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 September 30, 2008




** ̈**
            **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 Registered**Common
                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 November 10, 2008.




**Class**
            
            **Outstanding
                at November 10, 2008**Common
                stock - par value $0.00001
            
            650,993,240





ARROW
      RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
      DEVELOPMENT STAGE COMPANY)


FORM
      10-Q


THREE
      MONTHS ENDED SEPTEMBER 30, 2008




TABLE
      OF CONTENTS




**Page****PART
                  I - FINANCIAL INFORMATION**Item
                  1.
              
              Financial
                  Statements:Unaudited
                  Consolidated Balance Sheets at September 30, 2008 and December
                  31,
                  2007
              
              1Unaudited
                  Consolidated Statement of Operations for the three and nine months
                  ended
                  September 30, 2008 and 2007, and for the periods from inception
                  (November
                  15, 2005) to December 31, 2007 and from inception (November 15,
                  2005) to
                  September 30, 2008
              
              2Unaudited
                  Consolidated Statement of Changes in Stockholders' (Deficit) Equity
                  for
                  the nine months ended September 30, 2008 and for the period from
                  inception
                  (November 14, 2005) to September 30, 2008
              
              3Unaudited
                  Consolidated Statement of Cash Flows for the nine months ended
                  September
                  30, 2008 and 2007 and for the periods from inception (November 15,
                  2005) to December 31, 2007 and from inception (November 15, 2005)
                  to
                  September 30, 2008
              
              4Notes
                  to the Consolidated Financial Statements (Unaudited)
              
              5Item
                  2.
              
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              
              22-27Item
                  3.
              
              Quantitative
                  and Qualitative Disclosures About Market Risk
              
              27Item
                  4.
              
              Controls
                  and Procedures
              
              27**PART
                  II - OTHER INFORMATION**Item
                  1.
              
              Legal
                  Proceedings
              
              28Item
                  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
              
              29Item
                  6.
              
              Exhibits
              
              30Signatures
              
              
              31




**PART
      I - FINANCIAL INFORMATION**





**Item 1.**
            **Financial
                Statements**





ARROW
      RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
      DEVELOPMENT STAGE COMPANY)





Unaudited
      Consolidated Balance Sheets





**December
                  31, 2007****September
                  30, 2008**
              
              **(As
                  restated - Note 2)****ASSETS**Current:Cash
              
              $
              16
              
              $
              1,040Other
                  current asset:Prepaid
                  expenses
              
              
              -
              
              
              -Total
                  current assets
              
              
              16
              
              
              1,040Total
                  assets
              
              $
              16
              
              $
              1,040**LIABILITIES
                  AND STOCKHOLDERS’ (DEFICIT) EQUITY**Current:Accounts
                  and accrued expenses payable, including $4,764,628 and $3,592,491
                  due to
                  Company shareholders and directors, respectively
              
              $
              5,169,464
              
              $
              4,085,122Estimated
                  liability for legal judgment obtained by predecessor entity
                  shareholder
              
              
              1,053,385
              
              
              1,053,385Due
                  to related parties
              
              
              5,477,221
              
              
              4,404,183Notes
                  payable, including accrued interest of $20,000and
                  $20,000 at September 30, 2008 and December 31, 2007,
                  respectively
              
              
              1,108,000
              
              
              245,000Total
                  liabilities
              
              
              12,808,070
              
              
              9,787,690Commitments
                  and contingencies
              
              
              -
              
              
              -STOCKHOLDERS’
                  (DEFICIT) EQUITYPreferred
                  stock, $0.00001 par value, 10 million shares authorized, no shares
                  issued
                  or outstanding at September 30, 2008 and December 31, 2007
              
              
              -
              
              
              -Preferred
                  stock Series A, $0.00001 par value, 2 million shares authorized,
                  355,000
                  and 280,000 shares to be issued at September 30, 2008 and December
                  31,
                  2007
              
              
              355,000
              
              
              280,000Preferred
                  stock Series C, $0.00001 par value, 2 million shares authorized,
                  25,000
                  and 0 shares to be issued at September 30, 2008 and December 31,
                  2007
              
              
              25,000
              
              
              -Common
                  stock, $0.00001 par value, 1 billion shares authorized, 650,993,240
                  and
                  649,743,240 issued and outstanding, respectively
              
              
              6,509
              
              
              6,497Common
                  stock to be issued, $0.00001 par value, 11,056,350 and 2,485,685
                  shares to be issued at September 30, 2008 and December 31, 2007,
                  respectively
              
              
              113
              
              
              25Additional
                  paid-in capital
              
              
              125,444,941
              
              
              124,790,220Accumulated
                  deficit
              
              
              (138,639,617
              )
              
              (134,863,392
              )Total
                  stockholders’ (deficit) equity
              
              
              (12,808,054
              )
              
              (9,786,650
              )Total
                  liabilities and stockholders’ (deficit) equity
              
              $
              16
              
              $
              1,040





*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
                  the Three Months Ended September 30, 2008
              
              For
                  the Three Months Ended September 30, 2007
              
              For
                  the Nine Months Ended September 30, 2008
              
              For
                  the Nine Months Ended September 30, 2007
              
              For
                  the Period From Inception (November 15, 2005) to December 31, 2007
                  (As
                  Restated - Note 2)
              
              Accumulated
                  During the Development Stage for the Period From Inception (November
                  15,
                  2005) to September 30, 2008Revenue
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Operating
                  expenses:Consulting
                  fees and services, including $956,967, $858,508, $2,734,192, $2,473,835,
                  $7,555,470 and $10,289,662 incurred to related parties,
                  respectively
              
              
              1,031,772
              
              
              899,311
              
              
              3,124,065
              
              
              2,611,020
              
              
              7,955,066
              
              
              11,079,131General
                  and administrative
              
              
              29,022
              
              
              44,356
              
              
              180,525
              
              
              98,761
              
              
              554,177
              
              
              734,702Directors'
                  compensation
              
              
              65,000
              
              
              -
              
              
              205,000
              
              
              -
              
              
              260,178
              
              
              465,178Delaware
                  franchise taxes
              
              
              105
              
              
              14,413
              
              
              315
              
              
              43,239
              
              
              185,001
              
              
              185,316Total
                  operating expenses
              
              
              1,125,899
              
              
              958,080
              
              
              3,509,905
              
              
              2,753,020
              
              
              8,954,422
              
              
              12,464,327Loss
                  from operations during thedevelopment
                  stage
              
              
              (1,125,899
              )
              
              (958,080
              )
              
              (3,509,905
              )
              
              (2,753,020
              )
              
              (8,954,422
              )
              
              (12,464,327
              )Other
                  income (expense):Gain
                  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
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,053,385
              )
              
              (1,053,385
              )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
              )Expenses
                  incurred as part of recapitalization transaction
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (249,252
              )
              
              (249,252
              )Debt
                  issue costs to be satisfied of $216,320 in Company Common
                  Stock
              
              
              -
              
              
              -
              
              
              (266,320
              )
              
              -
              
              
              -
              
              
              (266,320
              )-
              
              
              
              
              
              -
              
              
              (266,320
              )
              
              -
              
              
              (125,908,970
              )
              
              (126,175,290
              )Net
                  loss
              
              $
              (1,125,899
              )
              $
              (958,080
              )
              $
              (3,776,225
              )
              $
              (2,753,020
              )
              $
              (134,863,392
              )
              $
              (138,639,617
              )Basic
                  and diluted net loss per weighted-average shares common stock
                  outstanding
              
              $
              (0.002
              )
              $
              (0.001
              )
              $
              (0.006
              )
              $
              (0.004
              )
              $
              (0.214
              )
              $
              (0.220
              )Weighted-average
                  number of shares of common stock outstanding
              
              
              651,835,631
              
              
              649,543,240
              
              
              650,445,795
              
              
              649,543,240
              
              
              631,654,538
              
              
              629,282,647




*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
                    Stock****Shares
                    to be issued**
                
                
                **Amount**
                
                
                **Shares
                    to be issued**
                
                
                **Amount**
                
                
                **Shares
                    to be issued**
                
                
                **Amount**
                
                
                **Shares
                    issued**
                
                
                **Amount**Balance,
                    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 (As Restated - See Note 2)
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                --Balance,
                    December 31, 2007 (As Restated - See Note 2)
                
                
                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 to be issued for directors' compensation
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                750,000
                
                
                9
                
                
                --
                
                
                --Debt
                    issue costs to be satisfied in Company Common Stock
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                3,704,000
                
                
                38
                
                
                --
                
                
                --Common
                    stock to be issued for purchase of common stock
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                1,000,000
                
                
                10
                
                
                --
                
                
                --Common
                    stock to be issued for consulting and marketing services
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                3,116,665
                
                
                31
                
                
                --
                
                
                --Common
                    stock issued for consulting and marketing services
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                1,250,000
                
                
                12Net
                    loss for the nine months ended September 30, 2008
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                --Balance,
                    September 30, 2008
                
                
                355,000
                
                $
                355,000
                
                
                25,000
                
                $
                25,000
                
                
                11,056,350
                
                $
                113
                
                
                650,993,240
                
                $
                6,509


*See
      accompanying notes to the consolidated financial statements.*






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**
              
              **Total**Balance,
                  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 (As Restated - See Note 2)
              
              
              --
              
              
              (130,076,689
              )
              
              (130,076,689
              )Balance,
                  December 31, 2007 (As Restated - See Note 2)
              
              $
              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 to be issued for directors' compensation
              
              
              54,991
              
              
              --
              
              
              55,000Debt
                  issue costs to be satisfied in Company Common Stock
              
              
              216,283
              
              
              --
              
              
              216,321Common
                  stock to be issued for purchase of common stock
              
              
              49,990
              
              
              --
              
              
              50,000Common
                  stock to be issued for consulting and marketing services
              
              
              245,968
              
              
              --
              
              
              245,999Common
                  stock issued for consulting and marketing services
              
              
              87,489
              
              
              --
              
              
              87,501Net
                  loss for the nine months ended September 30, 2008
              
              
              --
              
              
              (3,776,225
              )
              
              (3,776,225
              )Balance,
                  September 30, 2008
              
              $
              125,444,941
              
              $
              (138,639,617
              )
              $
              (12,808,054
              )




*See
      accompanying notes to the consolidated financial
      statements.*


3


ARROW
      RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
      DEVELOPMENT STAGE COMPANY)




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




For
                  the Nine Months Ended September 30, 2008
              
              For
                  the Nine Months Ended September 30, 2007
              
              For
                  the Period From Inception (November 15, 2005) to December 31, 2007
                  (As
                  Restated - See Note 2)
              
              Accumulated
                  During the Development Stage for the Period From Inception (November
                  15,
                  2005) to September 30, 2008Net
                  loss
              
              $
              (3,776,225
              )
              $
              (2,753,020
              )
              $
              (134,863,392
              )
              $
              (138,639,617
              )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
              
              
              125,000,000Debt
                  issue costs to be satisfied in Company Common Stock
              
              
              216,321
              
              
              -
              
              
              -
              
              
              216,321Debt
                  issue costs to be satisfied in Company Common Stock
              
              
              50,000
              
              
              -
              
              
              -
              
              
              50,000Common
                  stock issued for consulting and marketing services
              
              
              87,501
              
              
              -
              
              
              -
              
              
              87,501Common
                  stock to be issued for consulting and marketing services
              
              
              245,999
              
              
              
              
              
              -
              
              
              245,999Increase
                  in prepaid expenses
              
              
              -
              
              
              (1,861
              )
              
              -
              
              
              -Stock-based
                  directors' compensation to be issued
              
              
              55,000
              
              
              
              
              
              60,041
              
              
              115,041Changes
                  in operating asset and liabilities:Increase
                  in accounts and accrued expenses payable
              
              
              1,334,342
              
              
              940,840
              
              
              2,848,562
              
              
              4,182,904Estimated
                  liability for legal judgement obtained by predecessor entity
                  shareholder
              
              
              -
              
              
              -
              
              
              1,053,385
              
              
              1,053,385Net
                  cash (used in) operating activities
              
              
              (1,787,062
              )
              
              (1,814,041
              )
              
              (4,637,187
              )
              
              (6,424,249
              )Cash
                  flows from investing activities:Cash
                  acquired as part of merger transaction
              
              
              -
              
              
              -
              
              
              39,576
              
              
              39,576Advances
                  to related party
              
              
              (250,000
              )
              
              (244,575
              )
              
              (369,575
              )
              
              (619,575
              )Net
                  cash (used in) investing activities
              
              
              (250,000
              )
              
              (244,575
              )
              
              (329,999
              )
              
              (579,999
              )Cash
                  flows from financing activities:Proceeds
                  of issuance of note payable
              
              
              863,000
              
              
              -
              
              
              25,000
              
              
              888,000Proceeds
                  of loans received from related parties
              
              
              605,000
              
              
              725,000
              
              
              1,175,000
              
              
              1,780,000Repayment
                  towards loan from related party
              
              
              (88,000
              )
              
              (86,425
              )
              
              (86,425
              )
              
              (174,425
              )Net
                  increase in due to related parties attributed to operating expenses
                  paid
                  on the Company’s behalf by the related party
              
              
              556,038
              
              
              970,041
              
              
              2,027,653
              
              
              2,583,691Net
                  increase in investments/capital contributed
              
              
              100,000
              
              
              450,000
              
              
              1,776,998
              
              
              1,876,998Advances
                  from senior advisor
              
              
              -
              
              
              -
              
              
              50,000
              
              
              50,000Net
                  cash provided by financing activities
              
              
              2,036,038
              
              
              2,058,616
              
              
              4,968,226
              
              
              7,004,264Net
                  change in cash
              
              
              (1,024
              )
              
              -
              
              
              1,040
              
              
              16Cash
                  balance at beginning of period
              
              
              1,040
              
              
              -
              
              
              -
              
              
              -Cash
                  balance at end of period
              
              $
              16
              
              $
              -
              
              $
              1,040
              
              $
              16Supplemental
                  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.*


4




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
      the development of natural resources.




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, com and related products from
      land leased by GMPLH which is operated by APR and it's subsidiaries, located
      in
      Indonesia. Under the agreement Arrow Ltd. will receive a commission of 10%
      of
      gross sales derived from lumber, com 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.





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 September 30, 2008 and
      the
      results of its operations, changes in stockholders' (deficit) equity, and cash
      flows for the three and nine months periods ended September 30, 2008 and 2007,
      respectively, for
      the
      period from the commencement of the development stage (November 15, 2005) to
      September 30, 2008, and for the period from the commencement of the development
      stage (November 15, 2005) to December 31, 2007 .
      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 and nine months ended September 30, 2008
      and for
      the
      period from the commencement of the development stage (November 15, 2005) to
      September 30, 2008, are not necessarily indicative of the results that may be expected for the
      full
      year ending December 31, 2008, and
      for
      the period from the commencement of the development stage (November 15, 2005)
      to
      December 31, 2008 .
      The accompanying consolidated financial statements should be read in conjunction
      with the more detailed “restated” consolidated financial statements, and the
      related footnotes thereto, filed with the Company’s amended Annual Report on
      Form 10KSB/A for the year ended December 31, 2007 filed on June 26, 2008.





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 $1,125,899 and $3,776,225 for the three and nine months
      ended September 30, 2008, and a net loss during the development stage from
      inception in November 15, 2005 through September 30, 2008 of $138,639,617.
      The
      Company’s operations are in the development stage, and the Company has not
      generated any revenue since inception. The Company’s existence in the current
      period has been dependent upon advances from related parties and other
      individuals, and the sale of senior notes payable.





One
      of
      the principal reasons for the Company’s substantial doubt regarding its ability
      to continue as a going concern involves the fact that as of December 31, 2007, the Company’s principal asset, a marketing and
      distribution intangible asset in the amount of $125,000,000 was written off
      as
      impaired as discussed in Note 6 due to the fact that environment laws affecting
      timber harvesting have become more restrictive in Papua New Guinea.


5




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
      Statement of Financial Accounting Standards No. 7 “Accounting and Reporting by
      Development-Stage Enterprises”. A development state 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 SFAS No. 109, “Accounting for Income Taxes.” Under the asset and
      liability method of SFAS No. 109, deferred tax assets and liabilities are
      recognized for the future tax consequences attributable to differences between
      the financial statement carrying amounts of existing assets and liabilities
      and
      their respective tax bases. A valuation allowance has been provided for the
      Company's net deferred tax asset, due to uncertainty of
      realization.





Effective
      January 1, 2007, the Company adopted Financial Accounting Standard Board
      Interpretation No. 48 Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN
      48 clarifies the accounting for uncertainty in income taxes recognized in an
      enterprise’s financial statements in accordance with SFAS Statement No. 109
      Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and
      measurement attributes for the financial statement recognition and measurement
      of a tax position taken or expected to be taken in tax return. FIN 48 also
      provides guidance on derecognition, classification, interest and penalties,
      accounting interim period, disclosure and transition. There were no adjustments
      required upon adoption of FIN 48.




Fair
      value of financial instruments:




For
      financial statement purposes, financial instruments include cash, accounts
      and
      accrued expenses payable, and amounts due to Empire Advisory, LLC (“Empire”) (as
      discussed in Notes 6 and 7) for which the carrying amounts approximated fair
      value because of their short maturity.




Use
      of estimates:




The
      preparation of consolidated financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the consolidated financial statements and the reported amounts
      of
      revenues and expenses during the reporting period. Actual results may differ
      from those estimates.


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)




Loss
      per share:




The
      Company complies with the requirements of the Financial Accounting Standards
      Board issued Statement of Financial Accounting Standards No. 128, “Earning per
      share” (“SFAS No. 128”). SFAS No. 128 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, 2007 and for the period from November
      15,
      2005 to September 30, 2008. As of September 30, 2008, there are no dilutive
      equity instruments outstanding. However, the Company has 355,000 and 0 shares
      of
      Series A Convertible Preferred Stock and 25,000 and 0 shares of Series C
      Convertible Preferred Stock that are issuable as of September 30, 2008 and
      2007,
      respectively.




Acquired
      intangibles:




Intangible
      assets were comprised of an exclusive sales and marketing agreement. In
      accordance with SFAS 142, “Goodwill and Other Intangible Assets” 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).


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)





Consideration
      of Other Comprehensive Income Items:





SFAS
      130 - Reporting 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 September
      30,
      2008, the Company’s consolidated financial statements do not contain any changes
      in equity that are required to be reported separately in comprehensive
      income.





Recent
      Accounting Pronouncements:





In
      May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
      Insurance Contracts-an interpretation of FASB Statement No. 60.” Diversity
      exists in practice in accounting for financial guarantee insurance contracts
      by
      insurance enterprises under FASB Statement No. 60, Accounting and Reporting
      by
      Insurance Enterprises. 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 163 is not expected to have a material impact on the
      Company’s financial position.





In
      May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
      Accounting Principles.” The
      current GAAP hierarchy, as set forth in the American Institute of Certified
      Public Accountants (AICPA) Statement on Auditing Standards No. 69, The Meaning
      of Present Fairly in Conformity With Generally Accepted Accounting Principles,
      has been criticized because (1) it is directed to the auditor rather than the
      entity, (2) it is complex, and (3) it ranks FASB Statements of Financial
      Accounting Concepts. The FASB believes that the GAAP hierarchy should be
      directed to entities because it is the entity (not its auditor) that is
      responsible for selecting accounting principles for financial statements that
      are presented in conformity with GAAP. Accordingly, the FASB concluded that
      the
      GAAP hierarchy should reside in the accounting literature established by the
      FASB and is issuing this Statement to achieve that result. This Statement is
      effective 60 days following the SEC’s approval of the Public Company Accounting
      Oversight Board amendments to AU Section 411, The Meaning of Present Fairly
      in
      Conformity With Generally Accepted Accounting Principles. The
      adoption of FASB 162 is not expected to have a material impact on the Company’s
      financial position.





In
      March
      2008, the FASB issued SFAS No. 161, “ Disclosures
      about Derivative Instruments and Hedging Activities—an amendment of FASB
      Statement No. 133.” Constituents have expressed concerns that the existing
      disclosure requirements in FASB Statement No. 133, Accounting for Derivative
      Instruments and Hedging Activities, do not provide adequate information about
      how derivative and hedging activities affect an entity’s financial position,
      financial performance, and cash flows. SFAS No. 161 requires enhanced
      disclosures about an entity’s derivative and hedging activities and thereby
      improves the transparency of financial reporting. This Statement is effective
      for financial statements issued for fiscal years and interim periods beginning
      after November 15, 2008, with early application encouraged. This Statement
      encourages, but does not require, comparative disclosures for earlier periods
      at
      initial adoption. The adoption of FASB 161 is not expected to have a material
      impact on the Company’s financial position.




In
      December 2007, the FASB issued SFAS No.160, “Noncontrolling Interests in
      Consolidated Financial Statements - an amendment of ARB No. 51”.  SFAS
      No.160 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. 
SFAS No.160 is effective for fiscal years, beginning on or after December 15,
      2008 and cannot be applied earlier.





In
      December 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      141(revised 2007), “Business Combinations,” (“FASB 141R”). This standard
      requires that entities recognize the assets acquired, liabilities assumed,
      contractual contingencies and contingent consideration measured at their fair
      value at the acquisition date for any business combination consummated after
      the
      effective date. It further requires that acquisition-related costs are to be
      recognized separately from the acquisition and expensed as incurred. FASB 141R
      is effective for fiscal years beginning after December 15, 2008.





The
      Company does not anticipate that the adoption of SFAS No. 141R and No. 160
      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.


8




In
      December 2007, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 110, “Use of a Simplified Method in Developing Expected Term of
      Share Options” (“SAB 110”). SAB 110 expresses the current view of the staff that
      it will accept a company’s election to use the simplified method discussed in
      Staff Accounting Bulletin 107, *Share Based Payment* , (“SAB 107”), for estimating the expected term of “plain vanilla” share options
      regardless of whether the company has sufficient information to make more
      refined estimates. SAB 110 became effective for the Company on January 1, 2008.
      The adoption of SAB 110 is not expected to have a material impact on the
      Company’s financial position.




9




ARROW
      RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
      DEVELOPMENT STAGE COMPANY)


NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS




NOTE
      3 - AGREEMENT AND PLAN OF MERGER BETWEEN ARROW RESOURCES DEVELOPMENT, LTD.
      AND
      CNE GROUP, INC.




In
      August 2005, the Company entered into an Agreement and Plan of Merger (“the
      Agreement”) with CNE Group, Inc. (“CNE”) under which, CNE was required to issue
      10 million shares of Series AAA convertible preferred stock (“the Preferred
      Stock”) to the Company, representing 96% of all outstanding equity of CNE on a
      fully diluted basis for the Marketing and Distribution Agreement provided to
      the
      Company, Empire, as agent. Under the Agreement, the Company changed its name
      to
      Arrow Resources Development, Inc. and divested all operations not related to
      Arrow Ltd. The Preferred Stock contained certain liquidation preferences and
      each share of the Preferred Stock was convertible to 62.4 shares of common
      stock.




The
      transaction was consummated upon the issuance of the Preferred Stock on November
      14, 2005, which was used to settle the senior secured note payable for
      $125,000,000 and $1,161,000 of cash advances from Empire. The Preferred Stock
      was subsequently converted to common stock on December 2, 2005, for a total
      of
      approximately 649 million shares of common stock outstanding. This was recorded
      as a change of control transaction that was accounted for as a recapitalization
      of CNE.




The
      operations of the Company's wholly-owned subsidiary, Career Engine, Inc. were
      discontinued prior to the recapitalization transaction. The net assets of Career
      Engine had no value as of December 31, 2005.




During
      the period from November 15, 2005 to December 31, 2005, the Company incurred
      $249,252 of expenses incurred as part of recapitalization
      transaction.





NOTE
      4 - INCOME TAXES




In
      August 2005, the Company entered into an Agreement and Plan of Merger (“the
      Agreement”) with CNE Group, Inc. (“CNE”). Under the Agreement, the Company
      changed its name to Arrow Resources Development, Inc. and divested all
      operations not related to Arrow Ltd. The transaction was consummated upon the
      issuance of the Preferred Stock on November 14, 2005. (See Note 3 for a detailed
      description of the transaction.)





Consequently,
      as of November 14, 2005 the predecessor CNE entity had a net operating loss
      carryforward available to reduce future taxable income for federal and state
      income tax purposes of the successor entity of approximately zero, because
      those
      losses arose from the predecessor CNE exiting previous business lines that
      had
      generated operating losses.





For
      tax purposes, all expenses incurred by the re-named entity now known as Arrow
      Resources Development, Inc. after November 14, 2005 have been capitalized as
      start up costs in accordance with Internal Revenue Code Section (“IRC”) No. 195.
      Pursuant to IRC 195, the Company will be able to deduct these costs by
      amortizing them over a period of 15 years for tax purposes once the Company
      commences operations. Accordingly for tax purposes, 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 or 2007.




10


ARROW
      RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
      DEVELOPMENT STAGE COMPANY)


NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS




NOTE
      4 - INCOME TAXES (Continued)




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




Net
                  operating loss carryforward
              
              $
              63,007Differences
                  resulting from use of cash basis for tax purposes
              
              
              -Total
                  deferred tax assets
              
              
              63,007Less
                  valuation allowance
              
              
              (63,007
              )Net
                  deferred tax assets
              
              $
              —




The
      net operating losses expire as follows:




December
                  31, 2026
              
              $
              127,349December
                  31, 2027
              
              
              57,967Net
                  Operating Loss Carryover
              
              $
              185,316





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
              
              $
              138,454,301Delaware
                  franchise taxes deductible on Company's tax return
              
              
              185,316Net
                  loss for the period from inception (November 15, 2005) to September
                  30,
                  2008
              
              $
              138,639,617




NOTE
      5 - NOTES PAYABLE




As
      of September 30, 2008 and December 31, 2007, the Company had notes payable
      outstanding as follows:




**Holder**
                **Terms**
                
                **September
                    30,**
                
                **December
                    31,****2008**
                
                **2007**Barry
                    Blank (1)
                Due
                    on demand, 10% interest
                $
                200,000
                $
                200,000Accrued
                    interest (1)
                
                
                20,000
                
                20,000H.
                    Lawrence Logan
                Due
                    on demand, non-interest bearing
                
                25,000
                
                25,000John
                    Marozzi (2)
                Due
                    on demand, non-interest bearing
                
                100,000
                
                -James
                    R. McConnaughy (3)
                Due
                    on demand, non-interest bearing
                
                38,000
                
                -Christopher
                    T. Joffe (4)
                Due
                    on demand, non-interest bearing
                
                63,000
                
                -John
                    E. McConnaughy III (5)
                Due
                    on demand, non-interest bearing
                
                12,000
                
                -Frank
                    Ciolli (6)
                Due
                    on demand, non-interest bearing
                
                550,000
                
                -Barry
                    Weintraub (7)
                Due
                    on demand, non-interest bearing
                
                -
                
                -John
                    Frugone (8)
                Due
                    on demand, non-interest bearing
                
                100,000
                
                -**Total**
                
                $
                1,108,000
                $
                245,000




(1)
            The
                Company has a note payable outstanding for $200,000, plus $20,000
                in
                accrued interest. Although the predecessor company (CNE) reserved
                456,740
                shares of its common stock to retire this debt pursuant to a settlement
                agreement, the stock cannot be issued until the party to whom the
                note was
                assigned by its original holder emerges from bankruptcy or reorganization.
                During the nine months ended September 30, 2008, no interest expense
                was
                recorded on the note as the number of shares to be issued was
                determined in the settlement agreement, executed prior to the
                recapitalization.


(2)
            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
                in debt
                issue costs related to the 1,000,000 shares of common stock that
                were
                issuable to John Marozzi as of March 31, 2008. As of September 30,
                2008,
                these shares have not yet been issued. On May 5, 2008, John Marozzi
                received repayment of $50,000 from the Company leaving a balance
                of
                $100,000 unpaid principal as of September 30, 2008.


(3)
            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 toJames
                R. McConnaughyas of September 30, 2008. James McConnaughy is a relative of John
                E.
                McConnaughy Jr., a Company Director discussed in Note 7
                [3].


11


(4)
            On
                April 24, 2008, the Company received a $38,000 non-interest bearing
                advance from Christopher T. Joffe, which is due on demand. In repayment,
                the Company will repay the full amount of the note plus 304,000 shares
                of
                the Company’s unregistered restricted common stock.The
                Company recorded $24,320 in debt issue costs related to the 304,000
                shares
                of common stock that are issuable toChristopher
                T. Joffeas of September 30, 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.


(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 September 30,
                2008.


(6)
            On
                April 30, 2008, the Company received a $500,000 non-interest bearing
                advance from Frank Ciolli. In repayment, the Company promises to
                pay Frank
                Ciolli the principal sum of $550,000 on or before October 31, 2008.


(7)
            April
                8, 2008, the Company received a $50,000 non-interest bearing advance
                from
                Barry Weintraub, which was due on demand and was repaid by the Company
                on
                April 30, 2008.. In repayment, the Company was to repay the full
                amount of
                the note plus 2,000,000 shares of the Company’s unregistered restricted
                common stock. The Company recorded $120,000 in debt issue costs related
                to
                the 2,000,000 shares of common stock that are issuable to Barry Weintraub
                as of September 30, 2008.


(8)
            On
                September 10, 2008, the Company received a $100,000 non-interest
                bearing
                advance from John Frugone, which is due on demand. In repayment,
                the
                Company will repay the full amount of the note in cash over two years
                from
                the date the note is executed. John Frugone is a relative of Peter
                Frugone, the Company’s CEO and also a Company Director.







12





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




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.
      No amortization of the agreement had ever been taken during the period from
      inception (November 15, 2005) to September 30, 2008, as the relevant operations
      had not commenced.





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





·
            Significant
                inability to achieve expected projected future operating
                results;·
            Significant
                changes in the manner in which the work is able to be performed what
                increases costs;·
            Significant
                negative impact on the
                environment.





We
      perform goodwill impairment tests on an annual basis and on an interim basis
      if
      an event or circumstance indicates that it is more likely than not that
      impairment has occurred. We assess the impairment of other amortizable
      intangible assets and long-lived assets whenever events or changes in
      circumstances indicate that the carrying value may not be recoverable. Factors
      we consider important that could trigger an impairment review include
      significant underperformance to historical or projected operating results,
      substantial changes in our business strategy and significant negative industry
      or economic trends.





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


13





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 September 30, 2008 and December 31, 2007, the Company had short-term
      borrowings of $3,585,221 and $3,029,183, 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 nine months
      ended September 30, 2008 and 2007 incurred to Empire totaled $1,609,192 and
      $1,348,836, respectively. Consulting fees and services charged in the Statement
      of Operations for the year ended December 31, 2007 incurred to Empire totaled
      $1,858,386. Consulting fees and services charged to the Statement of Operations
      for the year ended December 31, 2006 and for the period from November 15, 2005
      to December 31, 2005 incurred to Empire totaled $1,591,016 and $698,834,
      respectively.




During
      the nine months ended September 30, 2008, the Company incurred Director’s
      compensation expense of $51,250 to Mr. Frugone, consisting of cash compensation
      of $37,500 and stock based compensation of $13,750 based upon the Company’s
      share trading price on September 30, 2008. 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 September 30, 2008, the Company is
      obligated to issue 437,500 Common Stock shares to him, and “Accounts payable and
      accrued liabilities” includes $87,500 due to him for the cash based portion of
      his 2007 and 2008 director’s compensation (See Note 7[4]).





During
      the nine months ended September 30, 2008, the Company made cash payments of
      $1,053,155 to Empire under the agreement. During the nine months ended September
      30, 2007, the Company received additional advances of $1,031,498, from Empire
      under the agreement.





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




Consulting
      fees and services charged in the Statement of Operations for the nine months
      ended September 30, 2008 and 2007 incurred to Hans Karundeng and Rudolph
      Karundeng under Engagement and Consulting Agreements totaled $1,125,000 and
      $1,125,000, respectively. In addition, as of September 30, 2008 and December
      31,
      2007, the Company owed them $4,501,991 and $3,592,491, respectively, under
      these
      agreements. These agreements are discussed in detail in Note 11.





During
      the nine months ended September 30, 2008, the Company incurred Director’s
      compensation expense of $51,250 to Rudolph Karundeng, consisting of cash
      compensation of $37,500 and stock based compensation of $13,750 based upon
      the
      Company’s share trading price on September 30, 2008. 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 September 30, 2008, the Company
      is obligated to issue 437,500 Common Stock shares to him, and “Accounts payable
      and accrued liabilities” includes $87,500 due to him for the cash based portion
      of his 2007 director’s compensation (See Note 7[4]).


14





**[3]** Non-Interest Bearing Advance Received from Company Director:




In
      July 2006, the Company received a $150,000 non-interest bearing advance from
      John E. McConnaughy, Jr., a Director of the Company, which is due on demand.
      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. As of September
      30, 2008 and December 31, 2007, the Company had $1,892,000 and $1,375,000,
      respectively, left to be repaid to Mr. McConnaughy, which is included in “Due to
      Related Parties.”





During
      the nine months ended September 30, 2008, the Company incurred Director’s
      compensation expense of $51,250 to Mr. McConnaughy, consisting of cash
      compensation of $37,500 and stock based compensation of $13,750 based upon
      the
      Company’s share trading price on September 30, 2008. During the year ended
      December 31, 2007, the Company also incurred Director’s compensation expense
      $65,000 to Mr. McConnaughy, 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 September 30, 2008, the Company
      is
      obligated to issue 437,500 Common Stock shares to him, and “Accounts payable and
      accrued liabilities” includes $87,500 due to him for the cash based portion of
      his 2007 director’s compensation (See Note 7[4]).





**[4]** Directors’ Compensation:





On
      December 3, 2007, the Board of Directors approved a plan to compensate all
      members of the Board of Directors at a rate of $50,000 per year and 250,000
      shares of Company common stock effective January 1, 2007. This compensation
      plan
      applies to any board member that belonged to the Board as of and subsequent
      to
      January 1, 2007. Those board members that were only on the Board for part of
      the
      year will received pro-rata compensation based on length of service. As of
      September 30, 2008 and December 31, 2007, none of the shares under this plan
      have been issued and the Company has an accrued liability of $350,137 and
      $200,137, respectively, of cash-based compensation and recorded additional
      paid-in capital through those dates of $115,022 and $60,031, respectively,
      for
      stock-based compensation based on the fair value of 1,750,685 shares and
      1,000,685 to be issued to the members of the Board, respectively.




15




ARROW
      RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES


(A
      DEVELOPMENT STAGE COMPANY)


NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS




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. As of August 15, 2008, the Company has not received any
      additional capital contribution towards the stock purchase agreement. (See
      Note
      10 [5] - Stock Purchase Agreement.)





On
      November 20, 2007, the Board of Directors approved a private placement offering
      (the "Offering") approximating $2,000,000 to accredited investors at $1.00
      per
      share of Series A Convertible Preferred Stock. The Offering will consist of
      the
      Company's Series A Convertible Preferred Stock that will be convertible into
      our
      common stock. These securities are not required to be and will not be registered
      under the Securities Act of 1933. Shares issued under this placement will not
      be
      sold in the United States, absent registration or an applicable exemption from
      registration. As of September 30, 2008, the Company received $355,000 from
      investors towards the fulfillment of the financing agreement. The offering
      had
      an extended expiration date of February 15, 2008.





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
      September 30, 2008 and December 31, 2007, none of the shares under this plan
      have been issued and the Company has accrued $350,137 and $200,137 of cash-based
      compensation and recorded additional paid-in capital of $115,022 and $60,031
      for
      stock-based compensation based on the fair value of 1,750,685 shares and
      1,000,685 to be issued to the members of the Board.





On
      February 1, 2008, the Company entered into Independent Contractor Agreement
      with
      Charles A. Moskowitz of MoneyInfo. Inc. to provide consulting services to the
      Company in the lumber market development, ethanol market development, and
      compilation of market prices associated with lumber and ethanol and development
      of a database for the ongoing analysis of these markets. The term of this
      agreement was February 1, 2008 through July 31, 2008. As payment for the
      Consultant’s services, the Company will issue 2,600,000 shares of common stock
      to Charles A. Moskowitz. 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 September 30, 2008. As of September 30, 2008, 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
      September 30, 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.


16




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 September 30, 2008, the Company has expensed $25,000 related
      to 416,665 of the 1,000,000 shares of common stock that are now issuable to
      Ciolli Management Consulting, Inc. as of September 30, 2008.





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
      leaving a balance of $100,000 unpaid principal as of September 30, 2008.





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 September 30, 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 September 30, 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 September 30, 2008 (See Note 5).





On
      April
      25, 2008, the Company received a $12,000 non-interest bearing advance from
      John
      E. McConnaughy, III, which is due on demand. In repayment, the Company will
      repay the full amount of the note plus 96,000 shares of unregistered restricted
      common stock. The Company recorded $7,680 in debt issue costs related to the
      96,000 shares of common stock that are issuable to John E. McConnaughy, III
      as
      of September 30, 2008 (See Note 5).





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, 2008, the Company received $25,000 from
      investors towards the fulfillment of the financing agreement.





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 September 30, 2008, 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 September 30, 2008, the Company recorded 49,990 to Additional
      Paid-in Capital to be issued related to this transaction.




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 period
      from the commencement of the development stage (November 15, 2005) to September
      30, 2008, and for the period from the commencement of the development stage
      (November 15, 2005) to December 31, 2007 in the same amount.




NOTE
      10 - COMMITMENTS AND OTHER MATTERS




**[1]** Engagement
      and Consulting Agreements entered into with individuals affiliated with
      APR


17




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 nine months ended September 30, 2008, the Company made cash payments to
      Hans
      Karundeng of $250,000 under his agreement. During the nine months ended
      September 30, 2008, the Company made cash payments of $3,000 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 nine months ended September 30, 2008, the Company made cash payment of
      $1,053,155 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




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





In
      May 2006, the Company was advised that it was alleged to be in default of a
      settlement agreement entered into in January of 2005 by CNE, its predecessor
      company, related to the release of unrestricted, freely-tradable, non-legend
      shares of stock. In August 2006, the plaintiffs, alleging the default, obtained
      a judgment in the 17th Judicial Circuit Court Broward County, Florida for
      approximately $1,000,000. On November 13, 2007, legal counsel engaged by
      Management commenced
      an action on the Company’s behalf in the above Circuit Court seeking to vacate
      and set aside the 2006 judgment asserting claims under Rule 1.540(b) of the
      Florida Rules of Civil Procedure. Our counsel’s evaluation is that the Company
      has only a limited chance of having the 2006 judgment opened by the Court
      because Florida law provides very narrow grounds for opening a judgment once
      a
      year has passed from its entry. The Courts are generally reluctant to disturb
      final judgments and the Company’s grounds for opening the judgment depend on the
      Court’s adopting a somewhat novel argument regarding such matters. If, however,
      the Court does open the default judgment, the Company will then have the
      opportunity to defend the 2006 action and, in such event, our counsel believes
      that the Company has a reasonable chance of succeeding in defending that claim,
      at least in part, based on the documents he has reviewed. As of December 31,
      2007, the Company has accrued $1,053,385 related to this matter.




**[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 September
      30, 2008, the Company has not recovered any revenue from this
      agreement.


18




In
      April of 2006, Arrow Resources Development, Ltd. entered into an agency
      agreement with APR to provide marketing and distribution services for timber
      resource products and currently has an exclusive marketing and sales agreement
      with APR to market lumber and related products from land leased by GMPLH which
      is operated by APR and it's subsidiaries, located in Indonesia. Under the
      agreement Arrow Ltd. will receive a commission of 10% of gross sales derived
      from lumber and related products. As of November 4, 2008, the Company has begun
      to receive revenue under 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 September 30, 2008, the Company
      has
      not recovered any revenue from this agreement.





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 September 30, 2008. As of September 30, 2008, 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
      September 30, 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 as 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 September 30, 2008, the Company has expensed $25,000 related
      to 416,665 of the 1,000,000 shares of common stock that are now issuable to
      Ciolli Management Consulting, Inc. as of September 30, 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 349,370,000 shares or 53.76%. As of September 30, 2008,
      the Company has received $1,485,000 from APR towards the fulfillment of this
      agreement. As of November 10, 2008, the Company has received no additional
      funds.





(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, 2008, the
      Company raised $355,000 from investors under this financing agreement.





(c)
      Private Placement Offering- Series C Convertible Preferred Stock


19




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, 2008, the Company received $25,000 from
      investors towards the fulfillment of the financing agreement.





On
      April 20, 2008, the Company issued 25,000 shares of Series C Convertible
      Preferred Stock to Scott B. Neff according to the Preferred Stock purchase
      agreement for the aggregate purchase price of $25,000 at $1.00 per share. Each
      share of Preferred Stock shall be convertible into shares of the Company’s
      common stock, par value $0.00001 per share at the Conversion Ratio, solely
      at
      the option of the Company, at any time and from time to time from and after
      the
      Original Issue Date.




**[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.




20





At
      September 30, 2008, the Company has accrued an additional $105 for estimated
      unpaid Delaware franchise taxes incurred to date reportable during the year
      ending December 31, 2008. The Company had estimated unpaid Delaware franchise
      taxes for the years ended December 31, 2007, 2006 and 2005 in the amount of
      $57,650, $57,650 and $69,699, respectively. Accordingly, as of September 30,
      2008, accounts and accrued expenses payable includes aggregate estimated unpaid
      Delaware Franchise taxes of $185,316. The Company hopes to file the delinquent
      tax returns some time towards the end of 2008 and pay the amount owned in full
      during the fourth quarter of 2008.




**[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 September 30,**
              
              **Amounts**2009
              
              $
              4,134,5062010
              
              
              3,584,048$
              7,718,554





The
      Company also engages certain consultants to provide services including
      management of the corporate citizenship program and investor relation services.
      These agreements contain cancellation clauses with notice periods ranging from
      zero to sixty days.





NOTE
      11 - SUBSEQUENT EVENTS





On
      October 13, 2008, the Company received a $50,000 advance from John Marozzi.
      The
      advance bears interest payable in the form of 1,000,000 shares of the Company’s
      common stock. The Company will repay the full amount of the note in cash within
      60 days from the date the note is executed.





On
      October 16, 2008, the Company received a $50,000 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
      October 31, 2008, the Company received an extension of 60 days of the $550,000
      non-interest bearing advance from Frank Ciolli.


The
      note
      was originally due on October 31, 2008. As compensation for granting the
      extension, the Company will issue 1,000,000 shares of restricted, unregistered
      common stock to Frank Ciolli.




21





**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 September 30, 2008
      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 September 30, 2008, the Company has not recovered
      any revenue from 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.




22




**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.





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





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





·
            Significant
                inability to achieve expected projected future operating
                results;





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





·
            Significant
                negative impact on the
                environment.




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





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




**RECENT
      ACCOUNTING PRONOUNCEMENTS**





In
      May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
      Insurance Contracts-an interpretation of FASB Statement No. 60.” Diversity
      exists in practice in accounting for financial guarantee insurance contracts
      by
      insurance enterprises under FASB Statement No. 60, Accounting and Reporting
      by
      Insurance Enterprises. 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 163 is not expected to have a material impact on the
      Company’s financial position.





In
      May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
      Accounting Principles.” The
      current GAAP hierarchy, as set forth in the American Institute of Certified
      Public Accountants (AICPA) Statement on Auditing Standards No. 69, The Meaning
      of Present Fairly in Conformity With Generally Accepted Accounting Principles,
      has been criticized because (1) it is directed to the auditor rather than the
      entity, (2) it is complex, and (3) it ranks FASB Statements of Financial
      Accounting Concepts. The FASB believes that the GAAP hierarchy should be
      directed to entities because it is the entity (not its auditor) that is
      responsible for selecting accounting principles for financial statements that
      are presented in conformity with GAAP. Accordingly, the FASB concluded that
      the
      GAAP hierarchy should reside in the accounting literature established by the
      FASB and is issuing this Statement to achieve that result. This Statement is
      effective 60 days following the SEC’s approval of the Public Company Accounting
      Oversight Board amendments to AU Section 411, The Meaning of Present Fairly
      in
      Conformity With Generally Accepted Accounting Principles. The
      adoption of FASB 162 is not expected to have a material impact on the Company’s
      financial position.


23




In
      March
      2008, the FASB issued SFAS No. 161, “ Disclosures
      about Derivative Instruments and Hedging Activities—an amendment of FASB
      Statement No. 133.” Constituents have expressed concerns that the existing
      disclosure requirements in FASB Statement No. 133, Accounting for Derivative
      Instruments and Hedging Activities, do not provide adequate information about
      how derivative and hedging activities affect an entity’s financial position,
      financial performance, and cash flows. SFAS No. 161 requires enhanced
      disclosures about an entity’s derivative and hedging activities and thereby
      improves the transparency of financial reporting. This Statement is effective
      for financial statements issued for fiscal years and interim periods beginning
      after November 15, 2008, with early application encouraged. This Statement
      encourages, but does not require, comparative disclosures for earlier periods
      at
      initial adoption. The adoption of FASB 161 is not expected to have a material
      impact on the Company’s financial position.




In
      December 2007, the FASB issued SFAS No.160, “Noncontrolling Interests in
      Consolidated Financial Statements - an amendment of ARB No. 51”.  SFAS
      No.160 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. 
SFAS No.160 is effective for fiscal years, beginning on or after December 15,
      2008 and cannot be applied earlier.





In
      December 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      141(revised 2007), “Business Combinations,” (“FASB 141R”). This standard
      requires that entities recognize the assets acquired, liabilities assumed,
      contractual contingencies and contingent consideration measured at their fair
      value at the acquisition date for any business combination consummated after
      the
      effective date. It further requires that acquisition-related costs are to be
      recognized separately from the acquisition and expensed as incurred. FASB 141R
      is effective for fiscal years beginning after December 15, 2008.





The
      Company does not anticipate that the adoption of SFAS No. 141R and No. 160
      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
      noncontrolling interest.





In
      December 2007, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 110, “Use of a Simplified Method in Developing Expected Term of
      Share Options” (“SAB 110”). SAB 110 expresses the current view of the staff that
      it will accept a company’s election to use the simplified method discussed in
      Staff Accounting Bulletin 107, *Share Based Payment* , (“SAB 107”), for estimating the expected term of “plain vanilla” share options
      regardless of whether the company has sufficient information to make more
      refined estimates. SAB 110 became effective for the Company on January 1, 2008.
      The adoption of SAB 110 is not expected to have a material impact on the
      Company’s financial position.




**RESULTS
      OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
      2008**





In
      November 2005, we discontinued and disposed of our subsidiaries except for
      Arrow
      Ltd. in conjunction with the recapitalization of the Company. The Company had
      no
      revenue during this period as Arrow Ltd. is still in the development stage.
      For
      the three and nine months ended September 30, 2008, we incurred consulting
      fees
      of $1,031,772 and $3,124,065, of which, $956,967 and $2,734,192 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 and nine
      months ended September 30, 2007, we incurred consulting fees of $899,311 and
      $2,611,020, of which, $858,508 and $2,473,835 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 and nine months ended September 30, 2008 and
      September 30, 2007 as the Company is in development stage.





**COST
      OF GOODS SOLD**




There
      was no cost of goods sold for the three and nine months ended September 30,
      2008
      and September 30, 2007 as the Company is in development stage.





**OTHER
      EXPENSES**





Compensation,
      consulting and related costs increased to $1,031,772 and $3,124,065 for the
      three and nine months ended September 30, 2008 as compared to $899,311 and
      $2,611,020 for the three and nine months ended September 30, 2007, $7,955,066
      for the period from inception (November 15, 2005) to December 31, 2007, and
      $11,079,131 for the accumulated during the development stage for the period
      from
      inception (November 15, 2005) to September 30, 2008. 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.


24




General
      and administrative expenses increased to $29,022 and $180,525 for the three
      and
      nine months ended September 30, 2008 as compared to $44,356 and $98.761 for
      the
      three and nine months ended September 30, 2007, $554,177 for the period from
      inception (November 15, 2005) to December 31, 2007, and $734,702 for the
      accumulated during the development stage for the period from inception (November
      15, 2005) to September 30, 2008. This was primarily due to an increase in
      advertising and accounting expense.





Directors’
      compensation increased to $65,000 and $205,000 for the three and nine months
      ended September 30, 2008, none for the three and nine months ended September
      30,
      2007, $260,178 for the year ended December 31, 2007 as compared to $465,178
      accumulated during the development stage for the period from inception (November
      15, 2005) to September 30, 2008. The increase 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.




Delaware
      franchise taxes amount decreased to $105 and $315 for the three and nine months
      ended September 30, 2008 compared to $14,413 and $43,239 for the three and
      nine months ended September 30, 2007, $185,001 for the period from inception
      (November 15, 2005) to December 31, 2007 and $185,316 for the period from
      inception (November 15, 2005) to September 30, 2008. The Company is delinquent
      in its filing and payment of the Delaware Franchise Tax report and, accordingly,
      is not in good standing. At September 30, 2008, the Company has estimated unpaid
      Delaware franchise taxes for the years ended December 31, 2007, 2006 and 2005
      in
      the amount of $57,650, $57,650 and $69,699, respectively. 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 2008 and pay
      the amount owned in full during the fourth quarter of 2008.





Total
      operating expenses during the development stage increased to $1,125,899 and
      $3,509,905 for the three and nine months ended September 30, 2008 as compared
      to
      $958,080 and $2,753,020 for the three and nine months ended September 30, 2007,
      $8,954,422 for the period from inception (November 15, 2005) to December 31,
      2007, and $12,464,327 accumulated during the development stage for the period
      from inception (November 15, 2005) to September 30, 2008.





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
      leaving a balance of $100,000 unpaid principal as of September 30, 2008.





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 September 30, 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 September 30, 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 September 30, 2008 (See Note 5).





On
      April
      25, 2008, the Company received a $12,000 non-interest bearing advance from
      John
      E. McConnaughy, III, which is due on demand. In repayment, the Company will
      repay the full amount of the note plus 96,000 shares of unregistered restricted
      common stock. The Company recorded $7,680 in debt issue costs related to the
      96,000 shares of common stock that are issuable to John E. McConnaughy, III
      as
      of September 30, 2008 (See Note 5).





On
      September 10, 2008, the Company received a $100,000 non-interest bearing advance
      from John Frugone, which is due on demand. In repayment, the Company will repay
      the full amount of the note in cash over two years from the date the note is
      executed. John Frugone is a relative of Peter Frugone, the Company’s CEO and
      also a Company Director.





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.)


25





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





In
      May 2006, the Company was advised that it was alleged to be in default of a
      settlement agreement entered into in January of 2005 by CNE, its predecessor
      company, related to the release of unrestricted, freely-tradable, non-legend
      shares of stock. In August 2006, the plaintiffs, alleging the default, obtained
      a judgment in the 17th Judicial Circuit Court Broward County, Florida for
      approximately $1,000,000. On November 13, 2007, legal counsel engaged by
      Management commenced
      an action on the Company’s behalf in the above Circuit Court seeking to vacate
      and set aside the 2006 judgment asserting claims under Rule 1.540(b) of the
      Florida Rules of Civil Procedure. Our counsel’s evaluation is that the Company
      has only a limited chance of having the 2006 judgment opened by the Court
      because Florida law provides very narrow grounds for opening a judgment once
      a
      year has passed from its entry. The Courts are generally reluctant to disturb
      final judgments and the Company’s grounds for opening the judgment depend on the
      Court’s adopting a somewhat novel argument regarding such matters. If, however,
      the Court does open the default judgment, the Company will then have the
      opportunity to defend the 2006 action and, in such event, our counsel believes
      that the Company has a reasonable chance of succeeding in defending that claim,
      at least in part, based on the documents he has reviewed. As of December 31,
      2007, the Company has accrued $1,053,385 related to this matter.


26




**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 September 30, 2008 and December 31, 2007 the Company had
      $16 and $1,040 of cash, respectively. We had losses of $1,125,899 and $3,776,225
      for the three and nine months ended September 30, 2008, and do not currently
      generate any revenue. We had losses of $958,080 and $2,753,020 for the three
      and
      nine months ended September 30, 2007. In order for us to survive during the
      next
      twelve months we will need to secure approximately $350,000 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
      September 30, 2008, we had no off-balance sheet arrangements.





**OPERATING
      ACTIVITIES**





We
      used $1,787,062 of cash in our operating activities during the nine months
      ended
      September 30, 2008. We had a net loss of $3,776,225. We had an increase in
      stock-based directors’ compensation to be issued of $55,000, accounts payable
      and accrued expenses payable of $1,334,342 mostly related to compensation and
      management fees, debt issue costs related to note payables of $216,321, common
      stock to be issued for consulting and marketing services of $87,501, common
      stock to be issued for cash received by the Company of $50,000, and common
      stock
      to be issued for consulting and marketing services of $245,999. In addition,
      we
      had a working capital deficiency of $11,746,821 at September 30, 2008. We did
      not have any material commitments for capital expenditures as of September
      30,
      2008.





**INFLATION**




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





**RECENT
      TRANSACTIONS**




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, 2008, the Company has 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
      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
      September 30, 2008, none of the shares under this plan have been issued and
      the
      Company has accrued $350,137 of cash and recorded additional paid-in capital
      of
      $115,022 for stock compensation based on the fair value of 1,750,685 shares
      to
      be issued to the members of the Board.





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, 2008, the Company received $25,000 from
      investors towards the fulfillment of the financing agreement.





**Item 3.**
            **Quantitative
                and Qualitative Disclosures About Market
                Risk**





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




**Item 4.**
            **Controls
                and Procedures**





Evaluation
      of Disclosure Controls and Procedures


27




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 September 30, 2008 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. As a result of
      the
      ineffectiveness of our controls, a
      description of a litigation in which the Company is a party was not accurately
      described in the Company’s Form 10K filed on April 15, 2008. In addition, the
      Company’s financial statements did not reflect a reserve relating to a judgment
      against the Company in this litigation. 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 September 30, 2008 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 September 30, 2008, that materially affected, or is
      reasonably likely to materially affect, the Company’s internal control over
      financial reporting.





**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
      December 31, 2007, the Company has accrued $1,053,385 related to this
      matter.


28




**Item 1A.**
            **Risk
                Factors**





Item 1A.
      “Risk Factors” of our Annual Report on Form 10-KSB for the year ended
      December 31, 2007 includes a detailed discussion of our risk factors. There
      have been no significant changes to our risk factors as set forth in our 2007
      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, 2008, the Company has received $355,000 from
      investors towards the fulfillment of this financing agreement. 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
      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
      September 30, 2008, none of the shares under this plan have been issued and
      the
      Company has accrued $350,137 of cash and recorded additional paid-in capital
      of
      $115,022 for stock compensation based on the fair value of 1,750,685 shares
      to
      be issued to the members of the Board.





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, 2008, the Company received $25,000 from
      investors towards the fulfillment of the financing agreement.





**Item 5.**
            **Other
                Information**




None




29





**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




30





**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:
                November 17, 2008
            By:
            /S/  PETER
                J. FRUGONEPeter
                J. Frugone
              President
                and Chief Executive Officer




Dated:
                November 17, 2008
            By:
            /S/  PETER
                J. FRUGONEPeter
                J. Frugone
              Principal
                Accounting Officer


31