SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







FORM
10-Q









(Mark
One)




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





For the
quarterly period ended March 31, 2010




 ̈
            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. 57 th Street,
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    ̈





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


Yes  ̈
  No   x





The
number of shares outstanding of each of the issuer's classes of common equity,
as of May 18, 2010.




Class
            
            Outstanding
      at May 18, 2010Common
      stock - par value $0.00001
            
            678,452,244









ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


FORM
10-Q


THREE
MONTHS ENDED MARCH 31, 2010





TABLE OF
CONTENTS





PART
      I - FINANCIAL INFORMATIONItem
      1.
            
            Financial
      Statements:Consolidated
      Balance Sheets at March 31, 2010 (Unaudited) and December 31, 2009
      (Audited)
            
            1Consolidated
      Statement of Operations for the three months ended March 31, 2010 and 2009
      (Unaudited), and for the periods from inception (November 15, 2005) to
      December 31, 2009 and from inception (November 15, 2005) to March 31,
      2010
            
            2Consolidated
      Statement of Changes in Stockholders' (Deficit) Equity for the three
      months ended March 31, 2010 (Unaudited) and for the period from
      inception (November 14, 2005) to December 31, 2005 and the years ended
      December 31, 2006, 2007, 2008 and 2009 (Audited).
            
            3-4Consolidated
      Statement of Cash Flows for the three months ended March 31, 2010
      (Unaudited) and March 31,2009 (Unaudited) and for the periods
      from inception (November 15, 2005) to December 31, 2009 and from inception
      (November 15, 2005) to March 31, 2010
            
            5Notes
      to the Consolidated Financial Statements (Unaudited)
            
            6-23Item
      2.
            
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
            
            24-28Item
      3.
            
            Quantitative
      and Qualitative Disclosures About Market Risk
            
            28Item
      4.
            
            Controls
      and Procedures
            
            28PART II - OTHER INFORMATIONItem 1.
            
            Legal
      Proceedings
            
            29Item 1A.
            
            Risk
      Factors
            
            29Item 2.
            
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            
            29Item 3.
            
            Defaults
      Upon Senior Securities
            
            29Item 4.
            
            Submission
      of Matters to a Vote of Security Holders
            
            29Item 5.
            
            Other
      Information
            
            30Item 6.
            
            Exhibits
            
            31Signatures
            
            
            
            32










PART
I - FINANCIAL INFORMATION




Item 1.
            Financial
      Statements





ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)





Consolidated
Balance Sheets




March
      31, 2010
              
              
              December
      31,2009UnauditedASSETSCurrent:Cash
              
              $
              2
              
              
              $
              91Total
      current assets
              
              
              2
              
              
              
              91Total
      assets
              
              $
              2
              
              
              $
              91LIABILITIES
      AND STOCKHOLDERS’ (DEFICIT)Current:Accounts
      and accrued expenses payable, including $6,846,291 and $6,446,791 due to
      Company shareholders and directors, respectively
              
              $
              8,663,576
              
              
              $
              7,765,910Estimated
      liability for legal judgment obtained by predecessor entity
      shareholder
              
              
              1,282,496
              
              
              
              1,266,695Due
      to related parties
              
              
              7,971,186
              
              
              
              7,401,519Notes
      payable, including accrued interest of $153,344 and $152,500 at March 31,
      2010 and December 31, 2009, respectively
              
              
              2,299,844
              
              
              
              2,089,000Total
      liabilities
              
              
              20,217,102
              
              
              
              18,523,124Commitments
      and contingencies
              
              
              -
              
              
              
              -STOCKHOLDERS’
      (DEFICIT)Preferred
      stock, $0.00001 par value, 6 million shares authorized, no shares issued
      or outstanding at March 31, 2010 and December 31, 2009
              
              
              -
              
              
              
              -Preferred
      stock Series A, $0.00001 par value, 2 million shares authorized, none and
      none shares to be issued at March 31, 2010 and December 31, 2009,
      respectively
              
              
              -
              
              
              
              -Preferred
      stock Series C, $0.00001 par value, 2 million shares authorized, none and
      none shares to be issued at March 31, 2010 and December 31, 2009,
      respectively
              
              
              -
              
              
              
              -Common
      stock, $0.00001 par value, 1 billion shares authorized, 678,452,244 and
      678,452,244 issued and outstanding at March 31, 2019 and December 31,
      2009, respectively
              
              
              6,785
              
              
              
              6,785Common
      stock to be issued, $0.00001 par value, 32,992,184 and 32,804,684 shares
      to be issued at March 31, 2010 and December 31, 2009,
      respectively
              
              
              330
              
              
              
              328Additional
      paid-in capital
              
              
              128,219,498
              
              
              
              128,213,875Accumulated
      deficit
              
              
              (148,443,713
              )
              
              
              (146,744,021
              )Total
      stockholders’ (deficit)
              
              
              (20,217,100
              )
              
              
              (18,523,033
              )Total
      liabilities and stockholders’ (deficit)
              
              $
              2
              
              
              $
              91




See accompanying notes to the
consolidated financial statements.




1




ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)





Unaudited
Consolidated Statement of Operations (During the Development Stage)


For
      theThree MonthsEndedMarch 31,2010
              
              
              For
      theThree MonthsEndedMarch 31,2009
              
              
              AccumulatedDuring
      theDevelopment Stage for thePeriod
      FromInception(November 15,2005) toDecember
      31,2009
              
              
              AccumulatedDuring
      theDevelopmentStage for thePeriod
      FromInception(November 15,2005) toMarch
      31,2010Revenue
              
              $
              -
              
              
              $
              -
              
              
              $
              52,000
              
              
              $
              52,000Operating
      expenses:Consulting
      fees and services, including $1,116,464, $989,519, $15,440,707 and
      $16,557,171 incurred to related parties, respectively
              
              
              1,135,149
              
              
              
              1,011,227
              
              
              
              16,481,694
              
              
              
              17,616,843General
      and administrative
              
              
              15,168
              
              
              
              19,423
              
              
              
              861,275
              
              
              
              876,443Directors'
      compensation
              
              
              43,125
              
              
              
              55,000
              
              
              
              772,678
              
              
              
              815,803Delaware
      franchise taxes
              
              
              105
              
              
              
              105
              
              
              
              185,841
              
              
              
              185,946Total
      operating expenses
              
              
              1,193,547
              
              
              
              1,085,755
              
              
              
              18,301,488
              
              
              
              19,495,035Loss
      from operations during thedevelopment
      stage
              
              
              (1,193,547
              )
              
              
              (1,085,755
              )
              
              
              (18,249,488
              )
              
              
              (19,443,035
              )Other
      income (expense):Income
      from spin-off
              
              
              -
              
              
              
              50,000
              
              
              
              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
              
              
              (15,801
              )
              
              
              (15,801
              )
              
              
              (1,266,695
              )
              
              
              (1,282,496
              )Penalty
      for default of notes payable
              
              
              (489,500
              )
              
              
              -
              
              
              
              (578,000
              )
              
              
              (1,067,500
              )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 none, $150,000,
      $1,336,320 and $1,336,320 is to be satisfied in Company Common Stock and
      none, none, $32,000, and $32,000 incurred to related
    parties
              
              
              (844
              )
              
              
              (199,924
              )
              
              
              (1,601,744
              )
              
              
              (1,602,588
              )(506,145
              )
              
              
              (165,725
              )
              
              
              (128,494,533
              )
              
              
              (129,000,678
              )Net
      loss
              
              $
              (1,699,692
              )
              
              
              (1,251,480
              )
              
              $
              (146,744,021
              )
              
              $
              (148,443,713
              )Basic
      and diluted net loss per weighted-average shares common stock
      outstanding
              
              $
              (0.003
              )
              
              
              (0.002
              )
              
              $
              (0.232
              )
              
              $
              (0.234
              )Weighted-average
      number of shares of common stock outstanding
              
              
              678,452,244
              
              
              
              656,081,653
              
              
              
              633,667,055
              
              
              
              634,146,361
  See accompanying notes to the
consolidated financial statements.




2




ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)





Unaudited 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
      StockSharesto
      beissued
            
            
            Amount
            
            
            Sharesto
      beissued
            
            
            Amount
            
            
            Sharesto
      beissued
            
            
            Amount
            
            
            Sharesissued
            
            
            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
            
            
            $
            6,785Common
      stock to be issued for directors' compensation
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            187,500
            
            
            
            2
            
            
            
            —
            
            
            
            —Net
      loss for the period ended March 31, 2010
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Balance,
      March 31, 2010
            
            
            0
            
            
            $
            0
            
            
            
            0
            
            
            $
            0
            
            
            
            32,992,184
            
            
            $
            330
            
            
            
            678,452,244
            
            
            $
            6,785


See accompanying notes to the
consolidated financial statements.




3





ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)





Unaudited Consolidated
Statement of Changes in Stockholders' (Deficit) Equity (During the Development
Stage)





Additional
                Paid-in Capital
              
              
              Accumulated
                Deficit
              
              
              TotalBalance,
      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
              )Common
      stock to be issued for directors' compensation
              
              
              5,623
              
              
              
              —
              
              
              
              5,625Net
      loss for the period ended March 31, 2010
              
              
              —
              
              
              
              (1,699,692
              )
              
              
              (1,699,692
              )Balance,
      March 31, 2010
              
              $
              128,219,498
              
              
              $
              (148,443,713
              )
              
              $
              (20,217,100
              )




See accompanying notes to the
consolidated financial statements.




4





ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)





Unaudited
Consolidated Statement of Cash Flows (During the Development Stage)





For
      theThree MonthsendedMarch 31,2010
              
              
              For
      the Three MonthsendedMarch 31,2009
              
              
              AccumulatedDuring
      theDevelopmentStage for thePeriod
      FromInception(November 15,2005) toDecember
      31,2009
              
              
              Accumulated
      During the Development Stage for the Period From Inception
      (November 15, 2005) to March 31, 2010Net
      loss
              
              $
              (1,699,692
              )
              
              $
              (1,251,480
              )
              
              $
              (146,744,021
              )
              
              $
              (148,443,713
              )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
              
              
              -
              
              
              
              49,924
              
              
              
              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
              
              
              -
              
              
              
              70,000
              
              
              
              1,256,320
              
              
              
              1,256,320Debt
      issue costs satisfied in Company Common Stock
              
              
              -
              
              
              
              80,000
              
              
              
              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
              
              
              
              246,007Increase
      in prepaid expenses
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Stock-based
      directors' compensation to be issued
              
              
              5,625
              
              
              
              5,000
              
              
              
              172,541
              
              
              
              178,166Changes
      in operating asset and liabilities:Increase
      in accounts and accrued expenses payable
              
              
              911,510
              
              
              
              445,039
              
              
              
              7,072,050
              
              
              
              7,983,560Estimated
      liability for legal judgement obtained by predecessor entity
      shareholder
              
              
              15,801
              
              
              
              15,801
              
              
              
              1,266,695
              
              
              
              1,282,496Net
      cash (used in) operating activities
              
              
              (766,756
              )
              
              
              (585,717
              )
              
              
              (9,430,766
              )
              
              
              (10,197,522
              )Cash
      flows from investing activities:Cash
      acquired as part of merger transaction
              
              
              -
              
              
              
              -
              
              
              
              39,576
              
              
              
              39,576Advances
      to related party
              
              
              (13,000
              )
              
              
              (15,500
              )
              
              
              (900,275
              )
              
              
              (913,275
              )Net
      cash (used in) investing activities
              
              
              (13,000
              )
              
              
              (15,500
              )
              
              
              (860,699
              )
              
              
              (873,699
              )Cash
      flows from financing activities:Proceeds
      of issuance ofnote payable
              
              
              210,000
              
              
              
              80,000
              
              
              
              1,869,000
              
              
              
              2,079,000Proceeds
      of loans received from related parties
              
              
              -
              
              
              
              5,000
              
              
              
              1,875,000
              
              
              
              1,875,000Repayment
      towards loan from related party
              
              
              -
              
              
              
              (5,000
              )
              
              
              (179,425
              )
              
              
              (179,425
              )Net
      increase in due to related parties attributed to operating expenses paid
      on the Company’s behalf by the related party
              
              
              569,667
              
              
              
              271,246
              
              
              
              4,444,981
              
              
              
              5,014,648Net
      increase in investments/capital contributed
              
              
              -
              
              
              
              250,000
              
              
              
              2,232,000
              
              
              
              2,232,000Advances
      from senior advisor
              
              
              -
              
              
              
              -
              
              
              
              50,000
              
              
              
              50,000Net
      cash provided by financing activities
              
              
              779,667
              
              
              
              601,246
              
              
              
              10,291,556
              
              
              
              11,071,223Net
      change in cash
              
              
              (89
              )
              
              
              29
              
              
              
              91
              
              
              
              2Cash
      balance at beginning of period
              
              
              91
              
              
              
              16
              
              
              
              -
              
              
              
              -Cash
      balance at end of period
              
              $
              2
              
              
              
              45
              
              
              $
              91
              
              
              $
              2Supplemental
      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.




5




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.





In April
of 2006, Arrow Ltd. entered into an agency agreement with Arrow Pacific
Resources Group Limited (“APR”) that 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 its subsidiaries, located in
Indonesia. Under the agreement Arrow Ltd. will receive a commission of 10% of
gross sales derived from lumber and 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.




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.





NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





BASIS
OF PRESENTATION





Interim
Financial Statements





In the
opinion of management, the accompanying consolidated financial statements
reflect all adjustments (consisting of normal recurring accruals) necessary to
present fairly the Company's financial position as of March 31, 2010 and the
results of its operations, changes in stockholders' (deficit) equity , and cash
flows for the three month periods ended March 31, 2010 and 2009 , respectively
and for the period from the commencement of the development stage (November 15,
2005) to March 31, 2010, and for the period from the commencement of the
development stage (November 15, 2005) to December 31, 2009. Although management
believes that the disclosures in these consolidated financial statements are
adequate to make the information presented not misleading, certain information
and footnote disclosures normally included in financial statements that have
been prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to the rules
and regulations of the Securities Exchange Commission.





The
results of operations for the three months ended March 31, 2010 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 2010. The accompanying consolidated financial statements
should be read in conjunction with the more detailed consolidated financial
statements, and the related footnotes thereto, filed with the Company’s Annual
Report on Form 10K for the year ended December 31, 2009 filed on April 15,
2010.





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 $1,699,692 for the three months ended March 31, 2010 and a net loss
during the development stage from inception in November 15, 2005 through March
31, 2010 of $148,443,713. The Company’s operations are in the development stage,
and the Company has not substantially generated any material 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.


6


ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED





BASIS
OF PRESENTATION CONTINUED





Going-Concern
Status continued





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 Ltd. 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.





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 carry forwards 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 Note 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.





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





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 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, 2009 and for the period ended March 31, 2010.
As of March 31, 2010, 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.





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 March 31, 2010, the Company’s consolidated financial statements do not
contain any changes in equity that are required to be reported separately in
comprehensive income.





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





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.




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





Recent
Accounting Pronouncements continued:





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 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.





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 to 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.




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)





Recent
Accounting Pronouncements (continued):





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 o r 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 val u e 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 th e 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 ASC 820
did not have a material impact on the Company’s consolidated results of
operations or financial conditi on.




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.




11





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
carry forward 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, except for Delaware
franchise taxes, none of the Company's post November 14, 2005 losses are as yet
reportable in Company income tax returns to be filed for the years ended
December 31, 2005, 2006, 2007, 2008 or 2009.




The
significant components of the Company's deferred tax assets are as
follows:




Net
      operating loss carry forward
            
            $
            63,222Differences
      resulting from use of cash basis for tax purposes
            
            
            -Total
      deferred tax assets
            
            
            63,222Less
      valuation allowance
            
            
            (63,222
            )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
            
            
            420December
      31, 2030
            
            
            105Net
      Operating Loss Carryover
            
            $
            185,946





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
            
            $
            148,257,767Delaware
      franchise taxes deductible on Company's tax return
            
            
            185,946Net
      loss for the period from inception (November 15, 2005) to March 31,
      2010
            
            $
            148,443,713




12





ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE 5 - NOTES PAYABLE





As of
March 31, 2010 and December 31, 2009, the Company had notes payable outstanding
as follows:




March
      31,
            
            
            December
      31,Holder
            
            Terms
            
            2010
            
            
            2009Barry
      Blank (1)
            
            Due
      on demand, 10% interest
            
            $
            200,000
            
            
            $
            200,000Accrued
      interest (1)
            
            
            
            
            50,000
            
            
            
            50,000H.
      Lawrence Logan
            
            Due
      on demand, non-interest bearing
            
            
            25,000
            
            
            
            25,000John
      Marozzi (2)
            
            Due
      on demand, non-interest bearing
            
            
            265,500
            
            
            
            265,500John
      Marozzi (2)
            
            Due
      on 3/11/11, 10% interest bearing
            
            
            110,000
            
            
            
            -Accrued
      interest (2)
            
            
            
            
            844
            
            
            
            -James
      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
            
            
            -
            
            
            
            -Frank
      Ciolli (6)
            
            Due
      on demand, non-interest bearing
            
            
            550,000
            
            
            
            550,000John
      Frugone (7)
            
            Due
      on demand, non-interest bearing
            
            
            255,000
            
            
            
            155,000Scott
      Neff (8)
            
            Due
      on demand, non-interest bearing
            
            
            50,000
            
            
            
            50,000Cliff
      Miller (9)
            
            Due
      on 10/11/09, interest bearing
            
            
            450,000
            
            
            
            450,000Accrued
      interest (9)
            
            
            
            
            100,000
            
            
            
            100,000John
      McConnaughy (10)
            
            Due
      on demand, 10% interest
            
            
            25,000
            
            
            
            25,000Accrued
      interest (10)
            
            
            
            
            2,500
            
            
            
            2,500Greg
      and Lori Popke (11)
            
            Due
      on 12/11/09
            
            
            100,000
            
            
            
            100,000Total
            
            
            
            $
            2,299,844
            
            
            $
            2,089,000




13





ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE 5 -
NOTES PAYABLE, CONTINUED




(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 could not
      be issued until the party to whom the note was assigned by its original
      holder emerges from bankruptcy or reorganization.In March 2010, the note holder
      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 was to 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 another
      $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. During
      the year ended December, 31, 2008, the Company recorded $60,000 of debt
      issue costs related to the 1,000,000 shares of common stock that were
      issuable to 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 was 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 left 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 was 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
      was to repay the full amount of the note in cash within 60 calendar days
      from the date the note was 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.  The $265,500 note payable is
      currently in default.  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. As of March 31, 2010, the Company accrued $844 in interest
      expense.  The principal of this loan was to mature and be
      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.  The Company has a total
      of  $375,500 unpaid principal owed to John Marozzi as of March
      31, 2010.(3)
            On
      April 24, 2008, the Company received $38,000 non-interest bearing advance
      from James R. McConnaughy, which is due on demand. In repayment, the
      Company was to 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 was to 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 another $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.




14




ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE 5 -
NOTES PAYABLE, CONTINUED





(5)
            On
      April 25, 2008, the Company received $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 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. This amount is now
      included in “Due to Related Parties” (See Note 7, item number
      3,  “Advance Received from Company
  Director.”





(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.  As of December 31, 2008, 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 was to repay the full amount of the note in cash over two years
      from the date the note was 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.  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.  This leaves a balance of $255,000 unpaid
      principal as of March 31, 2010.  John Frugone is a relative of
      Peter Frugone, the Company’s CEO and also a Company
    Director.





(8)
            On October 13, 2008, the Company
      received a $50,000 interest bearing advance from Scott Neff, for which the
      Company was to repay the full amount of the note in cash within 60
      calendar days from the date the note was executed plus interest expense
      paid in the form of 1,000,000 shares of Company common
      stock.  During the period ended December 31, 2008, t he 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.(9)
            On June 29, 2009, the Company
      received a $100,000 interest bearing advance from Cliff Miller. In
      repayment, the Company was to repay the full amount of the note in cash no
      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 was to 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 were 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 was to repay the full amount of
      the note in cash not later than October 11, 2009. The Company was to 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 was to 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 March 31,
      2010 and December 31, 2009, the Company accrued $400,500 and $476,000
      default penalty in interest expense,
  respectively.




15


ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 5 -
NOTES PAYABLE, CONTINUED


(10)
            On
      June 2, 2009, the Company received a $25,000 10% interest bearing advance
      from John E. McConnaughy Jr. In repayment, the Company was to 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.




(11)
            On
      July 20, 2009, the Company received a $100,000 interest bearing advance
      from Greg and Lori Popke. In repayment, the Company was to 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 March 31, 2010 and
      December 31, 2009, the Company accrued $89,000 and $102,000 default
      penalty in interest expense, respectively.




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.





The
Company’s only intangible asset was comprised of this marketing and distribution
agreement with Arrow Pte. In accordance with ASC 350, “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.




16




ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE 6 –
IMPAIRMENT OF MARKETING AND DISTRIBUTION AGREEMENT AND RELATED SENIOR NOTE
PAYABLE DUE TO EMPIRE ADVISORY, LLC, CONTINUED





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 reached the conclusion that the marketing and distribution agreement had
no value. Therefore, the Company 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.





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
March 31, 2010 and December 31, 2009, the Company had short-term borrowings of
$6,041,547 and $5,472,111, 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 three months
ended March 31, 2010 and 2009 incurred to Empire totaled $741,464 and $614,519,
respectively. Consulting fees and services charged to the Statement of
Operations for the years ended December 31, 2009, December 31, 2008, December
31, 2007, December 31, 2006 and for the period from November 15, 2005 to
December 31, 2005 incurred to Empire totaled $2,661,526, $2,223,711, $1,858,386,
$1,591,016 and $698,834, respectively.





During the three months ended March 31,
2010, the Company incurred Director’s compensation expense of $14,375 to Mr.
Frugone, consisting of cash compensation of $12,500 and stock based compensation
of $1,875 based upon the Company’s share trading price on March 31, 2010. 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.  During the year ended December 31, 2007,
the Company also incurred Director’s compensation expense of $65,000 to Mr.
Frugone, consisting of cash compensation of $50,000 and stock based compensation
of $15,000 based upon the Company’s share trading price on the date of the grant
of December 3, 2007. At March 31, 2010, the Company is obligated to issue
812,500 Common Stock shares to him, and “Accounts payable and accrued
liabilities” includes $162,500 due to him for the cash based portion of his
2007, 2008, 2009 and 2010 director’s compensation (See Note
7[4]).





During
the three months ended March 31, 2010, the Company made cash payments of
$170,468 to Empire under the agreement. During the three months ended March 31,
2009 the Company made cash payments of $340,653   to Empire under the
agreement.




17




ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE 7 -
RELATED PARTY TRANSACTIONS, CONTINUED





[2] Engagement and Consulting
Agreements entered into with individuals affiliated with Arrow
Pacific:





Consulting
fees and services charged in the Statement of Operations for the three months
ended March 31, 2010 and 2009 incurred to Hans Karundeng and Rudolph Karundeng
under Engagement and Consulting Agreements totaled $375,000 and $375,000,
respectively. In addition, as of March 31, 2010 and December 31, 2009, the
Company owed them a total of $6,521,291 and $6,146,791, respectively, under
these agreements. These agreements are discussed in detail in Note
11.





During
the three months ended March 31, 2010, the Company incurred Director’s
compensation expense of $14,375 to Rudolph Karundeng, consisting of cash
compensation of $12,500 and stock based compensation of $1,875 based upon the
Company’s share trading price on March 31, 2010. 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.  During the year ended December 31, 2007, the Company
also incurred Director’s compensation expense of $65,000 to Rudolph Karundeng,
consisting of cash compensation of $50,000 and stock based compensation of
$15,000 based upon the Company’s share trading price on the date of the grant of
December 3, 2007. At March 31, 2010, the Company is obligated to issue 812,500
Common Stock shares to him, and “Accounts payable and accrued liabilities”
includes $162,500 due to him for the cash based portion of his 2007, 2008, 2009
and 2010 director’s compensation (See Note 7[4]).





[3] 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. In October
2006, the Company received an additional $200,000 non-interest bearing advance
from Mr. McConnaughy, Jr. which is also due on demand. 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 $5 0,000 non-interest bearing
advance from John E. McConnaughy, Jr, which is due on demand. In November 2008,
the Company received $1 0,000 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 March 31,
2010 and December 31, 2009, the Company had $1,955,000 and $1,955,000 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 March 31, 2010,
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.




18


ARROW RESOURCES DEVELOPMENT,
INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE 7 -
RELATED PARTY TRANSACTIONS, CONTINUED





[3] Advance Received from
Company Director continued:





During
the three months ended March 31, 2010, the Company incurred Director’s
compensation expense of $14,375 to Mr. McConnaughy, consisting of cash
compensation of $12,500 and stock based compensation of $1,875 based upon the
Company’s share trading price on March 31, 2010.  During the year
ended December 31, 2009, the Company also incurred Director’s compensation
expense of $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 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 grant.  At March 31, 2010, the Company is obligated to issue
812,500 Common Stock shares to him, and “Accounts payable and accrued
liabilities” includes $162,500 due to him for the cash based portion of his
2007, 2008, 2009 and 2010 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 March
31, 2010 and December 31, 2009, none of the shares under this plan have been
issued and the Company has an accrued liability of $637,637 and $600,137,
respectively, of cash-based compensation and recorded additional paid-in capital
through those dates of $178,166 and $172,541, respectively, for stock-based
compensation based on the fair value of 3,188,185 and 3,000,685 shares to be
issued to the members of the Board, respectively.




NOTE 8 -
STOCKHOLDERS' 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.




19




ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE 8 -
STOCKHOLDERS' EQUITY, CONTINUED





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 March 31, 2010 and 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 March
31, 2010 and December 31, 2009, none of the shares under this plan have been
issued and the Company has accrued $637,637 and $600,137 of cash-based
compensation and recorded additional paid-in capital of $178,166 and $172,541for
stock-based compensation based on the fair value of 3,188,185 shares and
3,000,685 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 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. 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
March 31, 2010, none of these shares have been issued to Charles A.
Moskowitz.





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 General and Administration
Expenses 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
issued 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.





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.




20




ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE 8 -
STOCKHOLDERS' 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 of shares of common stock that were
issued to Frank Ciolli and Donna Alferi as of December 31, 2008 (See Note 5).





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
another $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 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. 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 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.  The $265,500 note payable is currently in
default.  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. As of March 31,
2010, the Company accrued $844 in interest expense.  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.  This Company has a total of
$375,500 unpaid principal owed to John Marozzi as of March 31,
2010.





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).





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).




21




ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE 8 -
STOCKHOLDERS' EQUITY, CONTINUED





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 would
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 March 31, 2010 and 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 March 31, 2010, 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 payable on February 5, 2010. The 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.





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.)




22




ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE 8 -
STOCKHOLDERS' EQUITY. CONTINUED





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 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.  The shares have not been issued yet, but $60,000 debt issue
cost was recorded as of December 31, 2009.  The total unpaid principal
balance of $450,000 is in default.  As of March 31, 2010 and December
31, 2009, the Company accrued $400,500 and $476,000 of default penalty in
interest expense, respectively.





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 March 31, 2010 and
December 31, 2009, the Company accrued $89,000 and $102,000 default penalty in
interest expense, respectively.





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.





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 March 31, 2010, 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.




23




ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS





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 three months ended March 31, 2010, the Company made cash payments to Hans
Karundeng of $13,000 under his agreement. During the three months ended March
31, 2010, the Company made no cash payments to Rudolph Karundeng under his
agreement. 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 three months ended March 31, 2010, the Company made cash payment of $170,468
to Empire under the agreement. During the year ended December 31, 2009, the
Company made cash payments 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.





[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, 2007 because an estimated liability had been recognized prior to
2007.




24




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 continued





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 March 31, 2010, the Company has accrued
$1,282,496, including accrued interest of $229,111, 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
reforestation in areas that were destroyed by illegal logging) 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 March 31,
2010, 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 its 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 March 31, 2010, 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
Alam Lestari (“Lestari”) 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 March 31, 2010, the Company has not recovered any
revenue from this agreement.




25





ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE 10 -
COMMITMENTS AND OTHER MATTERS, CONTINUED





[4] Consulting/Marketing and
Agency Agreements 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 March 31, 2010,
none of these shares have been issued to Charles A. Moskowitz.





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.microc
apreview.com
website on a rotating basis. The services began on March 13, 2008 and expire 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] 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 March 31, 2010, the Company has received
$1,540,000 from APR towards the fulfillment of this agreement.





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.




26





ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE 10 -
COMMITMENTS AND OTHER MATTERS, CONTINUED





[5] Stock Purchase Agreement
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
March 31, 2010 and 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 March 31, 2010 and 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 March
31, 2010, the Company has accrued an additional $105 for estimated unpaid
Delaware franchise taxes incurred to date reportable during the year ending
December 31, 2010. The Company had estimated unpaid Delaware franchise taxes for
the years ended December 31, 2009, 2008, 2007, 2006 and 2005 in the amount of
$420, $420, $57,650, $57,650 and $69,699, respectively. Accordingly, as of March
31, 2010, accounts and accrued expenses payable includes aggregate estimated
unpaid Delaware Franchise taxes of $185,946. The Company hopes to file the
delinquent tax returns in the third quarter of 2010 and pay the amount owned in
full during the fourth quarter of 2010.





[7] Table of annual
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 March
      31,
            
            Amounts2010
            
            $
            1,305,469$
            1,305,469





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.




27





ARROW
RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS





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.





NOTE 12 -
SUBSEQUENT EVENT





On April
21, 2010, the Company received a 10% interest bearing advance of $42,000 from
John Marozzi. The principal of this loan matures and is payable no later than
April 21, 2011.




28





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





GENERAL





We are a
holding company whose only operating subsidiary as of March 31, 2010 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 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. (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. This
agreement provides for the company to collect all revenues from all operations,
retain its 10% fee and disperse the remaining 90% to APR and its subsidiaries.
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 March 31, 2010, the Company has recovered $52,000
of revenue 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.




29





ALLOWANCE
FOR DOUBTFUL ACCOUNTS, REVENUE RECOGNITION





We
evaluate the collectibility 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
collectibility is reasonably assured.





VALUATIONOF 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 FASB Accounting Standard
Codification No 350, Intangibles-Goodwill and
Other, 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.





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.




30





RECENT
ACCOUNTING PRONOUNCEMENTS, CONTINUED





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 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.




31




RECENT
ACCOUNTING PRONOUNCEMENTS, CONTINUED





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 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.




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 to 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.




32




RECENT
ACCOUNTING PRONOUNCEMENTS, CONTINUED





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 o r 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 i n 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 val u e 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 th e 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 conditi on.




33




RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND MARCH 31,
2009





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 three months ended March 31, 2010, we incurred consulting fees of $1,135,149
of which $1,116,464 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 three months ended March 31, 2009, we incurred
consulting fees of $1,011,227 of which, $989,519 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




There was
no revenue for the three months ended March 31, 2010 and March 31, 2009 as the
Company is in its development stage.





COST
OF GOODS SOLD




There was
no cost of good sold for the three months ended March 31, 2010 and March 31,
2009  as the Company is in its development stage.





OTHER
EXPENSES





Compensation,
consulting and related costs increased to $1,135,149 for the three months ended
March 31, 2010 as compared to $1,011,227  for the three months ended
March 31, 2009, $16,481,694 for the period from inception (November 15, 2005) to
December 31, 2009, and $17,616,843 for the accumulated during the development
stage for the period from inception (November 15, 2005) to March 31, 2010. 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 $15,168 for the three months ended
March 31, 2010 as compared to $19,423 for the three months ended March 31, 2009,
and increased to $861,275 for the period from inception (November 15, 2005) to
December 31, 2009, and $876,443 for the accumulated during the development stage
for the period from inception (November 15, 2005) to March 31, 2010. This was
primarily due to a change in advertising and accounting expense.





Directors’
compensation decreased to $43,125 for the three months ended March 31, 2010, as
compared to $55,000 for the three months ended March 31, 2009, $772,678 for the
period from inception (November 15, 2005) to December 31, 2009 and $815,803
accumulated during the development stage for the period from inception (November
15, 2005) to March 31, 2010. The change 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 and James Rothenberg resigned from the position as a director, effective
as of December 31, 2009.




Delaware
franchise taxes amount was $105 for the three months ended March 31, 2010,
as compared to $105 for the three months ended March 31, 2009, $185,841 for
the period from inception (November 15, 2005) to December 31, 2009 and $185,946
for the period from inception (November 15, 2005) to March 31, 2010. The Company
is delinquent in its filing and payment of the Delaware Franchise Tax report
and, accordingly, is not in good standing. At March 31, 2010, the Company has
estimated unpaid Delaware franchise taxes for the years ended December 31, 2009,
2008, 2007, 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 third quarter of 2010 and pay the amount owed in full during the
fourth quarter of 2010.





Total
operating expenses during the development stage increased to $1,193,547 for the
three months ended March 31, 2010 as compared to $1,085,755 for the three months
ended March 31, 2009, and increased to $18,301,488 for the period from inception
(November 15, 2005) to December 31, 2009, and $19,495,035 accumulated during the
development stage for the period from inception (November 15, 2005) to March 31,
2010.




34




OTHER
EXPENSES, CONTINUED





On March
31, 2008, the Company received a $150,000 non-interest bearing advance from John
Marozzi, which is due on demand. In repayment, 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 debt issue costs related to the 1,000,000
shares of common stock that are now issuable to John Marozzi as of March 31,
2008.   On May 5, 2008, John Marozzi received repayment of $50,000
from the Company. On October 13, 2008, the Company received another $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. During the year ended December, 31,
2008, the Company recorded $60,000 of debt issue costs related to the 1,000,000
shares of common stock that were issuable to 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.  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. 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.  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. This leaves a balance of $32,500 unpaid   principal as of  
June 30, 2009.  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 this $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 March 31, 2010.  The $265,500 note
payable is currently in default.  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. As of March 31, 2010, the Company accrued $844 in interest
expense.  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.  This Company has a total of $375,500 unpaid principal owed to
John Marozzi as of March 31, 2010.





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.  This leaves a balance of $255,000 unpaid principal as of
March 31, 2010.





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 March 31, 2009.  The Company is currently negotiating an
additional extension for the Convertible Loan Agreement and Convertible
Note.  On August 12, 2009, the Company and Frank Ciolli entered into a
six month extension for the Convertible Loan Agreement and Convertible Note for
the principal sum of $550,000. The principal amount was payable on February 12,
2010. The note is currently in default.




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. (See Note 6.)




35





OTHER
EXPENSES, CONTINUED





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 March 31, 2010, the Company had accrued
$1,282,496, including accrued interest of $229,111, related to this matter.




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 March 31, 2010 and December 31, 2009 the Company had $2 and
$91 of cash, respectively. We had losses of $1,699,692  for the three
months ended March 31, 2010, and do not currently generate any revenue. We had
losses of $1,251,480 for the three months ended March 31, 2009. 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 March
31, 2010, we had no off -balance sheet arrangements.





OPERATING
ACTIVITIES





We used
$767,600 of cash in our operating activities during the three months ended March
31, 2010. We had a net loss of $1,699,692. We had an increase in stock-based
directors’ compensation to be issued of $5,625, accounts payable and accrued
expenses payable of $910,666 mostly related to compensation and management fees
and estimated liability for legal judgment obtained by predecessor entity
shareholder of $15,801. In addition, we had a working capital deficiency of
$20,217,100 at March 31, 2010. We did not have any material commitments for
capital expenditures as of March 31, 2010.





INFLATION




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




RECENT
TRANSACTIONS





On April
21, 2010, the Company received a 10% interest bearing advance of $42,000 from
John Marozzi. The principal of this loan is mature and payable no later than
April 21, 2011.




Item 3.
            Quantitative
      and Qualitative Disclosures About Market
Risk





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




36





Item 4.
            Controls
      and Procedures





Evaluation
of Disclosure Controls and Procedures




The
Company’s Chief Executive Officer and acting Chief Financial Officer 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 March 31, 2010 covered by this Quarterly Report on
Form 10-Q. 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.  The
Company is currently in the process of evaluating its options to fix the
deficiency in internal controls.




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 March 31, 2010 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
quarterly 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 Quarterly Report on Form
10-Q.




Changes
in Internal Control Over Financial Reporting




No change
in the Company’s internal control over financial reporting occurred during the
quarter ended March 31, 2010, that materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial
reporting.




37




PART
II - OTHER INFORMATION





Item 1.
            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 March 31, 2010, the Company had accrued
$1,282,496 including accrued interest of $229,111, related to this matter.





Item 1A.
            Risk
      Factors





Item 1A.
“Risk Factors” of our Annual Report on Form 10-KSB for the year ended
December 31, 2009 includes a detailed discussion of our risk factors. There
have been no significant changes to our risk factors as set forth in our 2009
Form 10-KSB.





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





None.





Item 3.
            Defaults
      Upon Senior Securities





None.





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 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 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 March 31, 2010 and December 31, 2009, there were
no Series A Convertible Preferred Stock outstanding.




38





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





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 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 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 March 31, 2010 and 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 March
31, 2010, none of the shares under this plan have been issued and the Company
has accrued $637,637 of cash and recorded additional paid-in capital of $178,166
for stock compensation based on the fair value of 3,188,185 shares to be issued
to the members of the Board.





Item 5.
            Other
      Information




None




39





Item 6.
            Exhibits





Exhibit
Index




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




40




SIGNATURES




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




ARROW
      RESOURCES DEVELOPMENT, INC.Dated:
      June 18, 2010
              By:
              /S/  PETER
      J. FRUGONEPeter
      J. FrugonePresident
      and Chief Executive OfficerDated:
      June 18, 2010
              By:
              /S/  PETER
      J. FRUGONEPeter
      J. FrugonePrincipal
      Accounting Officer




41