SECURITIES AND
EXCHANGE COMMISSION


Washington, D.C.
20549







FORM
10-Q




(Mark One)




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




For the quarterly period ended March 31,
2009




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




For the transition period
fromto




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.
      57thStreet, New York, NY
      10019(Address of Principal Executive
      Offices) (Zip Code)




212-262-2300


(Issuer's Telephone Number, including
Area Code)




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




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




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


________________________________________________________________





(Title of Class)





________________________________________________________________


(Title of Class)




Check whether the issuer; (1) filed
all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YesxNo ̈




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


Yes ̈Nox




The number of shares outstanding of each
of the issuer's classes of common equity, asofMay 19, 2009.




Class
            
            Outstanding at May 19, 2009Common stock - par value
      $0.00001
            
            656,381,335








ARROW RESOURCES DEVELOPMENT, INC.
      AND SUBSIDIARIES


(A DEVELOPMENT STAGE
      COMPANY)


FORM 10-Q


THREE MONTHS ENDED MARCH 31,
      2009








TABLE OF
      CONTENTS





PART I - FINANCIAL
      INFORMATIONItem 1.
            
            Financial
      Statements:Consolidated Balance Sheets at
      March 31, 2009 (Unaudited) and December 31, 2008
      (Audited)
            
            1Consolidated Statement of
      Operations for the three months ended March 31, 2009 and 2008 (Unaudited),
      and for the periods from inception (November 15, 2005) to December 31,
      2008 and from inception (November 15, 2005) to March 31,
      2009
            2Consolidated Statement of Changes
      in Stockholders' (Deficit) Equity for the three months ended March 31,
      2009 (Unaudited) and for the period from inception (November 14,
      2005) to December 31, 2005 and the years ended December 31, 2006, 2007 and
      2008 (Audited).
            3-4Consolidated Statement of Cash
      Flows for the three months ended March 31, 2009 (Unaudited) and March
      31, 2008 (Unaudited) and for the periods from inception (November 15,
      2005) to December 31, 2008 and from inception (November 15, 2005) to March
      31, 2009
            5Notes to the Consolidated
      Financial Statements (Unaudited)
            
            6-23Item 2.
            
            Management's Discussion and
      Analysis of Financial Condition and Results of
      Operations
            
            24-29Item 3.
            
            Quantitative and Qualitative
      Disclosures About Market Risk
            
            29Item 4.
            
            Controls and
      Procedures
            
            29PART II - OTHER
      INFORMATIONItem 1.
            
            Legal
      Proceedings
            
            30Item 1A.
            
            Risk
Factors
            
            30Item 2.
            
            Unregistered Sales of Equity
      Securities and Use of Proceeds
            
            30Item 3.
            
            Defaults Upon Senior
      Securities
            
            30Item 4.
            
            Submission of Matters to a Vote of
      Security Holders
            
            30Item 5.
            
            Other
      Information
            
            31Item 6.
            
            Exhibits
            
            32Signatures
            
            
            
            33












PART I - FINANCIAL
INFORMATION







Item 1.
            Financial
      Statements





ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES


(A DEVELOPMENT STAGE
COMPANY)





Unaudited Consolidated Balance
Sheets





March
      31, 2009
            
            
            December
      31, 2008ASSETSCurrent:Cash
            
            $
            45
            
            
            $
            16Total
      current assets
            
            
            45
            
            
            
            16Total
      assets
            
            $
            45
            
            
            $
            16LIABILITIES
      AND STOCKHOLDERS’ (DEFICIT)Current:Accounts
      and accrued expenses payable, including $5,416,628 and $5,019,628 due to
      Company shareholders and directors, respectively
            
            $
            6,061,679
            
            
            $
            5,587,742Estimated
      liability for legal judgment obtained by predecessor entity
      shareholder
            
            
            1,219,293
            
            
            
            1,203,492Due
      to related parties
            
            
            6,161,933
            
            
            
            5,890,687Notes
      payable, including accrued interest of $20,000 and $20,000 at March 31,
      2009 and December 31, 2008, respectively
            
            
            1,308,000
            
            
            
            1,228,000Total
      liabilities
            
            
            14,750,905
            
            
            
            13,909,921Commitments
      and contingencies
            
            
            -
            
            
            
            -STOCKHOLDERS’
      (DEFICIT)Preferred
      stock, $0.00001 par value, 6 million shares authorized, no shares issued
      or outstanding at March 31, 2009 and December 31, 2008
            
            
            -
            
            
            
            -Preferred
      stock Series A, $0.00001 par value, 2 million shares authorized, 355,000
      and 355,000 shares to be issued at March 31, 2009 and December 31, 2008
      December 31, 2007
            
            
            355,000
            
            
            
            355,000Preferred
      stock Series C, $0.00001 par value, 2 million shares authorized, 25,000
      and 25,000 shares to be issued at March 31, 2009 and December 31,
      2008
            
            
            25,000
            
            
            
            25,000Common
      stock, $0.00001 par value, 1 billion shares authorized, 656,381,335 and
      655,243,240 issued and outstanding at March31, 2009 and December 31, 2008,
      respectively
            
            
            6,564
            
            
            
            6,552Common
      stock to be issued, $0.00001 par value, 15,944,685 and 12,194,685 shares
      to be issued at March 31, 2009 and December 31, 2008,
      respectively
            
            
            160
            
            
            
            122Additional
      paid-in capital
            
            
            126,337,864
            
            
            
            125,927,389Accumulated
      deficit
            
            
            (141,475,448
            )
            
            
            (140,223,968
            )Total
      stockholders’ (deficit)
            
            
            (14,706,460
            )
            
            
            (13,909,905
            )Total
      liabilities and stockholders’ (deficit)
            
            $
            45
            
            
            $
            16





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 March 31, 2009
                
                
                For
      the Three Months Ended March 31, 2008
                
                
                Accumulated
      During the Development Stage for the Period From Inception (November 15,
      2005) to December 31, 2008
                
                
                Accumulated
      During the Development Stage for the Period From Inception (November 15,
      2005) to March 31, 2009Revenue
                
                $
                
                
                
                $
                -
                
                
                $
                52,000
                
                
                $
                52,000Operating
      expenses:Consulting
      fees and services, including $989,519, $888,613, $11,279,181 and
      $12,268,700 incurred to related parties, respectively
                
                
                1,011,227
                
                
                
                1,001,059
                
                
                
                12,184,862
                
                
                
                13,196,089General
      and administrative
                
                
                19,423
                
                
                
                42,503
                
                
                
                722,610
                
                
                
                742,033Directors'
      compensation
                
                
                55,000
                
                
                
                60,000
                
                
                
                537,678
                
                
                
                592,678Delaware
      franchise taxes
                
                
                105
                
                
                
                105
                
                
                
                185,421
                
                
                
                185,526Total
      operating expenses
                
                
                1,085,755
                
                
                
                1,103,667
                
                
                
                13,630,571
                
                
                
                14,716,326Loss
      from operations during thedevelopment
      stage
                
                
                (1,085,755
                )
                
                
                (1,103,667
                )
                
                
                (13,578,571
                )
                
                
                (14,664,326
                )Other
      income (expense):Income
      from Spin-off
                
                
                50,000
                
                
                
                -
                
                
                
                -
                
                
                
                50,000Gain
      on write off of liabilities associated with predecessor entity not to be
      paid
                
                
                -
                
                
                
                -
                
                
                
                395,667
                
                
                
                395,667Financing
      cost for common stock issued for reset of subscription
      agreement
                
                
                (49,924
                )
                
                
                -
                
                
                
                -
                
                
                
                (49,924
                )Loss
      on legal judgement obtained by predecessor entity
    shareholder
                
                
                (15,801
                )
                
                
                -
                
                
                
                (1,203,492
                )
                
                
                (1,219,293
                )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, of which $150,000, $40,000, $536,320 and $686,320 is to be
      satisfied in Company Common Stock and none, none, $32,000 and $32,000
      incurred to related parties
                
                
                (150,000
                )
                
                
                (40,000
                )
                
                
                (586,320
                )
                
                
                (736,320
                )(165,725
                )
                
                
                (40,000
                )
                
                
                (126,645,397
                )
                
                
                (126,811,122
                )Net
      loss
                
                $
                (1,251,480
                )
                
                $
                (1,143,667
                )
                
                $
                (140,223,968
                )
                
                $
                (141,475,448
                )Basic
      and diluted net loss per weighted-average shares common stock
      outstanding
                
                $
                (0.002
                )
                
                $
                (0.002
                )
                
                $
                (0.220
                )
                
                $
                (0.222
                )Weighted-average
      number of shares of common stock outstanding
                
                
                656,081,653
                
                
                
                649,743,240
                
                
                
                636,200,065
                
                
                
                636,364,652





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
      StockShares
      to be issued
                                              
                                              
                                              Amount
                                              
                                              
                                              Shares
      to be issued
                                              
                                              
                                              Amount
                                              
                                              
                                              Shares
      to be issued
                                              
                                              
                                              Amount
                                              
                                              
                                              Shares
      issued
                                              
                                              
                                              AmountBalance,
      November 14, 2005 pursuant to recapitalization transaction
                                              
                                              
                                              --
                                              
                                              
                                              $
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              $
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              $
                                              --
                                              
                                              
                                              
                                              25,543,240
                                              
                                              
                                              $
                                              255Common
      stock conversion and settlement of senior note pursuant to
      recapitalization transaction
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              624,000,000
                                              
                                              
                                              
                                              6,240Net
      loss for the period from November 15, 2005 to December 31,
      2005
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Balance,
      December 31, 2005
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              
                                              649,543,240
                                              
                                              
                                              $
                                              6,495Common
      stock to be issued for cash received by Company
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              985,000
                                              
                                              
                                              
                                              10
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Net
      loss for the year
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Balance,
      December 31, 2006
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              
                                              985,000
                                              
                                              
                                              $
                                              10
                                              
                                              
                                              
                                              649,543,240
                                              
                                              
                                              $
                                              6,495Common
      stock to be issued for cash received by Company
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              500,000
                                              
                                              
                                              
                                              5
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Series
      A Convertible Preferred Stock to be issued for cash received by
      Company
                                              
                                              
                                              280,000
                                              
                                              
                                              
                                              280,000
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Common
      stock issued in settlement of predecesor entity stockholder
      litigation
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              200,000
                                              
                                              
                                              
                                              2Common
      stock to be issued for directors' compensation
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              1,000,685
                                              
                                              
                                              
                                              10
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Net
      loss for the year
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Balance,
      December 31, 2007
                                              
                                              
                                              280,000
                                              
                                              
                                              $
                                              280,000
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              
                                              2,485,685
                                              
                                              
                                              $
                                              25
                                              
                                              
                                              
                                              649,743,240
                                              
                                              
                                              $
                                              6,497Series
      A Convertible Preferred Stock to be issued for cash received by
      Company
                                              
                                              
                                              75,000
                                              
                                              
                                              
                                              75,000
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Series
      C Convertible Preferred Stock to be issued for cash received by
      Company
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              25,000
                                              
                                              
                                              
                                              25,000
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Common
      Stock issued and to be issued for cash received by Company
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              305,000
                                              
                                              
                                              
                                              3
                                              
                                              
                                              
                                              250,000
                                              
                                              
                                              
                                              3Common
      stock to be issued for directors' compensation
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              1,000,000
                                              
                                              
                                              
                                              10
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Debt
      issue costs to be satisfied in Company Common Stock
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              4,704,000
                                              
                                              
                                              
                                              47
                                              
                                              
                                              
                                              3,000,000
                                              
                                              
                                              
                                              30Common
      stock to be issued for purchase of common stock
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              1,000,000
                                              
                                              
                                              
                                              10
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Common
      stock to be issued for consulting and marketing services
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              2,700,000
                                              
                                              
                                              
                                              27
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Common
      stock issued for consulting and marketing services
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              2,250,000
                                              
                                              
                                              
                                              23Net
      loss for twelve months ended December 31, 2008
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Balance,
      December 31, 2008
                                              
                                              
                                              355,000
                                              
                                              
                                              $
                                              355,000
                                              
                                              
                                              
                                              25,000
                                              
                                              
                                              $
                                              25,000
                                              
                                              
                                              
                                              12,194,685
                                              
                                              
                                              $
                                              122
                                              
                                              
                                              
                                              655,243,240
                                              
                                              
                                              $
                                              6,552Common
      Stock to be issued for cash received by Company
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              2,500,000
                                              
                                              
                                              
                                              25
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Common
      stock to be issued for directors' compensation
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              250,000
                                              
                                              
                                              
                                              3
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Debt
      issue costs to be satisfied in Company Common Stock
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              1,000,000
                                              
                                              
                                              
                                              10
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Debt
      issue costs satisfied in Company Common Stock
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,000,000
                                              
                                              
                                              
                                              10Common
      stock issued for reset of previous subscription agreement
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              138,095
                                              
                                              
                                              
                                              2Net
      loss for three months ended March 31, 2009
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --
                                              
                                              
                                              
                                              --Balance,
      March 31, 2009
                                              
                                              
                                              355,000
                                              
                                              
                                              $
                                              355,000
                                              
                                              
                                              
                                              25,000
                                              
                                              
                                              $
                                              25,000
                                              
                                              
                                              
                                              15,944,685
                                              
                                              
                                              $
                                              160
                                              
                                              
                                              
                                              656,381,335
                                              
                                              
                                              $
                                              6,564See
      accompanying notes to the consolidated financial
    statements.
  3
 ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 
 Unaudited Consolidated Statement of
Changes in Stockholders' (Deficit) Equity (During the Development
Stage)




Additional
                            
                            
                            AccumulatedPaid-in Capital
                            
                            
                            Deficit
                            
                            
                            TotalBalance,
      November 14, 2005 pursuant to recapitalization transaction
                            
                            $
                            (2,674,761
                            )
                            
                            $
                            --
                            
                            
                            $
                            (2,674,506
                            )Common
      stock conversion and settlement of senior note pursuant to
      recapitalization transaction
                            
                            
                            125,907,967
                            
                            
                            
                            --
                            
                            
                            
                            125,914,207Net
      loss for the period from November 15, 2005 to December 31,
      2005
                            
                            
                            --
                            
                            
                            
                            (1,272,258
                            )
                            
                            
                            (1,272,258
                            )Balance,
      December 31, 2005
                            
                            $
                            123,233,206
                            
                            
                            $
                            (1,272,258
                            )
                            
                            $
                            121,967,443Common
      stock to be issued for cash received by Company
                            
                            
                            984,990
                            
                            
                            
                            --
                            
                            
                            
                            985,000Net
      loss for the year
                            
                            
                            --
                            
                            
                            
                            (3,514,445
                            )
                            
                            
                            (3,514,445
                            )Balance,
      December 31, 2006
                            
                            $
                            124,218,196
                            
                            
                            $
                            (4,786,703
                            )
                            
                            $
                            119,437,998Common
      stock to be issued for cash received by Company
                            
                            
                            499,995
                            
                            
                            
                            --
                            
                            
                            
                            500,000Series
      A Convertible Preferred Stock to be issued for cash received by
      Company
                            
                            
                            --
                            
                            
                            
                            --
                            
                            
                            
                            280,000Common
      stock issued in settlement of predecesor entity stockholder
      litigation
                            
                            
                            11,998
                            
                            
                            
                            --
                            
                            
                            
                            12,000Common
      stock to be issued for directors' compensation
                            
                            
                            60,031
                            
                            
                            
                            --
                            
                            
                            
                            60,041Net
      loss for the year
                            
                            
                            --
                            
                            
                            
                            (130,076,689
                            )
                            
                            
                            (130,076,689
                            )Balance,
      December 31, 2007
                            
                            $
                            124,790,220
                            
                            
                            $
                            (134,863,392
                            )
                            
                            $
                            (9,786,650
                            )Series
      A Convertible Preferred Stock to be issued for cash received by
      Company
                            
                            
                            --
                            
                            
                            
                            --
                            
                            
                            
                            75,000Series
      C Convertible Preferred Stock to be issued for cash received by
      Company
                            
                            
                            --
                            
                            
                            
                            --
                            
                            
                            
                            25,000Common
      Stock issued and to be issued for cash received by Company
                            
                            
                            104,996
                            
                            
                            
                            --
                            
                            
                            
                            105,002Common
      stock to be issued for directors' compensation
                            
                            
                            77,490
                            
                            
                            
                            --
                            
                            
                            
                            77,500Debt
      issue costs to be satisfied in Company Common Stock
                            
                            
                            536,243
                            
                            
                            
                            --
                            
                            
                            
                            536,320Common
      stock to be issued for purchase of common stock
                            
                            
                            49,990
                            
                            
                            
                            --
                            
                            
                            
                            50,000Common
      stock to be issued for consulting and marketing services
                            
                            
                            245,969
                            
                            
                            
                            --
                            
                            
                            
                            245,996Common
      stock issued for consulting and marketing services
                            
                            
                            122,481
                            
                            
                            
                            --
                            
                            
                            
                            122,504Net
      loss for twelve months ended December 31, 2008
                            
                            
                            --
                            
                            
                            
                            (5,360,576
                            )
                            
                            
                            (5,360,576
                            )Balance,
      December 31, 2008
                            
                            $
                            125,927,389
                            
                            
                            $
                            (140,223,968
                            )
                            
                            $
                            (13,909,905
                            )Common
      Stock to be issued for cash received by Company
                            
                            
                            249,975
                            
                            
                            
                            --
                            
                            
                            
                            250,000Common
      stock to be issued for directors' compensation
                            
                            
                            4,997
                            
                            
                            
                            --
                            
                            
                            
                            5,000Debt
      issue costs to be satisfied in Company Common Stock
                            
                            
                            69,990
                            
                            
                            
                            --
                            
                            
                            
                            70,000Debt
      issue costs satisfied in Company Common Stock
                            
                            
                            79,990
                            
                            
                            
                            --
                            
                            
                            
                            80,000Common
      stock issued for reset of previous subscription agreement
                            
                            
                            5,523
                            
                            
                            
                            --
                            
                            
                            
                            5,525Net
      loss for three months ended March 31, 2009
                            
                            
                            --
                            
                            
                            
                            (1,251,480
                            )
                            
                            
                            (1,251,480
                            )Balance,
      March 31, 2009
                            
                            $
                            126,337,864
                            
                            
                            $
                            (141,475,448
                            )
                            
                            $
                            (14,750,860
                            )See
      accompanying notes to the consolidated financial
    statements.
 
 4




ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES


(A DEVELOPMENT STAGE
COMPANY)







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





For
      the Three Months Ended March 31, 2009
            
            
            For
      the Three Months Ended March 31, 2008
            
            
            Accumulated
      During the Development Stage for the Period From Inception (November 15,
      2005) to December 31, 2008
            
            
            Accumulated
      During the Development Stage for the Period From Inception (November 15,
      2005) to March 31, 2009Net
      loss
            
            $
            (1,251,480
            )
            
            $
            (1,143,667
            )
            
            $
            (140,223,968
            )
            
            $
            (141,475,448
            )Adjustments
      to reconcile net loss to net cash (used in) operating
      activities:Net
      non-cash change in stockholders’ equity due to recapitalization
      transaction
            
            
            -
            
            
            
            -
            
            
            
            1,264,217
            
            
            
            1,264,217Loss
      on write-off of marketing and distribution agreement
            
            
            -
            
            
            
            -
            
            
            
            125,000,000
            
            
            
            125,000,000Common
      stock issued for reset of previous subscription agreement
            
            
            49,924
            
            
            
            -
            
            
            
            -
            
            
            
            49,924Debt
      issue costs to be satisfied in Company Common Stock
            
            
            70,000
            
            
            
            40,000
            
            
            
            536,320
            
            
            
            606,320Debt
      issue costs satisfied in Company Common Stock
            
            
            80,000
            
            
            
            -
            
            
            
            -
            
            
            
            80,000Debt
      issue costs paid in cash
            
            
            -
            
            
            
            -
            
            
            
            50,000
            
            
            
            50,000Common
      stock issued for marketing services
            
            
            -
            
            
            
            -
            
            
            
            122,500
            
            
            
            122,500Common
      stock to be issued for consulting services
            
            
            -
            
            
            
            85,896
            
            
            
            246,007
            
            
            
            246,007Increase
      in prepaid expenses
            
            
            -
            
            
            
            
            
            
            
            -
            
            
            
            -Stock-based
      directors' compensation to be issued
            
            
            5,000
            
            
            
            10,000
            
            
            
            137,541
            
            
            
            142,541Changes
      in operating asset and liabilities:
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Increase
      in accounts and accrued expenses payable
            
            
            445,039
            
            
            
            378,898
            
            
            
            4,671,182
            
            
            
            5,116,220Estimated
      liability for legal judgement obtained by predecessor entity
      shareholder
            
            
            15,801
            
            
            
            -
            
            
            
            1,203,492
            
            
            
            1,219,293Net
      cash (used in) operating activities
            
            
            (585,717
            )
            
            
            (628,873
            )
            
            
            (6,992,709
            )
            
            
            (7,578,425
            )Cash
      flows from investing activities:Cash
      acquired as part of merger transaction
            
            
            -
            
            
            
            -
            
            
            
            39,576
            
            
            
            39,576Advances
      to related party
            
            
            (15,500
            )
            
            
            -
            
            
            
            (689,575
            )
            
            
            (705,075
            )Net
      cash (used in) investing activities
            
            
            (15,500
            )
            
            
            -
            
            
            
            (649,999
            )
            
            
            (665,499
            )Cash
      flows from financing activities:Proceeds
      of issuance of  note payable
            
            
            80,000
            
            
            
            150,000
            
            
            
            1,008,000
            
            
            
            1,088,000Proceeds
      of loans received from related parties
            
            
            5,000
            
            
            
            110,000
            
            
            
            1,845,000
            
            
            
            1,850,000Repayment
      towards loan from related party
            
            
            (5,000
            )
            
            
            -
            
            
            
            (174,425
            )
            
            
            (179,425
            )Net
      increase in due to related parties attributed to operating expenses paid
      on the Company’s behalf by the related party
            
            
            271,246
            
            
            
            293,873
            
            
            
            2,932,149
            
            
            
            3,203,395Net
      increase in investments/capital contributed
            
            
            250,000
            
            
            
            75,000
            
            
            
            1,982,000
            
            
            
            2,232,000Advances
      from senior advisor
            
            
            -
            
            
            
            -
            
            
            
            50,000
            
            
            
            50,000Net
      cash provided by financing activities
            
            
            601,246
            
            
            
            628,873
            
            
            
            7,642,724
            
            
            
            8,243,970Net
      change in cash
            
            
            29
            
            
            
            -
            
            
            
            16
            
            
            
            44Cash
      balance at beginning of period
            
            
            16
            
            
            
            1,040
            
            
            
            1,040
            
            
            
            1,056Cash
      balance at end of period
            
            $
            45
            
            
            
            1,040
            
            
            $
            1,056
            
            
            $
            1,100Supplemental
      disclosures of cash flow information:Cash
      paid during the period for:Income
      taxes
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Interest
      expense
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Non-cash
      investing and financing activities:Non-cash
      purchase of marketing and distribution agreement
            
            $
            -
            
            
            $
            -
            
            
            $
            125,000,000
            
            
            $
            125,000,000Settlement
      of senior note payable through issuance of convertible preferred
      stock
            
            $
            -
            
            
            $
            -
            
            
            $
            125,000,000
            
            
            $
            125,000,000Non-cash
      acquisition of accrued expenses in recapitalization
            
            $
            -
            
            
            $
            -
            
            
            $
            421,041
            
            
            $
            421,041Non-cash
      acquisition of notes payable in recapitalization
            
            $
            -
            
            
            $
            -
            
            
            $
            220,000
            
            
            $
            220,000





See accompanying notes to the
consolidated financial statements.




5
  ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE 1 - NATURE OF BUSINESS /
ORGANIZATION
  Business
Description
  Arrow Resources Development, Inc. and
Subsidiaries (“the Company”), was subject to a change of control transaction
that was accounted for as a recapitalization of CNE Group, Inc. (“CNE”) in
November 2005. Arrow Resources Development, Ltd., (“Arrow Ltd.”) the Company's
wholly-owned subsidiary, was incorporated in Bermuda in May 2005. Arrow Ltd.
provides marketing and distribution services for natural
resource.
  In April of 2006, Arrow Ltd. entered
into an agency agreement with Arrow Pacific Resources Group Limited (“APR”) that
provides marketing and distribution services for timber resource products and
currently has an exclusive marketing and sales agreement with APR to market
lumber and related products from land leased by GMPLH which is operated by APR
and 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. 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 March 31, 2009and the results of its operations,
changes in stockholders'(deficit)equity,and cash flows for the three months
periods ended March 31, 2009and 2008, respectivelyandfor the period from the
commencement of the development stage (November 15, 2005) to March 31, 2009, and
for the period from the commencement of the development stage (November 15,
2005) to December 31, 2008.Although management believes that the
disclosures in these consolidated financial statements are adequate to make the
information presented not misleading, certain information and footnote
disclosures normally included in financial statements that have been prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to the rules and regulations of
the Securities Exchange Commission.
  The results of operations for the three
months ended March 31, 2009are not necessarily indicative of the
results that may be expected for the full year ending December 31,
2009. The accompanying consolidated
financial statements should be read in conjunction with the more detailed
consolidated financial statements, and the related footnotes thereto, filed with
theCompany’s Annual Report
on Form 10KSB for theyear
ended December 31, 2008filed onApril 15, 2009.
 
 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 netloss of $1,251,480 for the three months ended March
31, 2009, and a net loss during the development stage from inception in November
15, 2005 through March 31, 2009 of$141,475,448. TheCompany’s operations are in the
development stage, and the Company has notsubstantiallygenerated any revenue since inception.
The Company’s existence in the current period has been dependent upon advances
from related parties and other individuals, and proceeds from the issuance
of  senior notes payable.
 
 One of
the principal reasons for the Company’s substantial doubt regarding its ability
to continue as a going concern involves the fact that as of December 31, 2007, the Company’s
principal asset, a marketing and distribution intangible asset in the amount of
$125,000,000 was written off as impaired as discussed inNote 6due to the fact that environment laws
affecting timber harvesting have become more restrictive in Papua New
Guinea.
 
 The
condensed consolidated financial statements do not include any adjustments
relating to the carrying amounts of recorded assets or the carrying amounts and
classification of recorded liabilities that may be required should the Company
be unable to continue as a going concern.
   6
 
 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 stage enterprise is one
in which planned and principal operations have not commenced or, if its
operations have commenced, there has been no significant revenue there
from.  Development-stage companies report cumulative costs from the
enterprise’s inception.
 
 Income taxes:
  The Company follows 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.
  7
  ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE 2 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
  Loss per share:
  The Company complies with the
requirements of the 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 forthe period from November 15, 2005 to
December 31, 2008 and for the period ended March 31, 2009. As of March 31, 2009,
there are no dilutive equity instruments outstanding. However, the Company has
355,000 and 355,000 shares of Series A Convertible Preferred Stockand
25,000 and 0 shares of Series C Convertible Preferred Stockthat are issuable as of March 31, 2009
and 2008, respectively.
  Acquired
intangibles:
  Intangible assets are 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).
 8
  ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE 2 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
 
 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 March 31, 2009, the Company’s consolidated financial
statements do not contain any changes in equity that are required to be reported
separately in comprehensive income.
 
 Recent Accounting
Pronouncements:
 
 In April
2009, the FASB issued FSP SFAS 157-4, “Determining Whether a Market Is Not
Active and a Transaction Is Not Distressed,” which further clarifies the
principles established by SFAS No. 157. The guidance is effective for the
periods ending after June 15, 2009 with early adoption permitted for the periods
ending after March 15, 2009. The adoption of FSP FAS 157-4 is not expected to
have a material effect on the Company’s financial position, results of
operations, or cash flows.
 
 In
October 2008, the FASB issued FSP SFAS No. 157-3, “Determining the Fair Value of
a Financial Asset When the Market for That Asset Is Not Active”, (“FSP 157-3”),
to clarify the application of the provisions of SFAS 157 in an inactive market
and how an entity would determine fair value in an inactive market. FSP 157-3
was effective upon issuance and applies to the Company’s current financial
statements. The application of the provisions of FSP 157-3 did not materially
affect the Company’s results of operations or financial condition for the three
months ended March 31, 2009.
 
 Other
accounting standards have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date and
are not expected to have a material impact on the financial statements upon
adoption.
 
 In June
2008, the FASB issued EITF No. 07-5, “Determining Whether an Instrument (or
Embedded Feature) Is Indexed to an Entity’s Own Stock” effective for financial
statements issued for fiscal years and interim periods beginning after December
15, 2008. EITF No.07-5 provides guidance for determining whether an
equity-linked financial instrument (or embedded feature) is indexed to an
entity’s own stock. The adoption of EITF No. 07-5 is not expected to have a
material effect on the Company’s consolidated financial statements.
 
 In June
2008, the FASB issued FSP Emerging Issues Task Force (EITF) No. 03-6-1,
“Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities.” Under the FSP, unvested share-based payment awards
that contain rights to receive nonforfeitable dividends (whether paid or unpaid)
are participating securities, and should be included in the two-class method of
computing EPS. The FSP is effective for fiscal years beginning after December
15, 2008, and interim periods within those years, and did not expect to have a
significant impact on the Company’s results of operations, financial condition
or cash flows.
 
 In May
2008, the FASB issued 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 162is 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. 161requires 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 161is not expected to
have a material impact on the Company’s financial
position.
   9
  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.
 
 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.
 
  10
  ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
  NOTE 2 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
  Recent Accounting Pronouncements
(continued):
  In February 2007, the Financial
Accounting Standards Board (“FASB”) issued SFAS No.159, “The Fair Value Option
for Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No.115”. SFAS No.159 permits entities to choose to measure eligible
financial instruments and other items at fair value at specified election dates.
A business entity shall report unrealized gains and losses on items for which
the fair value option has been elected in earnings at each subsequent reporting
date. The fair value option may be applied instrument by instrument but only
upon the entire instrument - not portions of the instrument. Unless a new
election date occurs, the fair value option is irrevocable. SFAS No.159 is
effective as of the beginning of an entity's first fiscal year that begins after
November 15, 2007. The Company does not expect that the adoption of SFAS No. 159
will have a material effect on the Company's consolidated financial
statements.
 
 In September 2006, the FASB issued SFAS
No. 157, “Fair Value Measurements”. The statement standardizes the definition of
fair value, establishes a framework for measuring in generally accepted
accounting principles and sets forth the disclosures about fair value
measurements. SFAS No. 157 is effective for the beginning of an entity's
fiscal year that begins after November 15, 2007. The Company does not expect
SFAS No. 157 will have a material effect on its 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 or 2006.
 11
 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
              
              $
              63,079Differences resulting from use of
      cash basis for tax purposes
              
              
              -Total deferred tax
      assets
              
              
              63,079Less valuation
      allowance
              
              
              (63,079
              )Net deferred tax
      assets
              
              $
              —
  The net operating losses expire as
follows:
 
 December 31,
      2026
                            
                            $
                            127,349December 31,
      2027
                            
                            
                            57,652December 31,
      2028
                            
                            
                            420December 31,
      2029
                            
                            
                            105Net Operating Loss
      Carryover
                            
                            $
                            185,526
  Reconciliation of net loss for income
tax purposes to net loss per financial statement purposes:
 
 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
              
              $
              141,289,922Delaware franchise taxes
      deductible on Company's tax return
              
              
              185,526Net loss for the period from
      inception (November 15, 2005) to March 31, 2009
              
              $
              141,475,448
 
 NOTE 5 - NOTES
PAYABLE
  As of March 31, 2009 and December 31,
2008, the Company had notes payable outstanding as
follows:
 
 Holder
              Terms
              
              March 31,
              
              
              December
31,2009
              
              
              2008Barry 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
              
              
              200,000
              
              
              
              150,000James R. McConnaughy
      (3)
              Due on demand, non-interest
      bearing
              
              
              53,000
              
              
              
              53,000Christopher T. Joffe
      (4)
              Due on demand, non-interest
      bearing
              
              
              63,000
              
              
              
              63,000John E. McConnaughy III
      (5)
              Due on demand, non-interest
      bearing
              
              
              12,000
              
              
              
              12,000Frank Ciolli
      (6)
              Due on demand, non-interest
      bearing
              
              
              550,000
              
              
              
              550,000Barry Weintraub
      (7)
              Due on demand, non-interest
      bearing
              
              
              -
              
              
              
              -John Frugone
      (8)
              Due on demand, non-interest
      bearing
              
              
              130,000
              
              
              
              100,000Money Info LLC
      (9)
              Due on demand, non-interest
      bearing
              
              
              5,000
              
              
              
              5,000Scott Neff
    (10)
              Due on demand, non-interest
      bearing
              
              
              50,000
              
              
              
              50,000Total
              
              
              $
              1,308,000
              
              
              $
              1,228,000
  (1)
              The Company has a note payable
      outstanding for $200,000, plus $20,000 in accrued interest. Although the
      predecessor company (CNE) reserved 456,740 shares of its common stock to
      retire this debt pursuant to a settlement agreement, the stock cannot be
      issued until the party to whom the note was assigned by its original
      holder emerges from bankruptcy or reorganization. During theyearended March31, 2009, 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.
 
 
 
  12
  
 ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
 
 NOTE 5 - NOTES PAYABLE
(Continued)
 
  (2)
              On March 31,
      2008, the Company received a $150,000 non-interest bearing advance from
      John Marozzi, which is due on demand.As payment for
      his services, the Company
      will repay the full amount of the note plus 1,000,000 shares of
      unregistered restricted common stock. The Company recorded $40,000 of debt
      issue costs related to the 1,000,000 shares of common stock that are now
      issuable John Marozzi as of March 31, 2008 (See Note8). On May 5, 2008,
      John Marozzi received repayment of $50,000 from the Company.On October 13,
      2008, the Company receivedanother$50,000 interest
      bearing advance from John Marozzi.The Company
      was
      torepay the full amount of theOctober 31, 2008
      $50,000note incash
      within 60 calendar days from the date the note was executed plus interest
      paid in the form of 1,000,000 shares of unregistered Company
      commonstock.During the year
      ended December, 31, 2008, the Company
      recorded $60,000 of debt issue costs related to the 1,000,000 shares of
      common stock thatwere
      issuabletoJohn Marozzi as
      of December 31, 2008 (See Note 5).OnMarch 5,
      2009, the Company
      receivedanother$50,000 interest
      bearing advance from JohnMarozzi.  The
      Company is to repay the full amount of the March 5, 2009 $50,000 note in
      cash within 60 calendar days from the date the note was executed plus
      interest paid in the form of 1,000,000 shares of unregistered Company
      common stock.  This leaves a balance of $200,000
      unpaidprincipal as ofMarch 31,
      2009.  This
      note is currently in default. The Company is currently in the process of
      negotiating an extension on this
  note.
 (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 Companyrecorded $24,320 in debt issue
      costs related to the 304,000 sharesof common stock that are issuable
      toJames R. McConnaughyas ofDecember 31, 2008.On December 23, 2008,the
      Company received another $15,000 non-interest bearing advance from James
      R. McConnaughy, which is due on demand.James McConnaughy is a relative of
      John E. McConnaughy Jr., a Company Director discussed in Note 7
      [3].
 (4)
              On
      April 24, 2008, the Company received a $38,000 non-interest bearing
      advance from Christopher T. Joffe, which is due on demand. In repayment,
      the Company will repay the full amount of the note plus 304,000 shares of
      the Company’s unregistered restricted common stock. The Company recorded $24,320 in
      debt issue costs related to the 304,000 shares of common stock that are
      issuable toChristopher T. Joffeas of December 31, 2008.
      On June 13, 2008, the Company received another $25,000 non-interest
      bearing advance from Christopher T. Joffe, which is due on demand. In
      repayment, the Company will repay the full amount of the
    note.
 (5)
              On April 25, 2008, the Company
      received $12,000 non-interest bearing advance from John E. McConnaughy
      III, which is due on demand. In repayment, the Company will repay the full
      amount of the note plus 96,000 shares of the Company’s unregistered
      restricted common stock. The Company recorded $7,680 in debt issue costs
      related to the 96,000 shares of common stock that are issuable to John E.
      McConnaughy III as of December 31,
2008.
 (6)
              On April 30, 2008, the Company
      received a $500,000 non-interest bearing advance from Frank Ciolli. In
      repayment, the Company promised to pay Frank Ciolli the principal sum of
      $550,000 on or before October 31, 2008.  On October 31, 2008,
      the Company entered into a 60 day loan extension with Frank
      Ciolli.  In payment, the Company issued 1,000,000 shares
      of the Company’s unregistered restricted common stockto Frank Ciolli and 1,000,000
      shares of the Company’s unregistered restricted common stockto Donna Alferi on behalf of
      Michael Alferi as designated by Frank Ciolli.  As of December
      31, 2008, the Company recorded $100,000 and $100,000, respectively, in
      debt issue costs related to the 1,000,000 and 1,000,000, respectively, of
      shares of common stock that were issued to Frank Ciolli and Donna Alferi
      as of December 31, 2008.On January 15, 2009, the
      Company entered into the thirty-one day extension from December 31, 2008
      for the Convertible Loan Agreement and Convertible Note with Frank Ciolli
      for the loan amount of $550,000 dated as of April 30, 2008. The Company
      issued 500,000 shares of restricted, unregistered common stock each for
      Michael Alferi and Frank Ciolli, which resulted in Company debt issue
      costs of $80,000 as of March 31, 2009.  The Company is currently
      negotiating an additional extension for the Convertible Loan Agreement and
      Convertible Note.  This
      note is currently in default. The Company is currently in the process of
      negotiating an extension on this
      note.
 (7)
              On
      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. On February 25, 2009, the Company received
      a $30,000 non-interest bearing advance from John Frugone, which is due on
      demand. In repayment, the Company will repay the full amount of the note
      in cash over two years from the date the note is
      executed.  This
      leaves a balance of $130,000 unpaidprincipal as ofMarch 31, 2009.John
      Frugone is a relative of Peter Frugone, the Company’s CEO and also a
      Company Director.
 (9)
              On
      October 30, 2008, the Company received a $2,500 non-interest bearing
      advance from Money Info, LLC.  On December 23, 2008, the Company
      received another $2,500 non-interest bearing advance from Money Info,
      LLC.  On January 21, 2009, the Company repaid the full amount of
      both notes in cash.  On January 15, 2009, the Company received a
      $5,000 non-interest bearing advance from Money Info, LLC.  In
      repayment, the Company will repay the full amount of the note in cash
      within 60 calendar days from the date the note is executed. This
      note is currently in default. The Company is currently in the process of
      negotiating an extension on this
note.
   13
  
 
 ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
 
 (10)
              On October 13, 2008, the Company
      received a $50,000 interest bearing advance from Scott Neff, the Company
      was to repay the full amount of the note in cash within 60 calendar days
      from the date the note is executed plus interest expense paid in the form
      of 1,000,000 shares of Company common stock.  During the year
      ended December 31, 2008, the Company
      recorded $60,000indebt issuecosts related to
      the1,000,000
      sharesof common stock
      that are issuable toScott
      Neffas ofDecember
      31,
      2008.  This
      note is currently in default. The Company is currently in the process of
      negotiating an extension on this
  note.
  NOTE 6 – IMPAIRMENT OF MARKETING AND
DISTRIBUTION AGREEMENT AND RELATED SENIOR NOTE PAYABLE DUE TO EMPIRE ADVISORY,
LLC
  As discussed in Note 1, in August 2005,
the Company executed a marketing and distribution agreement with Arrow Pte. This
agreement was valued at fair value as determined based on an independent
appraisal, which approximates the market value of 96% of the CNE public stock
issued in settlement of the note.
  The marketing and distribution agreement
would have been amortized over the remainder of 99 years (the life of the
agreement) once the Company commenced sales. As of December 31, 2005, the
Company had recorded a $125,000,000 amortizable intangible asset for this
agreement and corresponding credits to common stock and additional paid-in
capital in conjunction with the stock settlement of the senior secured note
payable to Empire Advisory, LLC and related cash advances in the same aggregate
amount. The senior secured note payable was non-interest bearing and was repaid
in the form of the preferred stock, which was subsequently converted to common
stock (See Note 3). Any preferred stock issued under the senior secured note
payable is considered restricted as to the sale thereof under SEC Rule 144 as
unregistered securities.
 
 The Company’s only intangible asset was
comprised of this marketing and distribution agreement with Arrow Pte. In
accordance with SFAS 142, “Goodwill and Other Intangible Assets” this intangible
agreement is no longer amortized; instead the intangible is tested for
impairment on an annual basis. The Company assesses the impairment of
identifiable intangibles and goodwill whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Factors
the Company considers to be important which could trigger an impairment review
include the following:
 
 ·
              Significant inability to achieve
      expected projected future operating results;·
              Significant changes in the manner
      in which the work is able to be performed what increases
      costs;·
              Significant negative impact on the
      environment.
 
 We perform goodwill impairment tests on
an annual basis and on an interim basis if an event or circumstance indicates
that it is more likely than not that impairment has occurred. We assess the
impairment of other amortizable intangible assets and long-lived assets whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. Factors we consider important that could trigger an impairment
review include significant underperformance to historical or projected operating
results, substantial changes in our business strategy and significant negative
industry or economic trends.
 
 The World Bank and World Wildlife
Federation have adopted forest management guidelines to ensure economic, social
and environmental benefits from timber and non-timber products and the
environmental services provided by forests. Most countries, including Indonesia
as of 2007, have adopted these guidelines as law in order to promote economical
development while combating the ongoing crisis of worldwide
deforestation.
 
 It has always been the policy of Arrow
Pte to follow the international guidelines for the harvesting of timber in
virgin forests. In December 2007, Arrow Pte. assessed that it would be unable to
harvest the timber products in Papua, New Guinea due to the fact that the widely
accepted international guidelines of the World Wildlife Federation had not been
adopted by Papua, New Guinea. This fact is adverse to the economic, social and
environmental goals of Arrow Pte. because with the amount of land that the
project was allotted combined with the agreed upon previous guidelines of the
marketing and distribution agreement, yields would be significantly reduced.
Given the significant change in the economics of the harvesting of the timber in
Papua, New Guinea, Arrow Pte. has decided not to pursue any further operations
in Papua, New Guinea given that the above restrictions cause a significant
reduction in the volume of harvesting, which results in a disproportionate cost
to yield ration at the Papua, New Guinea site which makes the project not
economically feasible in the foreseeable future.
 
 Based on the fact that Arrow Pte. is
unable to fulfill their part of the agreement, the Company 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.
 
 
  14
  ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
 
 NOTE 7 - RELATED PARTY
TRANSACTIONS
  [1]Management Agreement with Empire
Advisory, LLC:
  Effective August 1, 2005, the Company
entered into a Management Agreement with Empire Advisory, LLC (“Empire”) under
which Empire provides chief executive officer and administrative services to the
Company in exchange for a) an annual fee of $300,000 for overhead expenses, b)
$25,000 per month for rent, c) $1,000,000 per annum (subject to increases in
subsequent years) for executive services, and d) a one-time fee of $150,000 for
execution of the proposed transaction. In addition, the Board authorized a
one-time payment of $500,000 to Empire upon closing the
transaction.
 
 As of March 31, 2009 and December 31,
2008, the Company had short-term borrowings of $4,204,933 and
$3,933,679, respectively,
due to Empire, consisting of cash advances to the Company and working capital
raised by Empire, as agent, on behalf of the Company. These amounts are
non-interest bearing and due on demand.
 
 Peter Frugone is a member of the Board
of Directors of the Company and is the owner of Empire. Empire, as agent, was
the holder of the $125 million senior secured note payable settled in December
2005.
  Consulting fees and services charged in
the Statement of Operations for the three months ended March 31, 2009 and 2008
incurred to Empire totaled $614,519 and $513,613, respectively.Consulting fees and services charged in
the Statement of Operations for the year ended December 31, 2008 incurred to
Empire totaled $2,223,711.
Consulting fees and services charged to the Statement of Operations for the
years ended December 31, 2007, December 31, 2006 and for the period from
November 15, 2005 to December 31, 2005 incurred to Empire totaled
$1,858,386,$1,591,016 and
$698,834, respectively.
  During the three months ended March 31,
2009, the Company incurred Director’s compensation expense of $13,750 to Mr.
Frugone, consisting of cash compensation of $12,500 and stock based compensation
of $1,250 based upon the Company’s share trading price on March 31,
2009.During
the year ended December 31, 2008, the Company also incurred Director’s
compensation expense of $69,375 to Mr. Frugone, consisting of cash compensation
of $50,000 and stock based compensation of $19,375 based upon the Company’s
share trading price on the date of the grant.  During the year ended December 31, 2007,
the Company also incurred Director’s compensation expense of $65,000 to Mr.
Frugone, consisting of cash compensation of $50,000 and stock based compensation
of $15,000 based upon the Company’s share trading price on the date of the grant
of December 3, 2007. AtMarch 31, 2009, the Company is obligated toissue 562,500 Common Stock shares to
him, and “Accounts payable and accrued liabilities” includes $112,500 due to him
for the cash based portion of his 2007, 2008 and2009 director’s compensation (See Note
7[4]).
 
 During the three months ended March 31,
2009, the Company made cash payments of $340,653 to Empire under the agreement.
During the three months ended March 31, 2008 the Company made cash payments of
$94,500 to Empire under the agreement.
 
 [2]Engagement and Consulting Agreements
entered into with individuals affiliated with Arrow PNG:
  Consulting fees and services charged in
the Statement of Operations for the three months ended March 31, 2009 and 2008
incurred to Hans Karundeng and Rudolph Karundeng under Engagement and Consulting
Agreements totaled $375,000 and $375,000, respectively. In addition, as of March
31, 2009 and December 31, 2008, the Company owed them a total of $5,303,991 and$4,819,491, respectively,
under these agreements. These agreements are discussed in detail in Note
11.
 
 During the three months ended March 31,
2009, the Company incurred Director’s compensationexpense of $13,750 to Rudolph Karundeng,
consisting of cash compensation of $12,500 and stock based compensation of
$1,250 based upon the Company’s share trading price on March 31,
2009.During the year ended December 31, 2008, the Company
also incurred Director’s compensation expense $69,375 to Rudolph Karundeng,
consisting of cash compensation of $19,375 and stock based compensation of
$50,000 based upon the Company’s share trading price on the date of the
grant.  During the year
ended December 31, 2007, the Company also incurred Director’s compensation
expense of $65,000 to Rudolph Karundeng, consisting of cash compensation of
$50,000 and stock based compensation of $15,000 based upon the Company’s share
trading price on the date of the grant of December 3, 2007. At March 31, 2009,
the Company is obligated toissue 562,500 Common Stock shares to
him, and “Accounts payable and accrued liabilities” includes $112,500 due to him
for the cash based portion of his 2007, 2008 and 2009 director’s compensation
(See Note 7[4]).
  15
  
 ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
 
 NOTE 7 - RELATED PARTY TRANSACTIONS
CONTINUED
 
 [3]Non-Interest Bearing Advance Received
from Company Director:
  In July 2006, the Company received a
$150,000 non-interest bearing advance from John E. McConnaughy, Jr., a Director
of the Company, which is due on demand. 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.InOctober 2008, the Company received
$50,000 non-interest
bearing advance from John E. McConnaughy, Jr, which is due on demand.InNovember 2008, the Company received
$10,000 non-interest
bearing advance from John E. McConnaughy, Jr, which is due on demand.InDecember 2008, the Company received$5,000non-interest bearing advance from John
E. McConnaughy, Jr, which is due on demand.On January 15, 2009,
the Company received a $5,000 non-interest bearing advance from John E.
McConnaughy Jr. In repayment, the Company will repay the full amount of the note
in cash over two years from the date the note is executed. On January 27, 2009,
the Company repaid $5,000 to John
E. McConnaughy, Jragainst
the outstanding balance owed to him.  As of March 31, 2009 and December 31,
2008, the Companyhad
$1,957,000 and
$1,957,000, respectively,
left to be repaid to Mr. McConnaughy, which is included in “Due to Related
Parties.”
 
 During the three months ended March 31,
2009, the Company incurred Director’s compensation expense of $13,750 to Mr.
McConnaughy, consisting ofcash compensation of $12,500 and stock
based compensation of $1,250 based upon the Company’s share trading price on
March 31, 2009.  During the year ended December 31, 2008, the Company
also incurred Director’s compensation expense $$69,375 to Mr. McConnaughy, consisting of cash
compensation of $50,000 and stock based compensation of $19,375 based upon the
Company’s share trading price on the date of grant. At March 31, 2009, the
Company is obligated to issue 562,500 Common Stock shares to him, and “Accounts
payable and accrued liabilities” includes $112,500 due to him for the cash based
portion of his 2007, 2008 and 2009 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 boardmember that belonged to the Board as of
and subsequent to January 1, 2007. Those board members that were only on the
Board for part of the year will received pro-rata compensation based on length
of service. As of March 31, 2009 and December 31, 2008, none of the shares under
this plan have been issued and the Company has an accrued liability of $450,137
and $400,137, respectively, of cash-based compensation and recorded additional
paid-in capital through those dates of $142,538and $137,541, respectively, for
stock-based compensation based on the fair value of 2,250,685 and2,000,685 shares to be
issued to the members of the Board, respectively.
 
 NOTE 8 - STOCKHOLDERS'
EQUITY
  Arrow Ltd. was incorporated in May 2005
as a Bermuda corporation. Upon incorporation, 1,200,000 shares of $.01 par value
common stock were authorized and issued to CNE.
 
 On November 14, 2005, the Company
increased its authorized shares to 1 billion and reduced the par value of its
common stock to $0.00001 per share, resulting in a common stock conversion rate
of 1 to 62.4.
  On November 14, 2005, the Company
completed a reverse merger with CNE Group, Inc. by acquiring 96% of the
outstanding shares of CNE's common stock in the form of convertible preferred
stock issued in settlement of the senior note payable.
  During 2005, CNE divested or
discontinued all of its subsidiaries in preparation for the reverse merger
transaction. Accordingly, the results of operations for the divested or
discontinued subsidiaries are not included in the consolidated results presented
herein. In conjunction with the divestitures, CNE repurchased and retired all
preferred stock and made certain payments to related
parties.
  16
  
 ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
 
 NOTE 8 - STOCKHOLDERS' EQUITY
CONTINUED
 
 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.
 
 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 fromregistration. As of March 31, 2009, the
Company has received $355,000 from investors towards the fulfillment of the
financing agreement.
 
 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 thatbelonged to the Board as of
and subsequent to January 1, 2007. Those board members that were only on the
Board for part of the year will received pro-rata compensation based on length
of service. As of March 31, 2009 and December 31, 2008, none of the shares under
this plan have been issued and the Company has accrued $450,137 and $$400,137 of
cash-based compensation and recorded additional paid-in capital of
$142,538and $137,541 for stock-based
compensation based on the fair value of 2,250,685 shares and 2,000,685 to be
issuedto the members of
the Board.
 
 On
February 1, 2008, the Company entered into Independent Contractor Agreement with
Charles A. Moskowitz of MoneyInfo. Inc. to provide consulting services to the
Company in the lumber market development, ethanol market development, and
compilation of market prices associated with lumber and ethanol and development
of a database for the ongoing analysis of these markets. The term of this
agreement is February 1, 2008 through July 31, 2008. As payment for the
Consultant’s services, the Company will issue 2,600,000 shares of common stock
to Charles A. Moskowitz. During the year ended December 31, 2008, the Company recorded consulting fees and
services of $208,000 related to the 2,600,000 shares of common stock that are
now issuable toCharles A. Moskowitz.As of March 31,
2009, none of these shares have been issued to Charles A.
Moskowitz.
 
 On March
13, 2008, the Company and Micro-Cap Review, Inc. (“Micro-Cap”) executed an
Advertising Agreement wherein the Company will pay Micro-Cap Review, Inc.
1,000,000 of restricted common shares to display advertisements and advertorial
in the Micro-cap Review magazine and on http://www.microcapreview.com
website on a rotating basis. The services began on March 13, 2008 and expired on
June 30, 2008.  On April 29, 2008, the Company issued 1,000,000 shares
of unregistered restricted common stock to Micro-Cap Review,
Inc.  The Company
recorded a marketing expense of $70,000 in General and Administration Expenses
related to the issuance of the 1,000,000 shares of common stock as of December
31, 2008.
 
 On March 15, 2008, the Company and
Seapotter Corporation (“Seapotter”)executed a Consulting Agreement
wherein Seapotter would provide information technology support from March 15,
2008 to July 15, 2008 in exchange for $9,000 per month and 250,000 shares of common
stock.On April 29, 2008, the Company issued 250,000 shares of
unregistered restricted common stock to Charles Potter per the Consulting
Agreement entered into by the Company on March 15, 2008.  The Company recorded consulting fees and
services of$17,500 related to the 250,000 shares of common stock that
were issued to Seapotter on April 29, 2008.
 
 On April
30, 2008, the Company entered into Independent Contractor Agreement with Ciolli
Management Consulting, Inc. to provide advisory services in the land
development, construction management, equipment acquisition and project
management industries. As payment for the Consultant’s services, the Company
will issue a one-time, non-refundable fee of 1,000,000 unrestricted shares of
common stock.  As of December 31, 2008, the Company has expensed
$60,000 for the 1,000,000 shares of common stock that were issued to Ciolli
Management Consulting, Inc.
 
 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.
  17
  ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
 
 NOTE 8 - STOCKHOLDERS' EQUITY
CONTINUED
 
 On
January 15, 2009, the Company entered into the thirty-one day extension December
31, 2008 for the Convertible Loan Agreement and Convertible Note with Frank
Ciolli for the loan amount of $550,000 dated as of April 30, 2008. The Company
issued 500,000 shares of restricted, unregistered common stock each for Michael
Alferi and Frank Ciolli, which resulted in Company debt issue costs of $80,000
as of March 31, 2009.  The Company is currently negotiating an
additional extension for the Convertible Loan Agreement and Convertible Note.
This note
is currently in default. The Company is currently in the process of negotiating
an extension on this note.
 
 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 plus1,000,000 shares of unregistered
restricted common stock.
The Company recorded $40,000 of debt issue costs related to the 1,000,000 shares
of common stock that are now issuable  John Marozzi as of March 31,
2008 (See Note 5).On May 5, 2008, John Marozzi received
repayment of $50,000 from the Company.On October 13, 2008, the Company
received another$50,000 interest bearing advance from
John Marozzi.The Company was torepay the full amount of the note in
cash within60 calendar
days fromthe date the note
is executedplusinterestexpense paidin the form of 1,000,000 shares ofunregistered Companycommon stock.The Company recorded $60,000 of debt
issue costs related to the1,000,000 shares of common stock that
were issuable John Marozzi as of December 31, 2008 (See Note 5).  On
March 5, 2009, the Company received another $50,000 interest bearing advance
from John Marozzi.  The Company is to repay the full amount of the
March 5, 2009 $50,000 note in cash within 60 calendar days from the date the
note was executed plus interest paid in the form of 1,000,000 shares of
unregistered Company common stock.  The Company recorded $70,000 of
debt issue costs related to the 1,000,000 shares of common stock that are now
issuable John Marozzi as of March 31, 2009 (See Note 5).  This leaves
a balance of $200,000 unpaid principal as of March 31, 2009. This note
is currently in default. The Company is currently in the process of negotiating
an extension on this note.
 
 On April
8, 2008, the Company received a $50,000 non-interest bearing advance from Barry
Weintraub, which was due on demand. In repayment, the Company repaid the full
amount of the note on April 30, 2008 and is obligated to issue 2,000,000 shares
of the Company’s unregistered restricted common stock to Barry
Weintraub.  The Company recorded $120,000 in debt issue costs related
to the 2,000,000 shares of common stock that were issuable to Barry Weintraub as
of December 31, 2008 (See Note 5).
 
 On April
24, 2008, the Company received a $38,000 non-interest bearing advance from
Christopher T. Joffe, which is due on demand. In repayment, the Company will
repay the full amount of the note plus 304,000 shares of the Company’s
unregistered restricted common stock. The Company recorded $24,320 in debt issue
costs related to the 304,000 shares of common stock that are issuable to
Christopher T. Joffe as of December 31, 2008 (See Note 5).
 
 On April
24, 2008, the Company received another $38,000 non-interest bearing advance from
James R. McConnaughy, which is due on demand. In repayment, the Company will
repay the full amount of the note plus 304,000 shares of the Company’s
unregistered restricted common stock.  The Company recorded $24,320 in
debt issue costs related to the 304,000 shares of common stock that are issuable
to James R. McConnaughy as of December 31, 2008 (See Note 5).
 
 On April
25, 2008, the Company received a $12,000 non-interest bearing advance from John
E. McConnaughy, III, which is due on demand. In repayment, the Company will
repay the full amount of the note plus 96,000 shares of unregistered restricted
common stock.  The Company recorded $7,680 in debt issue costs related
to the 96,000 shares of common stock that are issuable to John E. McConnaughy,
III as of December 31, 2008 (See Note 5).
 
 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 March 31, 2009, 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 March 31, 2009, the Company has not yet issued these
shares to the Purchaser.  On the date of the purchase, the fair value
of these shares was $140,000.  As of December 31, 2008, the Company
recorded 49,990 to Additional Paid-in Capital to be issued related to this
transaction.
 
  18
  ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
 
 NOTE 8 - STOCKHOLDERS' EQUITY
CONTINUED
 
 On
October 13, 2008, the Company received a $50,000 interest bearing advance from
Scott Neff. The Company was to repay the full amount of the note in cash within
60 calendar days from the date the note is executed plus interest expense paid
in the form of 1,000,000 shares of unregistered Company common
stock.  The Company recorded $60,000 in costs related to the 1,000,000
shares of common stock that are issuable to Scott Neff as of December 31,
2008.  This note
is currently in default. The Company is currently in the process of negotiating
an extension on this note.
 
 On
October 29, 2008, the Company entered into a Subscription Agreement with James
Fuchs by which he purchased 250,000 shares of common stock in the amount of
$0.10 per share for total of $25,000. On November 24, 2008, the Company issued
250,000 shares of restricted, unregistered common stock to James
Fuchs.
 
 On
October 31, 2008, the Company entered into a 60 day loan extension with Frank
Ciolli related to the $550,000 in principal loan incurred by the Company on
April 30, 2008.  The Company issued 1,000,000 shares of the Company’s
unregistered restricted common stock to Frank Ciolli and 1,000,000 shares of the
Company’s unregistered restricted common stock to Donna Alferi on behalf of
Michael Alferi as Frank Ciolli’s designee.  The Company recorded
$200,000 in debt issue costs related to the 1,000,000 and 1,000,000,
respectively, of shares of common stock that were issued to Frank Ciolli and
Donna Alferi as of December 31, 2008 (See Note 5).
 
 On
November 14, 2008, the Company entered into a Subscription Agreement with Peter
Benolie Lane, Jacques Benolie Lane, and Christopher Benoliel Lane for the
purchase of 250,000 shares of common stock in the amount of $0.10 per share for
total of $25,000.
 
 On
December 11, 2008, the Company received $55,000 from Han Karundeng and Arrow
Pacific Resources Group Limited for the purchase of 55,000 shares of common
stock at $1.00 per share pursuant to the Stock Purchase Agreement that was
executed on August 2, 2006.
 
 On January 15, 2009, the Company entered
into a stock purchase agreement with APR wherein APR agreed to purchase up to an
aggregate amount of 15,000,000 shares of common stock in the Company for $.10
per share.On January 15, 2009, the Company received $85,000
from Hans Karundeng and Arrow Pacific Resources Group Limited for the purchase
of 850,000 shares of common stock at $.10 per share pursuant to the APR to purchase up to an aggregate
amount of 15,000,000 shares of common stock in the Company for $.10 per
share.On January 20, 2009, the Company received $165,000 from
Hans Karundeng and Arrow Pacific Resources Group Limited for the purchase of
1,650,000 shares of common stock at $.10 per share pursuant to the APR to purchase up toan aggregate amount of 15,000,000 shares
of common stock in the Company for $.10 per share. (See Note 10 [5] - Stock Purchase
Agreement.)
  Reset
of 2005 Subscription Agreement
 On
February 5, 2009 the Company agreed to issue 1,248,094 shares of common stock to
certain investors as settlement for the reset of their August 3, 2005
subscription agreements.  As of March 31, 2009 138,095 shares had been
issued.
 NOTE 9 -
GAIN ON WRITE OFF OF PREDECESSOR ENTITY LIABILITIES
  During
the fourth quarter of 2006, the Company wrote off accounts payable and accrued
expenses in the amount of $395,667 associated with CNE, the predecessor entity
in the reverse merger transaction, which will not be paid. This resulted in the
recognition of a gain reflected in the Statement of Operations for the year
ended December 31, 2006 in the same amount.
  NOTE 10 - COMMITMENTS AND OTHER
MATTERS
  [1]Engagement and Consulting
Agreements entered into with individuals affiliated with APR
  Effective May 20, 2005, the Company
entered into an Engagement Agreement with Hans Karundeng for business and
financial consulting services for fees of $1,000,000 per annum. The term of the
agreement is five years. Payments under the agreement are subject to the
Company's cash flow.
 
 Effective August 1, 2005, the Company
entered into a Consulting Agreement with Rudolph Karundeng for his services as
Chairman of the Board of the Company for fees of $1,000,000 per annum. The term
of the agreement was five years. Rudolph Karundeng is a son of Hans Karundeng.
However, on May 1, 2006, the Company accepted the resignation of Rudolph
Karundeng as Chairman of the Board, but he continues to be a director of the
Company. Peter Frugone has been elected as Chairman of the Board until his
successor is duly qualified and elected. Subsequent to his resignation, it was
agreed that Rudolph Karundeng's annual salary is to be $500,000 as a
director.
  19
  ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
 
 NOTE 10 - COMMITMENTS AND OTHER MATTERS
CONTINUED
  [1]Engagement and Consulting
Agreements entered into with individuals affiliated with APR
Continued
 
 During the three months ended March 31,
2009, the Company made cash payments to Hans Karundeng of $15,500
underhis agreement. During
the three months ended March 31, 2009, the Company made no cash payments to
Rudolph Karundeng under his agreement.During the year ended December 31, 2008,
the Company made cash payments to Hans Karundeng of $320,000 under
hisagreement. During theyearendedDecember 31, 2008, the Company madenocash payments to Rudolph Karundeng under
his agreement. During the
year ended December 31, 2007, the Company received additional advances of
$100,000 from Hans Karundeng under his agreement and made cash payments to him
of $556,000. During the year ended December 31, 2007, the Company made cash
payments of $7,000 to Rudolph Karundeng under his agreement. During the year
ended December 31, 2006, the Companyreceived additional advances of $61,787
from Hans Karundeng under his agreement. During the year ended December 31,
2006, the Company made cash payments of $62,174 to Rudolph Karundeng under his
agreement. During the period from November 15, 2005 to December 31, 2007, the
Company made cash payments to Hans Karundeng and Rudolph Karundeng of $563,000
under the agreements.
 
 [2]Management Agreement with Empire
Advisory, LLC
  Effective August 1, 2005, the Company
entered into a Management Agreement with Empire Advisory, LLC (“Empire”) under
which Empire provides chief executive officer and administrative services to the
Company in exchange for a) an annual fee of $300,000 for overhead expenses, b)
$25,000 per month for reimbursable expenses, c) $1,000,000 per annum (subject to
increases in subsequent years) for executive services, and d) a one-time fee of
$150,000 for execution of the proposed transaction.
 
 During the three months ended March 31,
2009, the Company made cash payment of$340,653to Empire under the agreement.During theyearendedDecember 31, 2008, the Company made cash paymentof $1,319,216to Empire under the
agreement.During the year ended
December 31, 2007, the Company made cash payments of $1,140,529 to Empire under
the agreement. During the year ended December 31, 2006, the Company made cash
payments of $562,454 to Empire under the agreement. During the period from
November 15, 2005 to December 31, 2005, the Company made cash payments of
approximately $364,000 to Empire under this agreement.
 
 [3]Litigation- predecessor entity
stock holders
  The Company was a party to a lawsuit
where the plaintiff alleged that he was entitled to $60,000 and 1,300,000 of
common stock based upon CNE’s failure to compensate him for services
related to identifying financing for CNE, based upon an agreement that was
entered into between CNE and the plaintiff in April 2005. On November 28, 2007,
the Company settled the lawsuit with the plaintiff. In full and final settlement
of the claims asserted in the action, the Company has paid the plaintiff $10,000
in cash and issued the plaintiff 200,000 shares of the Company’s common stock
having a fair value of $12,000, based on the public traded share price on
December 21, 2007. The settlement resulted in a loss on debt conversion of
$2,000 during the year ended December 31, 2007 because an estimated liability
had been recognized prior to 2007.
 
 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 Managementcommenced an action on the
Company’s behalf in the above Circuit Court seeking to vacate and set aside the
2006 judgment asserting claims under Rule 1.540(b) of the Florida Rules of Civil
Procedure.  Our counsel’s evaluation is that the Company has only a
limited chance of having the 2006 judgment opened by the Court because Florida
law provides very narrow grounds for opening a judgment once a year has passed
from its entry.  The Courts are generally reluctant to disturb final
judgments and the Company’s grounds for opening the judgment depend on the
Court’s adopting a somewhat novel argument regarding such
matters.  If, however, the Court does open the default judgment, the
Company will then have the opportunity to defend the 2006 action and, in such
event, our counsel believes that the Company has a reasonable chance of
succeeding in defending that claim, at least in part, based on the documents he
has reviewed. As of March 31, 2009, the Company had accrued $1,219,293,
including accrued interest of $165,908, 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 effectiveupon execution, shall remain in effect
for ten (10) years and shall not be terminated until the expiration of at least
one (1) year. As of March 31, 2009, the Company has not recovered any revenue
from this agreement.
  20
  ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
 
 NOTE 10 - COMMITMENTS AND OTHER MATTERS
CONTINUED
 
 [4]Consulting/Marketing and Agency
Agreements Continued
 
 In April of 2006, Arrow Resources
Development, Ltd. entered into an agency agreement with APR to provides
marketing and distribution services for timber resource products and currently
has an exclusive marketing and sales agreement with APR to market lumber and
related products from land leased by GMPLH which is operated by APR and it's
subsidiaries, located in Indonesia. Under the agreement Arrow Ltd. will receive
acommission of 10% of
gross sales derived from lumber and related products.As of
December 31, 2008, the Company has recovered $52,000 of revenue from this
agreement.
 
 On April 14, 2006, the Company entered
into a consulting agreement with P.T. Eucalyptus Alam Lestari (“Lestari”) in
which the Company will provide financial consultancy services to P.T. Eucalyptus
for an annual fee, payable quarterly, equal to 10% of P.T. Eucalyptus' gross
revenue payable commencing upon execution. The term of the agreement is
effective upon execution, shall remain ineffect for ninety-nine (99) years and
shall not be terminated until the expiration of at least ten (10) years. As of
March 31, 2009, 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 December 31, 2008.  As of March 31, 2009,
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 expire on
June 30, 2008.  On April 29, 2008, the Company issued 1,000,000 shares
of unregistered restricted common stock to Micro-Cap Review, Inc.  The
Company recorded a marketing expense of $70,000 in consulting fees and services
related to the issuance of the 1,000,000 shares of common stock as of December
31, 2008.
 
 On March 15, 2008, the Company and
Seapotter Corporation (“Seapotter”)executed a Consulting Agreement
wherein Seapotter would provide information technology support from March 15,
2008 to July 15, 2008 in exchange for $9,000 per month and 250,000 shares of commonstock.On April 29,
2008, the Company issued 250,000 shares of unregistered restricted common stock
to Charles Potter per the Consulting Agreement entered into by the Company on
March 15, 2008.  The Company recorded consulting fees and services of
$17,500 related to the 250,000 shares of common stock that were issued to
Seapotter on April 20, 2008.
 
 On April
30, 2008, the Company entered into Independent Contractor Agreement with Ciolli
Management Consulting, Inc. to provide advisory services in the land
development, construction management, equipment acquisition and project
management industries. As payment for the Consultant’s services, the Company
will issue a one-time, non-refundable fee of 1,000,000 unrestricted shares of
common stock.  As of December 31, 2008, the Company has expensed
$60,000 related to the 1,000,000 shares of common stock that are were issued to
Ciolli Management Consulting, Inc. on November 26, 2008.
 
 On
September 15, 2008, the Company entered into a Consulting Agreement with
Infrastructure Financial Services, Inc. to assist and advise the Company in
obtaining equity financing up to $5,000,000.  As payment for the
Consultant’s services, the Company will pay a cash transaction fee of 7% upon
closing of any equity financing the Consultants assist in
obtaining.
 
 [5]Stock Purchase
Agreement
  On August 2, 2006, the Company entered
into a stock purchase agreement with APR wherein APR agreed to purchase up to an
aggregate amount of 15,000,000 shares of common stock in the Company for $1.00
per share, making this a capital contribution of $15,000,000 in total. The stock
will be delivered at the time the Company files for registration. APR is
currently the principal shareholder of the Company,owning 349,370,000 shares or 53%.As of March
31, 2009, the Company has received $1,540,000 from APR towards the fulfillment
of this agreement.
 
 On January 15, 2009, the Company entered
into a stock purchase agreement with APR wherein APR agreed to purchase up to an
aggregate amount of 15,000,000 shares of common stock in the Company for $.10
per share.On January 15, 2009, the Company received $85,000
from Hans Karundeng and Arrow Pacific Resources Group Limited for the purchase
of 850,000 shares of common stock at $.10 per share pursuant to the APR to purchase up to an aggregate
amount of 15,000,000 shares of common stock in the Company for $.10 per
share.On January 20, 2009, the Company received $165,000 from
Hans Karundeng and Arrow Pacific Resources Group Limited for the purchase of
1,650,000 shares of common stock at $.10 per share pursuant to the APR to purchase up to an aggregate
amount of 15,000,000 shares of common stock in the Company for $.10 per
share.
  21
  ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
 
 NOTE 10 - COMMITMENTS AND OTHER MATTERS
CONTINUED
 
 [5]Stock Purchase Agreement
Continued
 
 (b) Private Placement Offering- Series A
Convertible Preferred Stock
 
 On November 20, 2007, the Board of
Directors approved a private placement offering (the "Offering") approximating
$2,000,000 to accredited investors at $1.00 per share of Series A Convertible
Preferred Stock. The Offering was to consist of the Company's Series A
Convertible Preferred Stock that will be convertible into our common stock.
These securities are not required to be and will not be registered under the
Securities Act of 1933 and will not be sold in the United States. Each Series A
Convertible Preferred Stock is convertible into 20 shares of the Company’s
Common Stock. The holders of the preferred stock have no voting rights except as
may be required by Delaware law, no redemption rights, and no liquidation
preferences over the Common Stock holders absent registration or an applicable
exemption from registration. On January 31, 2008, the Board of Directors
approved an extension of the privateplacement offering until February 15,
2008, after which the offer was closed. As of March 31, 2009, the Company has
raised $355,000 from investors under this financing
agreement.
 
 (c) Private Placement Offering- Series C
Convertible Preferred Stock
 
 On May
15, 2008, the Board of Directors approved a private placement offering (the
"Offering") approximating $2,000,000 to accredited investors at $1.00 per share
of Series C Convertible Preferred Stock. The Offering will consist of the
Company's Series C Convertible Preferred Stock that will be convertible into our
common stock. These securities are not required to be and will not be registered
under the Securities Act of 1933. Shares issued under this placement will not be
sold in the United States, absent registration or an applicable exemption from
registration. As of March 31, 2009, the Company received $25,000 from investors
towards the fulfillment of the financing agreement.
  [6]Delaware Corporate
Status
 
 The Company is delinquent in its filing
and payment of the Delaware Franchise Tax Report and, accordingly, is not in
good standing.
 
 At March 31, 2009, the Company has
accrued anadditional $105
forestimated unpaid
Delaware franchise taxes incurred to date reportable during the year ending
December 31, 2009. The Company had estimated unpaid Delaware franchise taxes for
the years ended December 31, 2008, 2007, 2006 and 2005 in the amountof $58,072, $57,650, $57,650 and $69,699, respectively.
Accordingly,as of March
31, 2009, accounts and accrued expenses payable includes aggregate estimated
unpaid Delaware Franchise taxes of $185,526. TheCompany hopes to file the delinquent
tax returnsin thethirdquarter of 2009 and pay the amount
owned in full during the fourth quarter of 2009.
  [7]Table of annual obligations under [1]
and [2] above:
  The minimum future obligations for
consulting fees and services under agreements outlined in [1] and [2] are as
follows:
 
 Years
      Ending March 31,
              
              Amounts2009
              
              $
              4,378,6462010
              
              
              1,314,715$
              5,693,361
 
 The Company also engages certain
consultants to provide services including management of the corporate
citizenship program andinvestor relation services. These
agreements contain cancellation clauses with notice periods ranging from zero to
sixty days.
 
 NOTE 11–SPIN OFF AGREEMENT
 
 On March
12, 2009, the Company entered into an agreement with a third party company to
reinstate a Letter Agreement dated March 13, 2006 (the “Original Agreement”) and
extend time to close on a contemplated spin-off.  Pursuant to the
Original Agreement, the Company will incorporate a new 100% owned Bermudan
subsidiary that will be spun out to the Company’s shareholders.  The
third party company will put assets into the new subsidiary and assume 90% of
the new subsidiary.  The third party company paid the Company $250,000
for anticipated closing and transactional costs in March 2006 pursuant to the
Original Agreement.  It costs $50,000 to the Company to reinstate the
Letter Agreement and to disclose reinstatement in its public filings by
amendment. Therefore, the third party company paid the Company an additional
$25,000 upon acceptance of the agreement and $25,000 on March 30,
2009.
 
 
 
  22
  
 
 ARROW RESOURCES DEVELOPMENT, INC. AND
SUBSIDIARIES
 (A DEVELOPMENT STAGE
COMPANY)
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
 
 NOTE 12- SUBSEQUENT EVENTS
 
 OnApril 17, 2009, the Company receiveda$12,500non-interest bearing advance from JohnMarozzi.  The
Company is to repay the full amount of theApril 17, 2009 $12,500 note in cash within 60 calendar days
from the date the note was executed.
 
 OnMay 8, 2009, the Company receiveda$20,000non-interest bearing advance from JohnMarozzi.  The
Company is to repay the full amount of theMay 8, 2009 $20,000 note in cash within 30 calendar days from the date the note
was executed.
 
 
 
  23
  
  Item 2.
              Management's Discussion and
      Analysis of Financial Condition and Results of
      Operations
 
 GENERAL
  We are a holding company whose only
operating subsidiary as of March 31, 2009 is Arrow Ltd. The principal business
of Arrow is to provide marketing, sales, distribution, corporate operations and
corporate finance services for the commercial exploitation of natural resources
around the world. Prior to November 2005, we used to be a telecommunications and
recruiting company formally known as CNE Group, Inc. The company elected to
shift its business focus to the worldwide commercial exploitation of natural
resources.
 
 ARROW RESOURCES DEVELOPMENT,
LTD.
  In August 2005, Arrow entered into an
Agreement and Plan of Merger (“the Agreement”) with its wholly-owned subsidiary,
Arrow Ltd., in which Arrow (formerly CNE) was required to issue 10 million
shares of Series AAA convertible preferred stock (“the Preferred Stock”) to
Arrow Ltd.'s designees, representing 96% of all outstanding equity of CNE on a
fully diluted basis in exchange for the Marketing and Distribution Agreement
provided to the Company by Arrow. Under the Agreement, the Company discontinued
all former operations (CareerEngine, Inc., SRC and US Commlink.) and changed its
name to Arrow Resources Development, Inc.
 
 On August 1, 2005, Arrow Ltd.
entered into the Marketing Agreement with Arrow Pte. and its subsidiaries in
consideration for Arrow issuing a non-interest bearing note (the “Note”) in the
principal amount of $125,000,000 to Empire Advisory, LLC, (“Empire”), acting as
agent, due on or before December 31, 2005. Empire is Arrow Pte.'s merchant
banker. The Note permitted the Company, as Arrow's sole stockholder, to cause
Arrow to repay the Note in cash or with 10,000,000 shares of the Company's
non-voting Series AAA Preferred Stock. However, in December 2007, Arrow Pte.
assessed that it would be unable to harvest the timber products in Papua, New
Guinea due to the fact that the widely accepted international guidelines of the
World Wildlife Federation had not been adopted by Papua, New
Guinea.
 
 This fact is adverse to the economic,
social and environmental goals of Arrow Pte. because with the amount of land
that the project was allotted combined with the agreed upon previous guidelines
of the marketing and distribution agreement, yields would be significantly
reduced. Given the significant change in the economics of the harvesting of the
timber in Papua, New Guinea, Arrow Pte. has decided not to pursue any further
operations in Papua, New Guinea given that the above restrictions cause a
significant reduction in the volume of harvesting, which results in a
disproportionate cost to yield ration at the Papua, New Guinea site which makes
the project not economically feasible in the foreseeable
future.
 
 Based on the fact that Arrow Pte. is
unable to fulfill their part of the agreement, the Company has reached the
conclusion that the marketing and distribution agreement has no value.
Therefore, the Company has fully impaired the value of the agreement and
recorded a loss on write-off of the marketing and distribution agreement of
$125,000,000 at December 31, 2007. (See Note 6.)
 
 On April 4, 2006 Arrow Resource
Development Ltd. (the Company's Bermuda subsidiary) entered into an agency
agreement with APR in which the Company will provide financial consultancy
services to APR for an annual fee, payable as collected, equal to 10% of APR's
gross revenue payable commencing upon execution. This agreement provides for the
company to collect all revenues from all operations, retain its 10% fee and
disperse the remaining 90% to APR and its subsidiaries. The term of the
agreement is effective upon execution, shall remain in effect for ninety-nine
(99) years and shall not be terminated until the expiration of at least ten (10)
years. As of March 31, 2009, the Company has recovered $52,000 of revenue under
this agreement.
 
 CRITICAL ACCOUNTING POLICIES AND
ESTIMATES
 
 The preparation of financial statements
in accordance with U.S. generally accepted accounting principles requires us to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
net revenue and expenses during the reporting period. On an ongoing basis, we
evaluate our estimates, including those related to our allowance for doubtful
accounts, inventory reserves, and goodwill and purchased intangible asset
valuations, and asset impairments. We base our estimates on historical
experience and on various other assumptions that we believe to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities. Actual results
may differ from these estimates under different assumptions or conditions. We
believe the following critical accounting policies, among others, affect the
significant judgments and estimates we use in the preparation of our
consolidated financial statements.
  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.
  24
  
 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 April
2009, the FASB issued FSP SFAS 157-4, “Determining Whether a Market Is Not
Active and a Transaction Is Not Distressed,” which further clarifies the
principles established by SFAS No. 157. The guidance is effective for the
periods ending after June 15, 2009 with early adoption permitted for the periods
ending after March 15, 2009. The adoption of FSP FAS 157-4 is not expected to
have a material effect on the Company’s financial position, results of
operations, or cash flows.
 
 In
October 2008, the FASB issued FSP SFAS No. 157-3, “Determining the Fair Value of
a Financial Asset When the Market for That Asset Is Not Active”, (“FSP 157-3”),
to clarify the application of the provisions of SFAS 157 in an inactive market
and how an entity would determine fair value in an inactive market. FSP 157-3
was effective upon issuance and applies to the Company’s current financial
statements. The application of the provisions of FSP 157-3 did not materially
affect the Company’s results of operations or financial condition for the three
months ended March 31, 2009.
 
 Other
accounting standards have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date and
are not expected to have a material impact on the financial statements upon
adoption.
 
 In June
2008, the FASB issued EITF No. 07-5, “Determining Whether an Instrument (or
Embedded Feature) Is Indexed to an Entity’s Own Stock” effective for financial
statements issued for fiscal years and interim periods beginning after December
15, 2008. EITF No.07-5 provides guidance for determining whether an
equity-linked financial instrument (or embedded feature) is indexed to an
entity’s own stock. The adoption of EITF No. 07-5 is not expected to have a
material effect on the Company’s consolidated financial statements.
 
 In June
2008, the FASB issued FSP Emerging Issues Task Force (EITF) No. 03-6-1,
“Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities.” Under the FSP, unvested share-based payment awards
that contain rights to receive nonforfeitable dividends (whether paid or unpaid)
are participating securities, and should be included in the two-class method of
computing EPS. The FSP is effective for fiscal years beginning after December
15, 2008, and interim periods within those years, and is not expected to have a
significant impact on the Company’s results of operations, financial condition
or cash flows.
 
 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.
  25
  
 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 162is 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. 161requires 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 161is 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.
 
 In February 2007, the Financial
Accounting Standards Board (“FASB”) issued SFAS No.159, “The Fair Value Option
for Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No.115”. SFAS No.159 permits entities to choose to measure eligible
financial instruments and other items at fair value at specified election dates.
A business entity shall report unrealized gains and losses on items for which
the fair value option has been elected in earnings at each subsequent reporting
date. The fair value option may be applied instrument by instrument but only
upon the entire instrument - not portions of the instrument. Unless a new
election date occurs, the fair value option is irrevocable. SFAS No.159 is
effective as of the beginning of an entity's first fiscal year that begins after
November 15, 2007. The Company does not expect that the adoption of SFAS No. 159
will have a material effect on the Company's consolidated financial
statements.
 
 In September 2006, the FASB issued SFAS
No. 157, “Fair Value Measurements”. The statement standardizes the definition of
fair value, establishes a framework for measuring in generally accepted
accounting principles and sets forth the disclosures about fair value
measurements. SFAS No. 157 is effective for the beginning of an entity's
fiscal year that begins after November 15, 2007. The Company does not expect
SFAS No. 157 will have a material effect on its financial
statements.
  26
  RESULTS OF OPERATIONS FOR THE THREE
MONTHS ENDED MARCH 31, 2009 AND MARCH 31, 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 months ended
March 31, 2009, we incurred consulting feesof $1,011,227 of which, $989,519 was related
to services provided by the Management Agreement with Empire under which Empire
provides the services of Chief Executive Officer and administrative services to
the Company and consulting services provided by Hans Karundeng and Rudolph
Karundeng under Engagement and Consulting Agreements.  For the three
months ended March 31, 2008, we incurred consulting feesof $1,001,059 of which, $888,613 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
  Therewas no revenue for the threemonths ended March 31, 2009 and
March 31, 2008 as the Company is in its development stage.
 
 COST OF GOODS SOLD
  Therewas no cost of good sold forthe three months ended March 31,
2009 and March 31, 2008 as the Company is in its development
stage.
 
 OTHER EXPENSES
 
 Compensation, consulting and relatedcosts increased to$1,011,227for the three months ended
March 31, 2009 as compared to$1,001,059 for the three months ended
March 31, 2008, $12,184,862 for the period from inception (November 15,
2005) to December 31, 2008,and $13,196,089for the accumulated during the
development stage for the period from inception (November 15, 2005) to March 31,
2009. The increase was
mostly due toconsulting
fees for services provided by the Management Agreement with Empire under which
Empire provides the services of Chief Executive Officer and administrative
services to the Company and consulting services provided by Hans Karundeng and
Rudolph Karundeng under Engagement and Consulting
Agreements.
 
 General and administrativeexpensesdecreased to$19,423 for the three months ended
March 31, 2009 as compared to $42,503 for the three months ended
March 31, 2008, and increased to $722,610 for the period from inception
(November 15, 2005) to December 31, 2008, and $742,033 for the accumulated
during the development stage for the period from inception (November 15, 2005)
to March 31, 2009.This was
primarily due to achange
in advertising and accountingexpense.
 
 Directors’ compensation decreasedto $55,000for the three months ended March 31,
2009, and increased to$60,000for the three months ended March 31,
2008, $537,678 for thefor the period from inception (November
15, 2005) to December 31, 2008 and $592,678 accumulated during the development
stage for the period from inception (November 15, 2005) to March 31,
2009. Thechangewas due to a December 3, 2007
resolution to compensate all members of the Board of Directors on an annualized
basis of $50,000in
cashand 250,000 shares in
the Company’srestrictedcommon stock, effective
January 1, 2007.The change is also due to
fluctuating share prices.
  Delaware franchise taxes amount was
$105for the three months ended
March 31, 2009 and March 31, 2008, $185,421 for the period from
inception (November 15, 2005) to December 31, 2008 and $185,526 for the period
from inception (November 15, 2005) to March 31, 2009. The Company is delinquent
in its filing and payment of the Delaware Franchise Tax report and, accordingly,
is not in good standing. At March 31, 2009, the Company has estimated unpaid
Delaware franchise taxes for the years ended December 31, 2008, 2007, 2006 and
2005 in the amount of$58,072,$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 second quarter of 2009 and pay the amount owned in full during the fourth
quarter of 2009.
 
 Total operating expenses during the
developmentstagedecreased to$1,085,755forthe three months ended March 31,
2009 as compared to,$1,103,667forthe three months ended March 31,
2008, and increased to $13,630,571 for the period from inception (November 15,
2005) to December 31, 2008, and $14,716,326 accumulated during the development
stage for the period from inception (November 15, 2005) to March 31,
2009.
 
 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 plus1,000,000 shares of unregistered
restricted common stock.
The Company recorded $40,000 debt issue costs related to the 1,000,000 shares of
common stock that are now issuable to John Marozzi as of March 31,
2008.On May 5,
2008, John Marozzi received repayment of $50,000 from the Company.On October 13, 2008, the Company
receivedanother$50,000 interest bearing
advance from John Marozzi.The Company was torepay the full amount of theOctober 31, 2008 $50,000note incash within 60 calendar days from the
date the note was executed plus interest paid in the form of 1,000,000 shares of
unregistered Company commonstock.During the year
ended December, 31, 2008, the Company recorded $60,000 of debt
issue costs related to the 1,000,000 shares of common stock thatwere issuabletoJohn Marozzi as of December 31, 2008
(See Note 5).OnMarch 5, 2009, the Company
receivedanother$50,000 interest bearing
advance from JohnMarozzi.  The Company is to
repay the full amount of the March 5, 2009 $50,000 note in cash within 60
calendar days from the date the note was executed plus interest paid in the form
of 1,000,000 shares of unregistered Company common stock.  This leaves
a balance of $200,000 unpaidprincipal as ofMarch 31, 2009. This note
is currently in default. The Company is currently in the process of negotiating
an extension on this note.
  27
  
 On
January 15, 2009, the Company entered into the thirty-one day extension from
December 31, 2008 for the Convertible Loan Agreement and Convertible Note with
Frank Ciolli for the loan amount of $550,000 dated as of April 30, 2008. The
Company issued 500,000 shares of restricted, unregistered common stock each for
Michael Alferi and Frank Ciolli, which resulted in Company debt issue costs of
$80,000 as of March 31, 2009.  The Company is currently negotiating an
additional extension for the Convertible Loan Agreement and Convertible Note.
This note
is currently in default. The Company is currently in the process of negotiating
an extension on this note.
 
 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
distributionagreement of
$125,000,000at December
31, 2007. (See Note 6.)
 
 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 Managementcommenced an action on the
Company’s behalf in the above Circuit Court seeking to vacate and set aside the
2006 judgment asserting claims under Rule 1.540(b) of the Florida Rules of Civil
Procedure.  Our counsel’s evaluation is that the Company has only a
limited chance of having the 2006 judgment opened by the Court because Florida
law provides very narrow grounds for opening a judgment once a year has passed
from its entry.  The Courts are generally reluctant to disturb final
judgments and the Company’s grounds for opening the judgment depend on the
Court’s adopting a somewhat novel argument regarding such
matters.  If, however, the Court does open the default judgment, the
Company will then have the opportunity to defend the 2006 action and, in such
event, our counsel believes that the Company has a reasonable chance of
succeeding in defending that claim, at least in part, based on the documents he
has reviewed. As of March 31, 2009, the Company had accrued $1,219,293,
including accrued interest of $165,908, related to this matter.
  LIQUIDITY AND CAPITAL
RESOURCES
 
 In November 2005, we discontinued and
disposed of our subsidiaries except for Arrow Ltd. in conjunction with the
recapitalization of the Company. The Company was recapitalized by the conversion
of $125,000,000 preferred convertible note related to the purchase of the
Marketing Agreement. As part of the recapitalization plan, the Company settled
all outstanding debt except for $220,000. As of March 31, 2009 and
December 31, 2008 the Company had $45 and $16 of cash, respectively. We had
losses of $1,251,480 for the three months ended March 31, 2009, and do not
currently generate any revenue. We had losses of $1,143,667 for the three months
ended March 31, 2008. 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 besuccessful.
  OFF-BALANCE SHEET
ARRANGEMENTS
  At March 31, 2009, wehad no off-balance sheet
arrangements.
 
 OPERATING ACTIVITIES
 
 We used $585,717 of cash in our
operating activities during the three months ended March 31, 2009. We had a net
loss of $1,251,480. We hadanincreasein stock-based directors’ compensation
to be issued of $5,000, common stock issued for reset of previous subscription
agreement of $49,924, accounts payable and accrued expenses payable of $445,039
mostly related to compensation and management fees, and debt issue costs related
to a note payable of $150,000. In addition, we had a working capital deficiency
of $14,706,460 at March 31, 2009. We did not have any material commitments for
capital expenditures as of March 31, 2009.
 
 INFLATION
  We believe that inflation does not
significantly impact our current operations.
  28
  
 RECENT TRANSACTIONS
  On January 15, 2009, the Company entered
into a stock purchase agreement with APR wherein APR agreed to purchase up to an
aggregate amount of 15,000,000 shares of common stock in the Company for $.10
per share.On January 15, 2009, the Company received $85,000
from Hans Karundeng and Arrow Pacific Resources Group Limited for the purchase
of 850,000 shares of common stock at $.10 per share pursuant to the APR to purchase up to an aggregate
amount of 15,000,000 shares of common stock in the Company for $.10 per
share.On January 20, 2009, the Company received $165,000 from
Hans Karundeng and Arrow Pacific Resources Group Limited for the purchase of
1,650,000 shares of common stock at $.10 per share pursuant to the APR to purchase up toan aggregate amount of 15,000,000 shares
of common stock in the Company for $.10 per
share.
 
 OnApril 17, 2009, the Company receiveda$12,500non-interest bearing advance from JohnMarozzi.  The
Company is to repay the full amount of theApril 17, 2009 $12,500 note in cash within 60 calendar days
from the date the note was executed.
 
 OnMay 8, 2009, the Company receiveda$20,000non-interest bearing advance from JohnMarozzi.  The
Company is to repay the full amount of theMay 8, 2009 $20,000 note in cash within 30 calendar days from the date the note
was executed.
 
 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
  The Company’s Chief Executive
Officer and acting Chief Financial Officer has evaluated the effectiveness of
the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act) as of the fiscal period ending
March 31, 2009 covered by this Quarterly Report on Form 10-Q. Based upon
such evaluation, the Chief Executive Officer and acting Chief Financial Officer
has concluded that, as of the end of such period, the Company’s disclosure
controls and procedures were not effective as required under Rules 13a-15(e) and
15d-15(e) under the Exchange Act.  The Company is currently in the
process of evaluating its options to fix the deficiency in internal
controls.
  Management’s Report on Internal Control
Over Financial Reporting
  Management is responsible for
establishing and maintaining adequate internal control over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) of the
Company. Internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States of
America.
  The Company’s internal control over
financial reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company;
(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America, and
that receipts and expenditures of the Company are being made only in accordance
with authorizations of management and directors of the Company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Company’s assets that
could have a material effect on the financial statements.
  Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
  Management, under the supervision of the
Company’s Chief Executive Officer and acting Chief Financial Officer, conducted
an evaluation of the effectiveness of internal control over financial reporting
based on the framework in  Internal Control—Integrated Framework 
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this evaluation, management concluded that the Company’s internal
control over financial reporting was not effective as of March 31, 2009
under the criteria set forth in the in Internal Control—Integrated
Framework.
  A material weakness is a deficiency, or
combination of deficiencies, in internal control over financial reporting such
that there is a reasonable possibility that a material misstatement of the
Company's annual or interim financial statements will not be prevented or
detected on a timely basis.   Management has determined that
material weaknesses exist due to a lack of segregation of duties, resulting from
the Company's limited resources.
   29
  This quarterly report does not include
an attestation report of the Company’s registered public accounting firm
regarding internal control over financial reporting. Management’s report was not
subject to attestation by our registered public accounting firm pursuant to
temporary rules of the SEC that permit us to provide only management’s report in
this Quarterly Report on Form 10-Q.
  Changes in Internal Control Over
Financial Reporting
  No change in the Company’s internal
control over financial reporting occurred during the quarter ended
March 31, 2009, 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 Managementcommenced an action on the
Company’s behalf in the above Circuit Court seeking to vacate and set aside the
2006 judgment asserting claims under Rule 1.540(b) of the Florida Rules of Civil
Procedure.  Our counsel’s evaluation is that the Company has only a
limited chance of having the 2006 judgment opened by the Court because Florida
law provides very narrow grounds for opening a judgment once a year has passed
from its entry.  The Courts are generally reluctant to disturb final
judgments and the Company’s grounds for opening the judgment depend on the
Court’s adopting a somewhat novel argument regarding such
matters.  If, however, the Court does open the default judgment, the
Company will then have the opportunity to defend the 2006 action and, in such
event, our counsel believes that the Company has a reasonable chance of
succeeding in defending that claim, at least in part, based on the documents he
has reviewed. As of March 31, 2009, the Company had accrued $1,219,293,
including accrued interest of $165,908, related to this matter.
 
 Item 1A.
              Risk
  Factors
 
 Item 1A. “Risk Factors” of our
Annual Report on Form 10-KSB for the year ended December 31,
2008includes a detailed discussion of our
risk factors. There have been no significant changes to our risk factors as set
forth in our 2008Form 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 March
31, 2009, 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 April
20, 2008, the Board of Directors approved a private placement offering (the
"Offering") approximating $2,000,000 to accredited investors at $1.00 per share
of Series C Convertible Preferred Stock. The Offering will consist of the
Company's Series C Convertible Preferred Stock that will be convertible into our
common stock. These securities are not required to be and will not be registered
under the Securities Act of 1933. Shares issued under this placement will not be
sold in the United States, absent registration or an applicable exemption from
registration. As of March 31, 2009, the Company has received $25,000 from
investors towards 25,000 Series C Convertible Preferred Stock shares issuable
under subscription agreements covering the placement offering. Each Series C
Convertible Preferred Stock is convertible into 20 shares of the Company’s
Common Stock. The holders of the preferred stock have no voting rights except as
may be required by Delaware law, no redemption rights, and no liquidation
preferences over the Common Stock holders.
  30
  
 On December 3, 2007, the Board of
Directors approved a plan to compensate all members of the Board of Directors at
a rate of $50,000 per year and 250,000 shares of Company common stock effective
January 1, 2007. This compensation plan applies to any board member that
belonged to the Board as of and subsequent to January 1, 2007. Those board
members that were only on the Board for part of the year will received pro-rata
compensation based on length of service. As of March 31, 2009,noneof the shares under this plan have been
issued and the Company has accrued $450,137 of cash and recorded additional
paid-in capital of$142,538for stock compensation based on the fair
value of 2,250,685 shares to be issued to the members of the
Board.
 
 Item 5.
              Other
      Information
  None
  31
  
  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
 
  32
  
 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: May 20, 2009
              By:
              /S/  PETER J.
      FRUGONEPeter J.
      Frugone
                President and Chief Executive
      Officer
  Dated: May 20, 2009
              By:
              /S/  PETER J.
      FRUGONEPeter J.
      Frugone
                Principal Accounting
      Officer
   33