel argument regarding such
matters. If, however, the Court does open the default judgment, the Company
would then have the opportunity to defend the 2006 action and, in such event,
our counsel believes that the Company has a reasonable chance of succeeding in
defending that claim, at least in part, based on the documents he has reviewed.
As of December 31, 2009, the Company had accrued $1,266,695, including accrued
interest of $213,310, related to this matter.
 
 On
December 14, 2005, Empire Advisory received a $250,000 non-interest bearing
advance from Butler Ventures, LLC. In repayment, the Company would repay the
full amount of the note in converted securities and U.S. dollars on the earlier
of March 31, 2006, without further notice or demand, or immediate payment in the
event of default. On December 8, 2008, Butler filed a motion for summary
judgment in lieu of complaint against Empire in the Supreme Court of the State
of New York for failing to repay the loan on the maturity date. On January 29,
2009, Empire Advisory, LLC and Butler Ventures, LLC entered into Settlement
Agreement and Mutual Release where the parties had agreed to resolve amicable
the amounts due and owing to Butler by issuing to Butler common stock in
Empire’s affiliated company, Arrow Resources Development, Inc. as well as by
payment of all attorneys’ fees and expenses accrued to date. Empire Advisor
shall cause the Company to issue to Butler shares of common stock in the
Company. Butler agreed to extend until on or prior to March 31, 2009 for
performance of all of Empire’s obligations. In consideration for this extension,
Empire Advisor agreed to cause the Company to issue to Butler an additional
100,000 shares of the Company common stock. On June 17, 2009, Empire Advisory
transferred the loan obligations to the Company, and the Company agreed to
assume the loan obligations. On July 14, 2009, the Company issued 9,690,909
shares of common stock to Butler Ventures, LLC with a market value on the date
of issuance of $533,000 in full settlement of the $250,000 note payable.
9,090,909 shares were issued in exchange for a senior note payable that has been
assumed by the Company and 600,000 shares were issued as consideration for
certain other obligations assumed by the Company.
 
 [4] Consulting/Marketing and
Agency Agreements
  On April
4, 2006, the Company entered into a consulting agreement with Dekornas GMPLH
(“Dekornas”) (a non profit organization in Indonesia responsible for replanting
of trees in areas that were destroyed by other logging companies) in which the
Company will provide financial consultancy services to Dekornas for an annual
fee of $1.00 for the duration of the agreement. The term of the agreement is
effective upon execution, shall remain in effect for ten (10) years and shall
not be terminated until the expiration of at least one (1) year. As of December
31, 2009, the Company has not recovered any revenue from this
agreement.
  In April
of 2006, Arrow Resources Development, Ltd. entered into an agency agreement with
APR to provides marketing and distribution services for timber resource products
and currently has an exclusive marketing and sales agreement with APR to market
lumber and related products from land leased by GMPLH which is operated by APR
and it's subsidiaries, located in Indonesia. Under the agreement Arrow Ltd. will
receive a commission of 10% of gross sales derived from lumber and related
products. As of December 31, 2009, the Company has recovered $52,000 of revenue
from this agreement.
 
 On April
14, 2006, the Company entered into a consulting agreement with P.T. Eucalyptus
in which the Company will provide financial consultancy services to P.T.
Eucalyptus for an annual fee, payable quarterly, equal to 10% of P.T.
Eucalyptus’ gross revenue payable commencing upon execution. The term of the
agreement is effective upon execution, shall remain in effect for ninety-nine
(99) years and shall not be terminated until the expiration of at least ten (10)
years. As of December 31, 2009, the Company has not recovered any revenue from
this agreement.
  F-24
  ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES
  (A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
 
 NOTE
      10 - COMMITMENTS AND OTHER MATTERS
(CONTINUED)
 
 On
February 1, 2008, the Company entered into Independent Contractor Agreement with
Charles A. Moskowitz of MoneyInfo. Inc. to provide consulting services to the
Company in the lumber market development, ethanol market development, and
compilation of market prices associated with lumber and ethanol and development
of a database for the ongoing analysis of these markets. The term of this
agreement is February 1, 2008 through July 31, 2008. As payment for the
Consultant’s services, the Company will issue 2,600,000 shares of common stock
to Charles A. Moskowitz. The Company recorded consulting fees and services of
$208,000 related to the 2,600,000 shares of common stock that are issuable to
Charles A. Moskowitz as of December 31, 2008. As of December 31, 2009, the
Company has not recovered any revenue from this agreement.
 
 On March
13, 2008, the Company and Micro-Cap Review, Inc. (“Micro-Cap”) executed an
Advertising Agreement wherein the Company will pay Micro-Cap Review, Inc.
1,000,000 of restricted common shares to display advertisements and advertorial
in the Micro-cap Review magazine and on http://www.microcapreview.com website on
a rotating basis. The services began on March 13, 2008 and expired on June 30,
2008.  On April 29, 2008, the Company issued 1,000,000 shares of
unregistered restricted common stock to Micro-Cap Review, Inc.  The
Company recorded a marketing expense of $70,000 in consulting fees and services
related to the issuance of the 1,000,000 shares of common stock as of December
31, 2008.
 
 On March
15, 2008, the Company and Seapotter Corporation (“Seapotter”) executed a
Consulting Agreement wherein Seapotter would provide information technology
support from March 15, 2008 to July 15, 2008 in exchange for $9,000 per month
and 250,000 shares of common stock.  On April 29, 2008, the Company
issued 250,000 shares of unregistered restricted common stock to Charles Potter
per the Consulting Agreement entered into by the Company on March 15,
2008.  The Company recorded consulting fees and services of $17,500
related to the 250,000 shares of common stock that were issued to Seapotter on
April 20, 2008.
 
 On April
30, 2008, the Company entered into Independent Contractor Agreement with Ciolli
Management Consulting, Inc. to provide advisory services in the land
development, construction management, equipment acquisition and project
management industries. As payment for the Consultant’s services, the Company
will issue a one-time, non-refundable fee of 1,000,000 unrestricted shares of
common stock.  As of December 31, 2008, the Company has expensed
$60,000 related to the 1,000,000 shares of common stock that are were issued to
Ciolli Management Consulting, Inc. on November 26, 2008.
 
 On
September 15, 2008, the Company entered into a Consulting Agreement with
Infrastructure Financial Services, Inc. to assist and advise the Company in
obtaining equity financing up to $5,000,000.  As payment for the
Consultant’s services, the Company will pay a cash transaction fee of 7% upon
closing of any equity financing the Consultants assist in
obtaining.
 
 [5] (a) Stock Purchase
Agreement
  On August
2, 2006, the Company entered into a stock purchase agreement with APR wherein
APR agreed to purchase up to an aggregate amount of 15,000,000 shares of common
stock in the Company for $1.00 per share, making this a capital contribution of
$15,000,000 in total. The stock will be delivered at the time the Company files
for registration. APR is currently the principal shareholder of the Company,
owning 352,422,778 shares or 52%. As of December 31, 2009, the Company has
received $1,540,000 from APR towards the fulfillment of this
agreement.  As of March 31, 2010, the Company has received no
additional funds.
 
 On
January 15, 2009, the Company entered into a stock purchase agreement with APR
wherein APR agreed to purchase up to an aggregate amount of 15,000,000 shares of
common stock in the Company for $.10 per share.  On January 15, 2009,
the Company received $85,000 from Hans Karundeng and Arrow Pacific Resources
Group Limited for the purchase of 850,000 shares of common stock at $.10 per
share pursuant to the APR to purchase up to an aggregate amount of 15,000,000
shares of common stock in the Company for $.10 per share.  On January
20, 2009, the Company received $165,000 from Hans Karundeng and Arrow Pacific
Resources Group Limited for the purchase of 1,650,000 shares of common stock at
$.10 per share pursuant to the APR to purchase up to an aggregate amount of
15,000,000 shares of common stock in the Company for $.10 per
share.
 
 F-25
  ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES
  (A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE
      10 - COMMITMENTS AND OTHER MATTERS
(CONTINUED)
  (b)
Private Placement Offering- Series A Convertible Preferred Stock
 
 On
November 20, 2007, the Board of Directors approved a private placement offering
(the "Offering") approximating $2,000,000 to accredited investors at $1.00 per
share of Series A Convertible Preferred Stock. The Offering was to consist of
the Company's Series A Convertible Preferred Stock that will be convertible into
our common stock. These securities are not required to be and will not be
registered under the Securities Act of 1933 and will not be sold in the United
States.. Each Series A Convertible Preferred Stock is convertible into 20 shares
of the Company’s Common Stock. The holders of the preferred stock have no voting
rights except as may be required by Delaware law, no redemption rights, and no
liquidation preferences over the Common Stock holders absent registration or an
applicable exemption from registration. On January 31, 2008, the Board of
Directors approved an extension of the private placement offering until February
15, 2008, after which the offer was closed.  As of September 30, 2009,
the Company raised $355,000 from investors under this financing
agreement.  On November 3, 2009, the 355,000 Series A Convertible
Preferred Stock were converted into 7,100,000 Common shares.  As of
December 31, 2009, there were no Series A Convertible Preferred Stock
outstanding.
 
 (c)
Private Placement Offering- Series C Convertible Preferred Stock
  On May
15, 2008, the Board of Directors approved a private placement offering (the
"Offering") approximating $2,000,000 to accredited investors at $1.00 per share
of Series C Convertible Preferred Stock. The Offering will consist of the
Company's Series C Convertible Preferred Stock that will be convertible into our
common stock. These securities are not required to be and will not be registered
under the Securities Act of 1933. Shares issued under this placement will not be
sold in the United States, absent registration or an applicable exemption from
registration. As of September 30, 2009, the Company received $25,000 from
investors towards the fulfillment of the financing agreement.  On
November 3, 2009, the 25,000 Series C Convertible Preferred Stock were converted
into 500,000 Common shares.  As of December 31, 2009, there were no
Series C Convertible Preferred Stock outstanding.
  [6] Delaware Corporate
Status
 
 The
Company is delinquent in its filing and payment of the Delaware Franchise Tax
Report and, accordingly, is not in good standing.
  At
December 31, 2009, the Company has accrued an additional $420 for estimated
unpaid Delaware franchise taxes incurred to date reportable during the year
ended December 31, 2009. At December 31, 2008 the Company has accrued $420
for estimated unpaid Delaware franchise taxes incurred to date reportable during
the year ending December 31, 2008. The Company had estimated unpaid Delaware
franchise taxes for the years ended December 31, 2007, 2006 and 2005 in the
amount of $57,650, $57,650 and $69,699, respectively.  Accordingly, as
of December 31, 2009 accounts and accrued expenses payable includes aggregate
estimated unpaid Delaware Franchise taxes of $185,841.  The Company
hopes to file the delinquent tax returns in the second quarter of 2010 and pay
the amount owned in full during the third quarter of 2010.
 
 [7] 5 Year Table of
obligations under [1] and [2] above:
  The
minimum future obligations for consulting fees and services under agreements
outlined in [1] and [2] are as follows:
  Years
      Ending December 31,
                
                Amounts2009
                
                $
                2,440,8212010
                
                
                -$
                2,440,821
 The
Company also engages certain consultants to provide services including
management of the corporate citizenship program and investor relation services.
These agreements contain cancellation clauses with notice periods ranging from
zero to sixty days.
  NOTE 11 –
SPIN OFF AGREEMENT
 
 On March
12, 2009, the Company entered into an agreement with a third party company to
reinstate a Letter Agreement dated March 13, 2006 (the “Original Agreement”) and
extend time to close on a contemplated spin-off.  Pursuant to the
Original Agreement, the Company will incorporate a new 100% owned Bermudan
subsidiary that will be spun out to the Company’s shareholders.  The
third party company will put assets into the new subsidiary and assume 90% of
the new subsidiary.  The third party company paid the Company $250,000
for anticipated closing and transactional costs in March 2006 pursuant to the
Original Agreement.  It costs $50,000 to the Company to reinstate the
Letter Agreement and to disclose reinstatement in its public filings by
amendment. Therefore, the third party company paid the Company an additional
$25,000 upon acceptance of the agreement and $25,000 on March 30,
2009.
  F-26
 ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES
  (A
      DEVELOPMENT STAGE COMPANY)
 
 NOTES
      TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE 12 -
SUBSEQUENT EVENTS
 
 On
January 4, 2010, the Company approved the resignation of James Rothenberg from
the position as a director, effective as of December 31, 2009. At the same time,
Peter J. Frugone, John E. McConnaughy and Rodolph Karundeng have been re-elected
to a 3-year term to the board of directors.
 
 On March
3, 2010, the Company received a $110,000 interest bearing advance from John
Marozzi. The Company will pay interest at the interest rate of 10% which shall
be payable at the time of repayment. The principal of this loan is mature and
payable no later than March 3, 2011.  The Company has the option to
repay the loan in Company stock at a price based on a 50% discount off the
market price, calculated on the average closing price five days prior to
delivery of the stock.
 
 On March
30, 2010, the Company received a $100,000 non-interest bearing advance from John
Frugone. The principal of this loan is mature and payable no later than March
30, 2012.
  F-27
  Exhibit Index
  Exhibit
No.
  31.1
              Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive
    Officer
  31.2
              Rule
      13a-14(a)/15d-14(a) Certification of the Principal Accounting
      Officer
  32.1
              Certification
      Pursuant to 18 U.S.C. §1350 of Chief Executive
  Officer
  32.2
              Certification
      Pursuant to 18 U.S.C. §1350 of the Principal Accounting
      Officer
  F-28