UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Form
10-K





|X|                      ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
("Act")





For the fiscal year endedSeptember
30, 2008





Commission
File No. 0-28789





FALCON RIDGE DEVELOPMENT,
INC.


(Exact
name of Registrant as specified in its charter)





NEVADA
            
            84-1461919(State
      or other jurisdiction of
            
            (I.R.S.
      Employerincorporation
      or organization)
            
            Identification
      No.)5111
      Juan Tabo Boulevard N.E.Albuquerque,
      New Mexico
            
            87111(Address
      of principal executive offices)
            
            (Zip
      code)




505.856.6043


(Registrant's
telephone number, including area code)





Securities registered pursuant to
Section 12(b) of the Act:None.





Securities
registered pursuant to Section 12(g) of the Act:


Title
      of each class
            Name
      of each exchange on which registeredCommon Stock, 0.001 par
      value
            OTCBB





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
|X| No |_|





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





Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act Yes |_| No |X|





Revenues for the most recent fiscal
year were $93,281.00





The
aggregate market value of the voting stock held by non-affiliates of the
Registrant as of January 6, 2009, based upon the average high and low prices of
such stock on that date was $172,576.   Solely for purposes of
the foregoing calculation all of the Registrant's directors and officers are
deemed to be affiliates.


Indicate
by check mark whether the registrant is a large accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of “large
accelerated filer,” “accelerated filer,” and “small reporting company” in Rule
12b-2 of the Exchange Act.
  Large accelerated
      filer []
              Accelerated filer
      []Non-accelerated
      filer   [] (Do not check if a smaller reporting
      company)
              Smaller reporting
      company  [X]
  Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practical date:


Common
Stock, $.001 Par Value - 78,054,805shares of outstanding as of January 6,
2009.





Transitional
Small Business Disclosure Format Yes |_| No |X|














FALCON
RIDGE DEVELOPMENT, INC.


2008
ANNUAL REPORT ON FORM 10-K





Table
of Contents


Part
              Item(s)
              
              PageI.
              1.
              Business
              41A.
              Risk
      Factors
              52.
              Properties
              103.
              Legal
      Proceedings
              114.
              Submission
      of Matters to a Vote of Security Holders
              11II.
              5.
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
              126.
              Selected
      Financial Data
              137.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              137A.
              Quantitative
      and Qualitative Disclosures About Market Risk
              138.
              Financial
      Statements and Supplementary Data
              F-19.
              Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
              179A.
              Controls
      and Procedures
              179B.
              Other
      Information
              17III.
              10.
              Directors
      and Executive Officers of the Registrant
              1811.
              Executive
      Compensation
              1912.
              Security
      Ownership of Certain Beneficial Owners and Management
              2013.
              Certain
      Relationships and Related Transactions
              2114.
              Principal
      Accountant Fees and Services
              22IV.
              15.
              Exhibits,
      Financial Statement Schedules
              22Signatures
              23








-
2 -








PART
I





SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS




We make
statements in this report that relate to matters that are not historical facts
that we refer to as "forward-looking statements" regarding, among other things,
our business strategy, our prospects and our financial position. These
statements may be identified by the use of forward-looking terminology such as
"believes," "estimates, "expects, "intends," "may," "will," "should" or
"anticipates" or the negative or other variation of these or similar words, or
by discussion of strategy or risks and uncertainties. Forward-looking statements
in this report include, among other things, statements concerning:





·
            projections
      of future results of operations or financial
  condition;


·
            expectations
      for our properties; and


·
            expectation
      of the continued availability of capital
  resources.




Any
forward-looking statement made by us necessarily is based upon a number of
estimates and assumptions that, while considered reasonable by us, are
inherently subject to significant business, economic, regulatory and competitive
uncertainties and contingencies, many of which are beyond our control, and are
subject to change. Actual results of our operations may vary materially from any
forward-looking statement made by or on our behalf. Forward-looking statements
should not be regarded as representations by us or any other person that the
forward-looking statements will be achieved. Undue reliance should not be placed
on any forward-looking statements.




All
subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the
cautionary statements included in this report. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this
report might not occur.





-
3 -








Item
1.   Description of Business





Introduction




Falcon Ridge
Development, Inc. (the "Company" or “we” or “us”) is a Nevada corporation. Our
principal business address is 5111 Juan Tabo Boulevard N.E., Albuquerque, New
Mexico 87111. We changed the domicile of the company from Colorado to Nevada on
or about July 6, 2005 and changed our name from PocketSpec Technologies, Inc. to
Falcon Ridge Development, Inc. We have various subsidiaries, Sierra
Norte, LLC ("Sierra Norte"), Spanish Trails, LLC ("Spanish Trails"), Falcon
Ridge Financial LLC., Falcon Ridge Realty LLC., Falcon Ridge Investments LLC. We
operate in the real estate industry and services to the real estate industry. We
acquire tracts of raw land and develop them into communities. Often these
communities include residential, commercial, industrial and retail components to
them.  We plan to offer our own housing products in these and other
communities developed by other developers. In addition, in 2007 we completed the
formation of various wholly owned subsidiaries including Falcon Ridge Financial
LLC, Falcon Ridge Realty LLC and Falcon Ridge Investments LLC. Falcon Ridge
Financial places and brokers real estate mortgages of all types but primarily
concentrates on residential mortgages. Falcon Ridge Realty is our resale
division and concentrates on selling homes for the general public under listing
and sale agreements with individual clients. Falcon Ridge Investments, LLC is a
vehicle for creating and operating private placement offerings as well as other
type of investment vehicles’.




On May 20,
2005, we completed a reverse acquisition transaction. We acquired Sierra Norte,
a New Mexico limited liability company, which thereby became our wholly-owned
subsidiary. Sierra Norte is a land development company in the Albuquerque, New
Mexico area. Formerly, we were a technology company in the business of
developing and marketing color comparison devices. We acquired Spanish Trails on
July 6, 2005 as discussed below. Originally, we were incorporated as Monument
Galleries, Inc., a Colorado corporation, on May 15, 1998.




As a result
of the Sierra Norte acquisition, the former security holders of Sierra Norte
acquired a majority of our outstanding shares of common stock. For accounting
purposes, Sierra Norte has been deemed to be the acquirer in the acquisition
and, consequently, the assets, liabilities and historical operations that are
reflected in our financial statements are those of Sierra Norte, which are
recorded at the historical cost basis of Sierra Norte. The reverse acquisition
was consummated under Colorado law pursuant to an Agreement and Plan of
Reorganization dated May 20, 2005.




On July 6,
2005, we entered into an exchange of securities whereby we acquired 100% of the
ownership of Spanish Trails, in exchange for the issuance of a total of
614,882,069 (pre-reverse split) of our common shares. As a result of the Spanish
Trails acquisition, the former security holders of Spanish Trails acquired a
majority of our outstanding shares of common stock, but we did not have a change
of control because the owners of a majority of Spanish Trails were the executive
officers and majority shareholders of the Company. After the exchange,
752,262,441 (pre-reverse split) shares of common stock were issued and
outstanding.




Also, on
July 6, 2005 we reincorporated our company to Nevada from Colorado and changed
our name to Falcon Ridge Development Inc., after shareholder approval. In
connection with the name change, we changed to a new trading symbol,
FLRD.BB.





On August
16, 2006 we affected a 1 for 200 reverse split of our common stock. This reduced
the outstanding common shares from 752,262,441 to 3,761,312. Our current trading
symbol is FCNR.BB.




-
4 -




We are
currently own the rights to 139 acres under  real estate contract with
an individual. The land’s original platting significantly limited the number of
useable lots. We are re-platting the entire 139 acres. 96 acres of our Spanish
Trails project is progressing through local real estate governmental clearance
towardfinal approval of our platting plan. We anticipate the process should be
completed by late spring 2008. At current time we have stopped moving forward on
this project pending improvement in market conditions. The mortgage was due
August 1, 2008. Its extension is at the discretion of the mortgage holder who
has not agreed to extend at the time of this filing.  The Company has
stopped making payments and is in the process of evaluating its options,
including deed in lieu of foreclosure.




Considerable
up-front costs in any real estate platting project must first be incurred and
paid for, thus in the early stages of our real estate projects significant
amounts of capital can be required until platting occurs, and lots are improved
and sold. Predictably, greater revenues will be achieved as soon as a portion of
the lots are improved and sold. When the lot development plan has been completed
and accepted by Valencia County, New Mexico, and construction of the lots
completed, the sale of these lots will be currently funded and closed. It is
also our intention to initiate a home building division, which will construct
entry level homes with the remaining developed Spanish Trails project lots. The
sale of homes and, consequently, the pace of construction, will be determined by
the rate of market absorption.




We have not
been involved in any bankruptcy, receivership, or similar
proceeding.





(b)
Business of the Issuer




Falcon Ridge
Development, Inc. (the "Company" or “we” or “us”) is a Nevada corporation. Our
principal business address is 5111 Juan Tabo Boulevard N.E., Albuquerque, New
Mexico 87111. We changed the domicile of the company from Colorado to Nevada on
or about July 6, 2005 and changed our name from PocketSpec Technologies, Inc. to
Falcon Ridge Development, Inc. We have various subsidiaries, Sierra
Norte, LLC ("Sierra Norte"), Spanish Trails, LLC ("Spanish Trails"), Falcon
Ridge Financial LLC., Falcon Ridge Realty LLC., Falcon Ridge Investments LLC. We
operate in the real estate industry and services to the real estate industry. We
acquire tracts of raw land and develop them into communities. Often these
communities include residential, commercial, industrial and retail components to
them.  We plan to offer our own housing product in these and other
communities developed by other developers. In addition, in 2007 we completed the
formation of various wholly owned subsidiaries including Falcon Ridge Financial
LLC, Falcon Ridge Realty LLC and Falcon Ridge Investments LLC. Falcon Ridge
Financial places and brokers real estate mortgages of all types but primarily
concentrates on residential mortgages. Falcon Ridge Realty is our resale
division and concentrates on selling homes for the general public under listing
and sale agreements with individual clients. Falcon Ridge Investments, LLC is a
vehicle for creating and operating private placement offerings as well as other
type of investment vehicles’.








Item
1A.   Risk Factors





WE
HAVE NO HISTORY OF PROFITABILITY FROM OUR DEVELOPMENT OF REAL
ESTATE.





Sales of
our real estate development properties may never generate sufficient revenues to
fund our continuing operations. We may never generate positive cash flow or
attain profitability in the future. As of September 30, 2008, our accumulated
deficit was $7,349,634.  For the fiscal year ended September 30, 2008,
we incurred a loss of $ 4,572,620. These losses have primarily resulted
from:





A lack of
funding for construction has resulted in an inability to produce lots for sale;
and costs of operating a public company that included increased accounting and
legal fees.





-
5 -





BECAUSE
OF OUR LIMITED HISTORY AND THE POTENTIAL FOR COMPETITION, AN INVESTMENT IN US IS
INHERENTLY RISKY.





Because
we are a company with a limited history, our operations are subject to numerous
risks similar to that of a start-up company. We expect the real estate
development business to be highly competitive because many developers have
access to the same market. Substantially all of them have greater financial
resources and longer operating histories than we have and can be expected to
compete within the business in which we engage and intend to engage. We cannot
assure that we will have the necessary resources to be competitive.





WE
MAY NOT BE ABLE TO CONDUCT SUCCESSFUL OPERATIONS IN THE FUTURE.





The
results of our operations will depend, among other things, upon our ability to
develop and market our properties. Furthermore, our proposed operations may not
generate income sufficient to meet operating expenses or will generate income
and capital appreciation, if any, at rates lower than those anticipated or
necessary to sustain ourselves. Our operations may be affected by many factors,
some known by us, some unknown, and some which are beyond our control. Any of
these problems, or a combination thereof, could have a materially adverse effect
on our viability as an entity and might cause the investment of our shareholders
to be impaired or lost.





TO
FULLY DEVELOP OUR BUSINESS PLAN, WE WILL NEED ADDITIONAL FINANCING.





For the
foreseeable future, we expect to rely principally upon internal financing,
although we have raised limited private placement and debt instrument funds
during the past fiscal year and may be required to do so in the future. We
cannot guarantee the success of this plan. We believe that from time to time, we
may have to obtain additional financing in order to conduct our business in a
manner consistent with our proposed operations. There can be no guaranty that
additional funds will be available when, and if, needed. If we are unable to
obtain financing, or if its terms are too costly, we may be forced to curtail
proposed expansion of operations until such time as alternative financing may be
arranged, which could have a materially adverse impact on our operations and our
shareholders' investment. At the present time, we are negotiating bank and other
financing institutions for the Spanish Trails Project.





IF
WE FAIL TO EXPAND OUR CONTROLS AND INTEGRATE NEW PERSONNEL TO SUPPORT OUR
ANTICIPATED GROWTH, OUR BUSINESS OPERATIONS WILL SUFFER.





Management
is in the process of analyzing and adopting new policies and procedures to
improve the design and operations of our disclosure controls, including review
and education concerning Form 8-K requirements. We have changed our policy with
respect to financial controls in order to alert us with respect to funding
provided by related parties and changes in disclosure requirements.





WE
ANTICIPATE THAT WE WILL BE SUBJECT TO INTENSE COMPETITION.





We will
face intense competition in the development of real estate near Albuquerque, New
Mexico. Many national developers have started developing in the nearby areas
with similar developments.





WE
LACK CAPITAL.





We
currently lack the capital necessary to independently sustain our operations.
Management is actively negotiating financing through lending institutions and
other sources to meet its short term working capital needs and is negotiating
long term capital options. There can be no guaranty that additional funds will
be available. If we are unable to obtain financing, or if its terms are too
costly, we may be forced to curtail proposed expansion of operations until such
time as alternative financing may be arranged, which could have a materially
adverse impact on our operations and our shareholders' investment.





-
6 -








WE
HAVE LIMITED HUMAN RESOURCES NECESSARY TO EXPAND OPERATIONS.





We have a
small staff of skilled developers and supplement our human resource needs
through sub-contracting. We are planning to acquire additional resources
internally thereby reducing the use of sub-contractors and increasing direct
control over our operations. If we are unable to acquire additional resources
internally we will be forced to use sub-contractors that may or may not be
available to work when and where we need them thereby limiting our ability to
expand operations as we intend.





OUR
ULTIMATE SUCCESS WILL BE DEPENDENT UPON MANAGEMENT.





Our
success is dependent upon the decision making of our directors and our executive
officers, who are Fred M. Montano and Karen Y. Duran. These individuals intend
to commit as much time as necessary to our business. The loss of any or all of
these individuals could have a materially adverse impact on our operations. We
have oral employment agreements with our officers and directors, but have not
obtained key man life insurance on the lives of any of these
individuals.





OUR
STOCK PRICE MAY BE VOLATILE, AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT OR
ABOVE YOUR INITIAL PURCHASE PRICE.





There has
been, and continues to be, a limited public market for our common stock.
Although our common stock trades on the NASD Bulletin Board, an active trading
market for our shares has not developed, and may never develop or be sustained.
If you purchase shares of common stock, you may not be able to resell those
shares at or above the initial price you paid. The market price of our common
stock may fluctuate significantly in response to numerous factors, some of which
are beyond our control, including the following:




·
            actual
      or anticipated fluctuations in our operating
  results;


·
            changes
      in financial estimates by securities analysts or our failure to perform in
      line with such estimates;


·
            changes
      in market valuations of other real estate companies, particularly those
      that sell products similar to ours; announcements by us or our competitors
      of significant innovations, acquisitions, strategic partnerships, joint
      ventures or capital commitments;


·
            introduction
      of new design and planning enhancements that reduce the need for our
      products; and


·
            departure
      of key personnel.





Most of
our common stock is currently restricted. As restrictions on resale end, the
market price of our stock could drop significantly if the holders of restricted
shares sell them or are perceived by the market as intending to sell them. This
could cause the market price of our common stock to drop significantly, even if
our business is doing well.





OUR
COMMON STOCK HAS A LIMITED PUBLIC TRADING MARKET.





While our
common stock currently trades in the Over-the-Counter Bulletin Board market, our
market is limited and sporadic. We cannot assure that such a market will improve
in the future, even if our securities are ever listed on the NASDAQ Small Cap
Market or the American Stock Exchange. We cannot assure that an investor will be
able to liquidate the investor’s investment without considerable delay, if at
all. If a more active market does develop, the price may be highly volatile. The
factors which we have discussed in this document may have a significant impact
on the market price of the common stock. The relatively low price of our common
stock may keep many brokerage firms from engaging in transactions in our common
stock.




-
7 -





THE
OVER-THE-COUNTER MARKET FOR STOCK SUCH AS OURS HAS HAD EXTREME PRICE AND VOLUME
FLUCTUATIONS.




The
securities of companies such as ours have historically experienced extreme price
and volume fluctuations during certain periods. These broad market fluctuations
and other factors, such as new product developments and trends in the our
industry and in the investment markets generally, as well as economic conditions
and annual variations in our operational results, may have a negative effect on
the market price of our common stock.





WE
ARE SUBJECT TO RISKS ASSOCIATED WITH INVESTMENTS IN REAL ESTATE





The value
of, and our income from, our properties may decline due to developments that
adversely affect real estate generally and those that are specific to our
properties. General factors that may adversely affect our real estate portfolios
include:





·
            increases
      in interest rates;





·
            a
      general tightening of the availability of
  credit;





·
            a
      decline in the economic conditions in one or more of our primary
      markets;





·
            an
      increase in competition for customers or a decrease in demand by
      customers;





·
            an
      increase in supply of our property types in our primary
      markets;





·
            declines
      in consumer spending during an economic recession that adversely affect
      our revenue; and





·
            the
      adoption on the national, state or local level of more restrictive laws
      and governmental regulations, including more restrictive zoning, land use
      or environmental regulations and increased real estate
    taxes.




Additional
factors may adversely affect the value of, and our income from, specific
properties, including:





·
            adverse
      changes in the perceptions of prospective purchasers of the attractiveness
      of the property;





·
            opposition
      from local community or political groups with respect to development or
      construction at a particular site;


·
            a
      change in existing comprehensive zoning plans or zoning regulations that
      impose additional restrictions on use or requirements with respect to our
      property;





·
            our
      inability to provide adequate management and maintenance or to obtain
      adequate insurance;





·
            an
      increase in operating costs;





·
            new
      development of a competitor's property in or in close proximity to one of
      our current markets; and





·
            earthquakes,
      floods or underinsured or uninsured natural
  disasters.





-
8 -




The
occurrence of one or more of the above risks could result in significant delays
or unexpected expenses. If any of these occur, we may not achieve our projected
returns on properties under development and we could lose some or all of our
investments in those properties.





WE
ARE SUBJECT TO REAL ESTATE DEVELOPMENT RISKS





Our
development projects are subject to significant risks relating to our ability to
complete our projects on time and on budget. Factors that may result in a
development project exceeding budget or being prevented from completion
include:





·
            an
      inability to secure sufficient financing on favorable terms, including an
      inability to refinance construction
loans;





·
            The
      subprime mortgage financial crisis of 2008 has brought about a rise in
      defaults and home foreclosures. It has also caused tighter lending
      standards. All this combined appears to be driving down home prices and
      affecting consumer confidence. The negative effect of the subprime
      situation is effecting the companies ability to sell homes and secure
      financing. It will also effect the goss margin and volume of business
      completed by Falcon Financial, the companies’ other
    division.





·
            construction
      delays or cost overruns, either of which may increase project development
      costs;





·
            an
      increase in commodity costs;





·
            an
      inability to obtain zoning, occupancy and other required governmental
      permits and authorizations;





If any of
these occur, we may not achieve our projected returns on properties under
development and we could lose some or all of our investments in those
properties.





WE
ARE VULNERABLE TO CONCENTRATION RISKS BECAUSE OUR OPERATIONS ARE CURRENTLY
ALMOST EXCLUSIVE TO THE ALBUQUERQUE, NEW MEXICO AREA MARKET.





Our real
estate activities are almost entirely located in the Albuquerque, New Mexico
area. Because of our geographic concentration and limited number of projects,
our operations are more vulnerable to local economic downturns and adverse
project-specific risks than those of larger, more diversified
companies.





The
performance of the Albuquerque economy greatly affects our sales and,
consequently the underlying values of our properties. The Albuquerque economy is
heavily influenced by conditions and employment in the defense industry and in
government. A decrease in government supported projects through budget cuts or
otherwise, could adversely affect the economy in our market. Rising interest
rates may adversely affect our ability to sell lots and homes.





OUR
RESULTS OF OPERATIONS AND FINANCIAL CONDITION ARE GREATLY AFFECTED BY THE
PERFORMANCE OF THE REAL ESTATE INDUSTRY.





Our real
estate activities are subject to numerous factors beyond our control, including
local real estate market conditions (both where our properties are located and
in areas where our potential customers reside), substantial existing and
potential competition, general national, regional and local economic conditions,
fluctuations in interest rates and mortgage availability and changes in
demographic conditions. Real estate markets have historically been subject to
strong periodic cycles driven by numerous factors beyond the control of market
participants.





-
9 -








Real
estate investments often cannot easily be converted into cash and market values
may be adversely affected by these economic circumstances, market fundamentals,
competition and demographic conditions. Because of the effect these factors have
on real estate values, it is difficult to predict with certainty the level of
future sales or sales prices that will be realized for individual
assets.





Our real
estate operations are also dependent upon the availability and cost of mortgage
financing for potential customers, to the extent they finance their purchases,
and for buyers of the potential customers' existing residences.





OUR
OPERATIONS ARE SUBJECT TO AN INTENSIVE REGULATORY APPROVAL PROCESS.





Before we
can develop a property, we must obtain a variety of approvals from local and
state governments with respect to such matters as zoning, density, parking,
sub-division, site planning and environmental issues. Certain of these approvals
are discretionary by nature. Because certain government


agencies
and special interest groups are involved there is a high degree of uncertainty
in obtaining these approvals.





THE
REAL ESTATE BUSINESS IS VERY COMPETITIVE AND MANY OF OUR COMPETITORS ARE LARGER
AND FINANCIALLY STRONGER THAN WE ARE.





The real
estate business is highly competitive. We compete with a large number of
companies and individuals, and many of them have significantly greater financial
and other resources than we have. Our competitors include local developers who
are committed primarily to particular markets and also national


developers
who acquire properties throughout the U.S. Because we are a company with a
limited history, our operations are subject to numerous risks similar to that of
a start-up company. We cannot assure that we will have the necessary resources
to be competitive.





OUR
OPERATIONS ARE SUBJECT TO NATURAL RISKS.





Our
performance may be adversely affected by weather conditions that delay
development or damage property.





The U.S.
military intervention in Iraq, the terrorist attacks in the U.S. on September
11, 2001 and the potential for additional future terrorist acts have created
economic, political and social uncertainties that could materially and adversely
affect our business.





Further
acts of terrorism could be directed against the U.S. domestically or abroad,
these acts of terrorism could be directed against properties and personnel of
companies such as ours. Moreover, while our property and business interruption
insurance covers damages to insured property


directly
caused by terrorism, this insurance does not cover damages and losses caused by
war. Terrorism and war developments may materially and adversely affect our
business and profitability and the prices of our common stock in ways that we
cannot predict at this time.








Item
2. Description of Property





(a) The
principal office of our company is located at 5111 Juan Tabo Boulevard N.E.,
Albuquerque, New Mexico 87111. We do not own the building that our principal
offices are located; however we do sub-lease the building on a month to month
tenancy.





-
10 -




Affiliated
Party Lease -





Falcon
Ridge Development LLC (a related party) leases our office space from Tucana LLC
(a related party) for $5,250 per month through May 14, 2007 with annual
escalations of $250 per month through May 14, 2008. Tucana LLC is owned by Fred
Montano and Karen Duran our CEO and CFO.





(b)
Investment Policies





We
acquire property for the purpose of developing, operating and reselling
it.





Two of
our principals own two companies that are involved in real estate
development.





(c)
Description of Real Estate and Operations





We
currently own, under a real estate contract, 139 acres in Belen, New Mexico. We
plan to develop lots for resale to third party builders and in the current year
we plan to offer for sale system built homes. The terms of the mortgages on this
land are described below;





Note
      payable Metro Loan Corp, with interest at 12 percent interest only
      payments in monthly installments of $11,100.00 collateralized by a First
      Mortgage due August 1, 2008. Terms of the Loan Agreement describe an
      Extension Option. Terms of the Extension Option are for two additional six
      (6) month periods at the higher of (i) eighteen percent (18%) interest or
      (ii) Prime Rate plus 1,000 basis points. Renewal Option is NOT AUTOMATIC
      and is at the discretion of the Lender. Fred Montano and the Corporation
      are Guarantors of this mortgage.
            
            Balance
      at September 30, 2008, $1,150,000Second
      Mortgage and Note to Karen Duran and/or Fred M. Montano with interest at
      3% over prime as stated in Wall Street Journal with monthly installments
      of interest and $20,000.00 principal payments
            
            Balance
      at September 30, 2008  $1,136,074





Item
3. Legal Proceedings





There are
no legal proceedings, to which we are a party, which could have a material
adverse effect on our business, financial condition or operating results.
However, a former attorney has filed a complaint and obtained a default judgment
against us for fees and costs in the approximate amount of $ 47,000. We believe
that the judgment will be reversed and we will enter arbitration with the
attorney. We have included $ 38,000 in these financial statements and the costs
assessed by the attorney of approximately $ 9,000 are not included.





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





As
permitted by Nevada corporate law, our majority shareholders acted by consent on
October 4, 2007 to re-elect the board of directors that became effective on
October 4, 2007. Part
II




-
11 -





Item
5. Market for Common Equity and Related Stockholder Matters





(a)
Principal Market or Markets.





Since May
2001, our securities have been listed for trading in the Over-the-Counter market
on the NASD's "Electronic Bulletin Board." We currently trade under the symbol
FCNR.BB. The following table sets forth the high and low bid quotation for our
common stock for each fiscal quarterly period of 2008 and 2007.





There is
no market for our preferred stock.





Bid Price ( Adjusted for a
200 for 1 split for periods prior to the split)





2008
            High
            LowFirst
      Quarter
            0.55
            0.16Second
      Quarter
            0.19
            0.10Third
      Quarter
            0.14
            0.01Fourth
      Quarter
            0.018
            0.0042007
            High
            LowFirst
      Quarter
            1.50
            0.50Second
      Quarter
            1.25
            .06Third
      Quarter
            1.25
            0.05Fourth
      Quarter
            0.45
            0.02Yahoo
      Finance web site





(b)
Approximate Number of Holders of Common Stock and Preferred Stock





As of
September 30, 2008, we had a total of 47,315,917 shares of common stock outstanding.
The number of holders of record of our common stock at that date was
approximately 180.





As of
September 30, 2008, we had a total of 354,000 shares of preferred stock
outstanding. The number of holders of record of our preferred stock at that date
was fourteen.





(c)
Dividends





Holders
of common stock and preferred stock are entitled to receive such dividends as
may be declared by our Board of Directors. We paid no dividends on the common
stock during the periods reported herein:





(d)
nor do we anticipate paying dividends in the foreseeable future.





(e)
Repurchases





We did
not repurchase any of the common stock or preferred stock during the
year.





(f)
Issuance of Unregistered Stock





We issued
194,000 shares of preferred stock for $2.50 per share. Our preferred stock is
not publicly traded.





-
12 -







Item
6.  Selected Financial Data





Reference
is made to the financial statements, the notes, and the reports of our
registered public accounting firm commencing on page F-1 of this report, which
financial statements, notes, and reports are incorporated herein by
reference.






Item
7.    Management's Discussion and Analysis and Results of
Operations
 
 This
section discusses the results of our operations. You should read the following
discussions and analyses in conjunction with the audited consolidated financial
statements that are included in this Form 10-K. Certain statements contained in
this Management's Discussion and Analysis of Financial Condition and Results of
Operations constitute "forward-looking statements," which statements involve
risks and uncertainties described elsewhere in this report. The historical
information should not necessarily be taken as a reliable indication of our
future performance.
 
 (a)
Management's Discussion and Analysis of Financial Condition and Results of
Operations
  OVERVIEW
  In mid to
late 2008, conditions within the homebuilding industry became very challenging.
Estimates are that sales purchases were down 15-20%.  Despite current
conditions, Management believes that housing market conditions will improve. We
estimate the improvement will occur over the long-term. In the short term, we
expect that conditions will continue to be demanding, and may deteriorate
further before recovery. Several factors contributed to the difficult
environment, including: lack of financing, continued high inventory levels for
both new and existing homes in addition to a glut of developed building lots,
The result will be seen in continued downward pressure of large price reductions
and higher sales incentives. Adding to this stress is the credit tightening of
the mortgage markets, along with increasing home foreclosures in many markets.
These factors taken with other unforeseeable occurrences will result in lower
gross profits for the industry in general
  STRATEGY
  We
believe the long-term fundamentals, namely population growth and household
formation, remain solid and will continue to support housing demand. This is
especially true when put in the context of specific, targeted markets that the
Company is in a position to enter. We also believe current market conditions are
extremely challenging and demanding and will remain so for the near term.
However, it will moderate over the long term. In the interim, we are exploring
other areas related to real estate that could generate revenue for the Company.
For instance, we are currently exploring potential merger(s) and/or
acquisition(s) of related businesses and Corporations.  Renegotiating
or cancelling land option purchase contracts from current levels is also under
serious consideration.  The ability to obtain financing, both for
development and home building projects, and for home mortgages, remains
extremely difficult to obtain. Any or all\of these factors can predictably lower
sales volume and gross profits significantly Management is also exploring how to
best use its real estate and finance experience, One area of focus is loan
workouts. In this scenario the Company may create a division to help real estate
owners in financial distress avoid foreclosure through the use of structured
refinance and loan modifications. It is currently under Letter of Intent with
one such company as a potential acquisition.
  -
13 -
 
 Forward-Looking
Statements
 
 This
Annual Report on Form 10-K and the documents incorporated herein by reference
contain forward-looking statements that have been made pursuant to the
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on current expectations, estimates, and
projections about our industry, management beliefs, and certain assumptions made
by our management. Words such as "anticipates," expects," "intends," "plans,"
"believes," "seeks," "estimates," variations of such words, and similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties, and assumptions that are difficult to predict; therefore,
actual results may differ materially from those expressed or forecasted in any
such forward-looking statements. Unless required by law, we undertake no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events, or otherwise. However, readers should
carefully review the risk factors set forth in other reports and documents that
we file from time to time with the Securities and Exchange Commission,
particularly our Annual Reports on Form 10-K and any Current Reports on Form
8-K.
 
 Overview and
History
 
 We are a
Nevada corporation with two subsidiaries, Sierra Norte, LLC ("Sierra Norte") and
Spanish Trails, LLC ("Spanish Trails"). We are in the real estate industry and
acquire tracts of raw land and develop them into residential lots for sale to
homebuilders. We plan to expand our operations in 2007 into homebuilding on our
Spanish Trails lots. Our executive offices are located in the Albuquerque, New
Mexico area.
 
 On May
20, 2005, we completed a reverse acquisition transaction. We acquired Sierra
Norte, a New Mexico limited liability company, which thereby became our
wholly-owned subsidiary. Sierra Norte is a land development company in the
Albuquerque, New Mexico area. Formerly we were a technology company which was in
the business of developing and marketing color comparison devices. We acquired
Spanish Trails on July 6, 2005 as discussed below.
 
 As a
result of the Sierra Norte acquisition, the former security holders of Sierra
Norte acquired a majority of our outstanding shares of common stock. For
accounting purposes, Sierra Norte has been deemed to be the acquirer in the
acquisition and, consequently, the assets, liabilities and historical operations
that are reflected in our financial statements are those of Sierra Norte, which
are recorded at the historical cost basis of Sierra Norte. The reverse
acquisition was consummated under Colorado law pursuant to an Agreement and Plan
of Reorganization dated May 20, 2005.
 
 On July
6, 2005, we entered into an exchange of securities whereby we acquired 100% of
the ownership of Spanish Trails, in exchange for the issuance of a total of
614,882,069 (pre-reverse split) of our common shares. As a result of the Spanish
Trails acquisition, the former security holders of Spanish Trails acquired a
majority of our outstanding shares of common stock, but we did not have a change
of control because the owners of a majority of Spanish Trails were the executive
officers and majority shareholders of the Company. After the exchange,
752,262,441 (pre-reverse split) shares of common stock were issued and
outstanding.
 
 Also, on
July 6, 2005 we reincorporated our company to Nevada from Colorado and changed
our name to Falcon Ridge Development Inc., after shareholder approval. In
connection with the name change, we changed to a new trading symbol,
FLRD.BB.
 
 On August
16, 2006 we affected a 1 for 200 reverse split of our common stock. This reduced
the outstanding shares from 752,262,441 to 3,761,312 and we changed our trading
symbol to FCNR.BB.
 
 -
14 -
 
 Our
Spanish Trails project is progressing through local real estate governmental
clearance toward final approval of our platting plan. We anticipate the process
should be completed in 2008. When our platting receives final approval, we will
be able to begin construction of the development. Considerable up front costs in
any real estate project must first be incurred and paid for, thus in the early
stages of our real estate projects significant amounts of capital can be
required before Platting approval occurs, lots are improved, built and sold.
Revenues will be achieved as soon as all or a portion of the lots are improved
and and accepted by the Valencia County, New Mexico. After which sales to third
parties of homes /andor lots can be closed. It is also our intention to sell a
portion of the finished lots to other builders and to construct homes on a
portion of the completed lots. The sale of homes and, consequently, the pace of
construction, will be determined by the rate of market absorption as well as
other market conditions.
 
 Results of
Operations
 
 Year Ended September 30,
2008 Compared to Year Ended September 30, 2007
 
 We had
revenue of 93,281 for the twelve months ended September 30, 2008 compared to
revenues of $32,017 for the year ended September 30, 2007. This increase was due
to more brokerage commissions in fiscal 2008 over 2007.
 
 Our costs
of sales for the twelve months ended September 30, 2008 was $-0- compared to
costs of sales of $-0- for the year months ended September 30,
2007.   Our selling, general and administrative expenses for the
twelve months ended September 30, 2008 were $390,582, compared to selling,
general and administrative expenses of $571,646 for the year ended September 30,
2007. The major components of these expenses are rent, legal and loan processing
costs and commission.
 
 Consulting
and stock based compensation was $3,805,912 in 2008 compared to $430,468 for the
year ended September 30, 2007.The increase on consulting fees is due primarily
for stock bonuses valued at  $2,000,000  awarded to the
President and Chief Financial Officer and  $887,292 in the cost of
warrants issued to a consulting firm
 
 Our
planned principal source of revenue in the near term is expected to be from 139
acres of land we own in the Spanish Trails project, which is being developed as
discussed above. However, the first mortgage of $1,150,000 is in default and the
Company is considering an option of surrendering the deed in lieu of
foreclosure.
 
 Liquidity and Capital
Resources
 
 At
September 30, 2008 our cash position was $1,119.
 
 From time
to time we need working capital when we do not have funds to pay for lot
development or general and administrative expenses. During the twelve months
ended September 30, 2007, our chief financial officer and Falcon Ridge
Development LLC (a related party) has loaned us funds for us to meet some of our
obligations and to continue working on platting and preparing lots for home
building. In May and June of 2008 the Company raised $207,123 in additional
working by issuing notes payable.  In addition,
 In the
month of September the  Company raised $15,000  of working
capital by issuing two notes payable of which $5,000 was loaned by a director of
the Company.  With increasing losses and the continued worsening of
the economy, the ability of the Company to raise additional working capital is a
major concern.Thus, being faced with a
working capital shortage we may be required to seek financing which may not be
available or, if available, it could be on terms which are cost prohibitive to
us.
  -
15 -
 
 Most of
our costs are incurred in the initial phases of our real estate projects. Our
revenue and profitability depends upon our ability to develop, manage and sell
real estate projects on a timely basis and to control our costs. We expect that
we will develop a more consistent pipeline of activity as we mature and,
thereby, a more consistent source of revenues and profit. If we succeed in this
effort and generate sufficient revenues, we will expect to be profitable.
However, we cannot assure that we will be profitable or that we can raise
sufficient capital to succeed.
 .
 We do not
intend to pay dividends for the foreseeable future. We do not expect our
revenues to be impacted by seasonal demands.
 
 Recently Issued Accounting
Pronouncements
 
 We do not
expect the adoption of any recently issued accounting pronouncements to have a
significant impact on our net results of operations, financial position or cash
flows.
 
 Critical Accounting
Policies
 
 The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires us to
make a number of estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements. Such estimates and assumptions affect the
reported amounts of revenues and expenses during the reporting period. On an
ongoing basis, we evaluate estimates and assumptions based upon historical
experience and various other factors and circumstances. We believe our estimates
and assumptions are reasonable in the circumstances; however, actual results may
differ from these estimates under different future conditions.
 We
believe that the estimates and assumptions that are most important to the
portrayal of our financial condition and results of operations, in that they
require our most difficult, subjective or complex judgments, form the basis for
the accounting policies deemed to be most critical to us. These
critical
 accounting
policies relate to long lived assets, contractual adjustments to revenue, and
contingencies and litigation. We believe estimates and assumptions related to
these critical accounting policies are appropriate under the circumstances;
however, should future events or occurrences result in unanticipated
consequences, there could impact on our future financial conditions or results
of operations.
 
 (b)
Off-Balance Sheet Arrangements
 
 We have
no Off-Balance Sheet Arrangements
    -
16 -
  Item
8.   Finanacial Statements and Supplementary
Data







FALCON
RIDGE DEVELOPMENT INC.








Consolidated
Financial Statements





September
30, 2008

















F
- 1

















FALCON
RIDGE DEVELOPMENT, INC,





Index to
Financial Statements











PageBalance
      Sheet at September 30, 2008 and 2007
            F-3Statements
      of Operations for the for the twelve monthsended
      September 30, 2008 and September 30, 2007
            F-4Statements
      of Stockholders' Deficit  for the twelve monthsended
      September 30, 2008 and September 30, 2007
            F-5Statements
      of Cash Flow for the for twelve monthsended
      September 30, 2008 and September 30, 2007
            F-6Notes
      to Financial Statements
            F-7





F
- 2








MOORE
& ASSOCIATES, CHARTERED
 ACCOUNTANTS AND
ADVISORS
 PCAOB REGISTERED
  
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To
the Board of Directors
 Falcon
Ridge Development, Inc.
 
 We have
audited the accompanying consolidated balance sheets of Falcon Ridge
Development, Inc. as of September 30, 2008 and 2007, and the related
consolidated statements of operations, stockholders’ equity (deficit), and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company’s management.  Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
 
 We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Falcon Ridge Development,
Inc. as of September 30, 2008 and 2007, and the related consolidated statements
of operations, stockholders’ equity (deficit), and cash flows for the years then
ended, in conformity with accounting principles generally accepted in the United
States of America.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 1
to the consolidated financial statements, the Company experienced significant
operating losses during 2008 and 2007, of $4,572,620 and $1,290,190
respectively. In addition the Company has stockholders’ deficit of $1,105,056 as
of September 30, 2008. These factors raise substantial doubt about its ability
to continue as a going concern.  Management’s plans concerning these
matters are also described in Note 1.  The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
 
 /s/
Moore & Associates, Chartered
 
 Moore
& Associates Chartered
 Las
Vegas, Nevada
 January
13, 2009
 
 
 6490 West Desert Inn Rd, Las
Vegas, NV 89146  (702)
253-7499  Fax (702)
253-7501










F
- 3





FALCON
RIDGE DEVELOPMENT, INC.


CONSOLIDATED
BALANCE SHEET







September
      30,
            
            
            September
      30,2008
            
            
            2007AssetsCash
            
            $
            1,119
            
            
            $
            74,521Fixed
      assets, net of accumulated depreciation
            
            
            45,211
            
            
            
            32,787Real
      estate held for development and sale
            
            
            3,191,570
            
            
            
            3,175,984Total
      assets
            
            $
            3,237,900
            
            
            $
            3,283,292Liabilities
      and Stockholders' DeficitLiabilitiesAccounts
      payable
            
            $
            657,428
            
            
            $
            444,523Notes
      payable related parties
            
            
            1,154,766
            
            
            
            1,136,074Notes
      payable
            
            
            1,569,123
            
            
            
            1,350,000Retainage
      payable
            
            
            90,000
            
            
            
            90,000Accrued
      interest
            
            
            363,430
            
            
            
            120,216Accrued
      expenses
            
            
            23,209
            
            
            
            2,587Convertible
      Preferred stock Series B , $.001 par value, 400,000 sharesauthorized,
      160,000 shares outstanding; liquidation value $485,000
            
            
            485,000
            
            
            
            485,000Total
      liabilities
            
            
            4,342,957
            
            
            
            3,628,400Stockholders'
      DeficitConvertible
      Preferred stock,  $.001 par value; 1,000,000 shares
      authorized:Preferred
      stock, Series A,  $.001 par value,400,000
      shares authorized, 160,000 shares issued andoutstanding
      , aggregate liquidation preference of $400,000.
            
            
            400,000
            
            
            
            400,000Common
      stock, $.001 par value, 900,000,000 sharesauthorized,
      47,315,917 and 18,459,337 shares issued andoutstanding
      respectively
            
            
            47,316
            
            
            
            18,459Additional
      paid-in capital
            
            
            5,886,152
            
            
            
            2,013,447Unexpired
      warrants
            
            
            (88,890
            )
            
            
            -Accumulated
      deficit
            
            
            (7,349,634
            )
            
            
            (2,777,014
            )Total
      Stockholders' deficit
            
            
            (1,105,056
            )
            
            
            (345,108
            )Total
      Liabilities and Stockholders' Deficit
            
            $
            3,237,900
            
            
            $
            3,283,292




The
accompanying notes are an intergal part of these financial
statements.


F
- 4




FALCON
RIDGE DEVELOPMENT, INC,


CONSOLIDATED STATEMENTS
OF OPERATIONS





Year
      Ended
            
            
            Year
      EndedSeptember
      30,
            
            
            September
      30,2008
            
            
            2007Net
      sales
            
            $
            93,281
            
            
            $
            32,017Expenses:Payroll
      related  expenses
            
            
            105,904
            
            
            
            175,202Depreciation
            
            
            9,359
            
            
            
            6,308Consulting
      and stock-based compensation
            
            
            3,805,912
            
            
            
            430,468Selling,
      general and administrative expenses
            
            
            390,582
            
            
            
            571,646Total
      expenses
            
            
            4,311,757
            
            
            
            1,183,624Other
      income (expense):Interest
      expense
            
            
            (354,143
            )
            
            
            (138,583
            )Total
      other income and (expense)
            
            
            (354,143
            )
            
            
            (138,583
            )Loss
      before provision for income taxes
            
            
            (4,572,620
            )
            
            
            (1,290,190
            )Income
      taxes
            
            
            -
            
            
            
            -Net
      Loss
            
            $
            (4,572,620
            )
            
            $
            (1,290,190
            )Loss
      per share
            
            $
            (0.132
            )
            
            $
            (0.070
            )Weighted
      average number of shares outstanding
            
            
            34,560,126
            
            
            
            18,459,337





The
accompanying notes are an intergal part of these financial
statements.


F
- 5




FALCON
RIDGE DEVELOPMENT, INC,


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY





Common
            
            
            AdditionalPreferred Stock
            
            
            
            
            
            Stock
            
            
            paid-in
            
            
            Unexpensed
            
            
            AccumulatedShares
            
            
            Par
      value
            
            
            Shares
            
            
            Par
      value
            
            
            capital
            
            
            warrants
            
            
            deficit
            
            
            TotalBalance
      December 31, 2005
            
            
            
            
            
            $
            400,000
            
            
            
            3,761,312
            
            
            $
            752,262
            
            
            $
            899,420
            
            
            $
            -
            
            
            $
            (1,068,850
            )
            
            $
            982,832Stock
      issuance for Cash
            
            
            194,000
            
            
            
            485,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            485,000Reclassified
      to liabilities
            
            
            -
            
            
            
            (485,000
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (485,000
            )Loss
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (417,974
            )
            
            
            (417,974
            )Balance
      September 30, 2006
            
            
            354,000
            
            
            
            400,000
            
            
            
            3,761,312
            
            
            
            752,262
            
            
            
            899,420
            
            
            
            -
            
            
            
            (1,486,824
            )
            
            
            564,858Reclass
      common stock and APIC
            
            
            -
            
            
            
            -
            
            
            
            (79
            )
            
            
            (748,501
            )
            
            
            748,501
            
            
            
            -
            
            
            
            -
            
            
            
            -Issuance
      of common stock
            
            
            -
            
            
            
            -
            
            
            
            14,698,104
            
            
            
            14,698
            
            
            
            365,526
            
            
            
            -
            
            
            
            -
            
            
            
            380,224Net
      loss 9-30-2007
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,290,190
            )
            
            
            (1,290,190
            )Balance
      September 30, 2007
            
            
            354,000
            
            
            
            400,000
            
            
            
            18,459,337
            
            
            
            18,459
            
            
            
            2,013,447
            
            
            
            -
            
            
            
            (2,777,014
            )
            
            
            (345,108
            )Stock
      issued for service
            
            
            
            
            
            
            
            
            
            
            28,650,000
            
            
            
            28,650
            
            
            
            2,860,221
            
            
            
            
            
            
            
            
            
            
            
            2,888,871Stock
      issued for debt
            
            
            
            
            
            
            
            
            
            
            206,580
            
            
            
            207
            
            
            
            10,102
            
            
            
            
            
            
            
            
            
            
            
            10,309Warrants
      issued with notes payable
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            115,090
            
            
            
            (88,890
            )
            
            
            
            
            
            
            26,200Warrants
      issued for service
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            887,292
            
            
            
            -
            
            
            
            
            
            
            
            887,292Net
      loss 09-30-08
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (4,572,620
            )
            
            
            (4,572,620
            )Balance
      September 30, 2008
            
            
            354,000
            
            
            $
            400,000
            
            
            
            47,315,917
            
            
            $
            47,316
            
            
            $
            5,886,152
            
            
            $
            (88,890
            )
            
            $
            (7,349,634
            )
            
            $
            (1,105,056
            )




The
accompanying notes are an intergal part of these financial
statements.


F
- 6




FALCON
RIDGE DEVELOPMENT, INC,


CONSOLIDATED
STATEMENTS OF CASH FLOWS





Year
      Ended
            
            
            Year
      EndedSeptember
              30,
            
            
            September
      30,2008
            
            
            2007Cash
      flows from operating activities:Net
      income/loss
            
            $
            (4,572,620
            )
            
            $
            (1,290,190
            )Adjustments
      to reconcile net loss to net cashStock
      issued for services
            
            
            2,888,871
            
            
            
            -Warrants
      expensed
            
            
            913,492
            
            
            
            -used
      by operating activities:Depreciation
            
            
            9,359
            
            
            
            6,308Changes
      in operating assets and liabilities,Real
      estate held for development and sale
            
            
            (15,586
            )
            
            
            (332,544
            )Other
      current assets
            
            
            -
            
            
            
            220Accounts
      payable
            
            
            212,905
            
            
            
            108,333Accrued
      interest
            
            
            243,214
            
            
            
            120,216Accrued
      liabilities
            
            
            20,930
            
            
            
            (43,208
            )Stock
      based compensation
            
            
            10,000
            
            
            
            (10,000
            )-
            
            
            
            --
            
            
            
            -Net
      cash (used in) provided byoperating
      activities
            
            
            (289,435
            )
            
            
            (1,440,865
            )Cash
      flows from investing activities:Acquisition
      of fixed assets
            
            
            (21,782
            )
            
            
            (2,713
            )Net
      cash used ininvesting
      activities
            
            
            (21,782
            )
            
            
            (2,713
            )Cash
      flows from financing activities:Increase  in
      related party notes payable
            
            
            18,692
            
            
            
            154,432Increase  notes
      payable
            
            
            219,123
            
            
            
            979,689Notes
      converted to common stock
            
            
            -
            
            
            
            380,224Proceeds
      from shares to be issued
            
            
            -
            
            
            
            -Stock
      based compensation
            
            
            -
            
            
            
            -Net
      cash from financing
      activities
            
            
            
            237,815
            
            
            
            1,514,345Net
      change in cash
            
            
            (73,402
            )
            
            
            70,767Cash:Beginning
      of period
            
            
            74,521
            
            
            
            3,754End
      period
            
            
            $
            1,119
            
            
            $
            74,521Supplemental
      disclosure of cash flow information:Cash
      paid during the year for:Income
      taxes
            
            $
            -
            
            
            $
            -Interest
            
            
            $
            20,150
            
            
            $
            138,583




The
accompanying notes are an intergal part of these financial
statements.


F
- 7





FALCON
RIDGE DEVELOPMENT, INC.


Notes
to Consolidated Financial Statements





(1)
Summary of Significant Accounting Policies





Organization,
Shell Merger and Principles of Consolidation





Organization





Falcon
Ridge Development, Inc. ("FRDI" or the "Company") is engaged in the real estate
industry and acquires tracts of raw land and develops them into communities.
Including, lots for sale to homebuilders and homes for sale to the public. These
operations are predominantly located in the City of Rio Rancho, New Mexico and
Belen, New Mexico. Since inception, the Falcon Ridge Development, Inc. has
developed one property known as Sierra Norte.





Going
Concern





The
Company experienced significant operating losses during 2008 and 2007, of
$4,572,620 and $1,290,190 respectively.  In addition the Company has a
stockholders’ deficit of $1,105,056 as of September 30,
2008.     The Company incurred a negative cash flow
from operating activities of $289,435 for the year ended September 30, 2008, and
implementation of its business plan is dependent upon its ability to raise
additional capital.  These matters raise substantial doubt about the
Company’s ability to continue as a going concern. Management believes that it
will be successful in raising additional capital and that it has assets
available to securitize debt should the Company look to borrow.  The
accompanying financial statements do not include any adjustments relating to the
recoverability and classification of the recorded asset amounts or the amounts
and classification of liabilities that might be necessary should the Company be
unable to continue in existence.





Shell
Merger





Falcon
Ridge Development, Inc. (the "Company" or “we” or “us”) is a Nevada corporation.
Our principal business address is 5111 Juan Tabo Boulevard N.E., Albuquerque,
New Mexico 87111. We changed the domicile of the company from Colorado to Nevada
on or about July 6, 2005 and changed our name from PocketSpec Technologies, Inc.
to Falcon Ridge Development, Inc. We have various subsidiaries, Sierra Norte,
LLC ("Sierra Norte"), Spanish Trails, LLC ("Spanish Trails"), Falcon Ridge
Financial LLC., Falcon Ridge Realty LLC., Falcon Ridge Investments LLC. We
operate in the real estate industry and services to the real estate industry. We
acquire tracts of raw land and develop them into communities. Often these
communities include residential, commercial, industrial and retail components to
them.  We plan to offer our own housing product in these and other
communities developed by other developers. In addition, in 2006 we completed the
formation of various wholly owned subsidiaries including Falcon Ridge Financial
LLC, Falcon Ridge Realty LLC and Falcon Ridge Investments LLC. Falcon Ridge
Financial places and brokers real estate mortgages of all types but primarily
concentrates on residential mortgages. Falcon Ridge Realty is our resale
division and concentrates on selling homes for the general public under listing
and sale agreements with individual clients. Falcon Ridge Investments, LLC is a
vehicle for creating and operating private placement offerings as well as other
type of investment vehicles’.





On May
20, 2005, we completed a reverse acquisition transaction. We acquired Sierra
Norte, a New Mexico limited liability company, which thereby became our
wholly-owned subsidiary. Sierra Norte is a land development company in the
Albuquerque, New Mexico area. Formerly, we were a technology company in the
business of developing and marketing color comparison devices. We acquired
Spanish Trails on July 6, 2005 as discussed below. Originally, we were
incorporated as Monument Galleries, Inc., a Colorado corporation, on May 15,
1998.





F
- 8





FALCON
RIDGE DEVELOPMENT, INC.


Notes
to Consolidated Financial Statements





As a
result of the Sierra Norte acquisition, the former security holders of Sierra
Norte acquired a majority of our outstanding shares of common stock. For
accounting purposes, Sierra Norte has been deemed to be the acquirer in the
acquisition and, consequently, the assets, liabilities and historical operations
that are reflected in our financial statements are those of Sierra Norte, which
are recorded at the historical cost basis of Sierra Norte. The reverse
acquisition was consummated under Colorado law pursuant to an Agreement and Plan
of Reorganization dated May 20, 2005.





Principles of
Consolidation





The
consolidated financial statements include the accounts of Falcon Ridge
Development, Inc. and its wholly owned subsidiaries SNLLC and Spanish Trails LLC
(STLLC) (together, the "Company"). Intercompany transactions and balances have
been eliminated in the consolidation.





Use of
Estimates





The
preparation of 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 financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.





Reclassifications





Certain
prior-period amounts have been reclassified for comparative purposes to conform
to the current period presentation.





STLLC
decided, in the fourth quarter of 2005, that the $471,908 Falcon Ridge
Development, LLC ("FRLLC") recorded as a contribution to capital during the
third quarter of 2005 in the acquisition of the Cordova Property should be
repaid to FRLLC. Therefore, the Company reclassified the $471,908 from
additional paid in capital to indebtedness to related parties in the
accompanying consolidated financial statements.





Revenue Recognition on Sales
of Real Estate





The
profit on sales of real estate is accounted for in accordance with the
provisions of SFAS No. 66, "Accounting for Sales of Real Estate." The Company
recognizes revenue from the sale of real estate at the time the sale is closed
and the title is transferred from the Company to the buyer.





Cash and Cash
Equivalents





The
Company considers all highly liquid securities with original maturities of three
months or less when acquired to be cash equivalents. The Company had no cash
equivalents at September 30, 2008.





Real Estate Held for
Sale




The
carrying value of land and development includes the initial acquisition costs of
land, improvements thereto, and other costs incidental to the acquisition or
development of land. These costs are allocated to properties on a relative sales
value basis and are charged to costs of sales as specific properties are sold.
Due to the nature of the business, land and development costs have been
classified as an operating activity on the consolidated statement of cash
flows.





F
- 9





FALCON
RIDGE DEVELOPMENT, INC.


Notes
to Consolidated Financial Statements








Impact
credits received from the negotiated settlement with the City of Rio Rancho are
offset against land development costs.





The
company reviews the fair value less costs to sell of land under development at
the end of each reporting cycle and where the carrying value of the asset is not
recoverable and exceeds its fair value an impairment loss will be
recognized.





Interest





The
Company capitalizes interest costs to real estate held for resale during
development and construction. Capitalized interest is charged to cost of sales
as the related lots are delivered to the buyer.





Fixed Assets and
Depreciation





Fixed
assets are recorded at cost. Expenditures that extend the useful lives of assets
are capitalized. Repairs, maintenance and renewals that do not extend the useful
lives of the assets are expensed as incurred. Depreciation is provided on the
straight-line method over the following estimated useful lives: software,
5


years;
equipment, 5 years.





Earnings (loss) per Common
Share





Basic net
income per share is computed by dividing the net income available to common
shareholders (the numerator) for the period by the weighted average number of
common shares outstanding (the denominator) during the period. The computation
of diluted earnings is similar to basic earnings per share, except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if potentially dilutive common shares had been
issued.





At
September 30, 2008 and September 30, 2007, there was no variance between basic
and diluted loss per share as the convertible preferred stock outstanding, if
converted, would be anti-dilutive.





Impairment or Disposal of
Long-Lived Assets





The
Company evaluates real estate projects and other long-lived assets on an
individual basis for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable in
accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" and SFAS 67 “Accounting for Costs and Initial Rental
Operations of Real Estate Projects.” An asset is considered impaired if its
carrying amount exceeds the future net cash flow the asset is expected to
generate or its net realizable value. If an asset is considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying
amount of the asset exceeds its fair market value. We assess the recoverability
of our real estate projects, long-lived and intangible assets by determining
whether the unamortized balances can be recovered through undiscounted future
net cash flows of the related assets. The amount of impairment, if any, is
measured based on projected discounted future net cash flows. When impairment
exists the carrying value of the asset will be reduced by an allowance for the
amount of the impairment. There is no impairment in 2008 or 2007.




F
- 10





FALCON
RIDGE DEVELOPMENT, INC.


Notes
to Consolidated Financial Statements





Stock-based
Compensation





The
Company adopted Statement of Financial Accounting Standards No. 123 (revised
2004), Share-Based Payment (SFAS 123R), effective January 1, 2007. SFAS 123R
requires the recognition of the fair value of stock-based compensation in net
income. The Company has elected the modified prospective transition method for
adopting SFAS 123R. Under this method, the provisions of SFAS 123R apply to all
awards granted or modified after the date of adoption. In addition, the
unrecognized expense of awards not yet vested at the date of adoption,
determined under the original provisions of SFAS 123, shall be recognized in net
income in the periods after the date of adoption. The Company had no unvested
awards at September 30, 2008 and no awards were granted during the year ended
September 30, 2007.





Income
Taxes





Income
taxes are accounted for using the asset and liability method. Under this method,
deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred income tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which these temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. A valuation
allowance is provided for deferred tax assets that are not expected to be
recovered from future operations.





Financial Instruments and
Concentration of Credit Risk





The
carrying amounts of the Company's financial assets and liabilities, including
cash,  accounts payable, and preferred shares with mandatory
redemption at September 30,2007, approximate fair value because of the short
maturity of these instruments. The carrying amount of the Company's notes
payable approximates fair value at September 30, 2007, since the notes are at
floating rates or fixed rates that approximate current market rates for notes
with similar risks and maturities.





Preferred Shares subject to
mandatory redemption





The
features of our Series B Preferred Stock  within SFAS 150 “Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and
Equity”. Due to redemption features of the securities, the preferred shares are
being classified as a liability in these financial statements. The securities
give the holder the option of a net cash settlement or a settlement in common
share based on a conversion rate. The settlement amount under SFAS 150 at
September 30, 2007 would have been 640,264 shares at a bid price of $ 1.01 per
share or $ 646,666.





New Accounting
Standards





SFAS No.
151, "Inventory Costs," is effective for fiscal years beginning after June 15,
2005. This statement amends the guidance in Accounting Research Bulletin ("ARB")
No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs, and wasted material
(spoilage). The adoption of SFAS 151 did not have a material impact on the
Company's financial statements.





F
- 11





FALCON
RIDGE DEVELOPMENT, INC.


Notes
to Consolidated Financial Statements





SFAS No.
152, "Accounting for Real Estate Time-Sharing Transactions," is effective for
fiscal years beginning after June 15, 2005. This statement amends SFAS No. 66,
Accounting for Sales of Real Estate, to reference the financial accounting and
reporting guidance for real estate time-sharing transactions that is provided in
American Institute of Certified Public Accountants Statement of Position 04-2,
Accounting for Real Estate Time-Sharing Transactions. The adoption of SFAS No.
152 did not have a material impact on the Company's


financial
statements.





SFAS No.
123(R), "Share-Based Payment," replaces SFAS No. 123, "Accounting for
Stock-Based Compensation," and supersedes APB Opinion No. 25, "Accounting for
Stock Issued to Employees." This statement requires that the compensation cost
relating to share-based payment transactions be recognized in the financial
statements. The Company is required to apply this statement in the first interim
period that begins after December 15, 2005. The adoption of SFAS No. 123(R) did
not have a material impact on the Company's financial.





SFAS No.
153, "Exchanges of Non-monetary Assets" - an amendment of APB Opinion No. 29, is
effective for fiscal years beginning after June 15, 2005. This statement
addresses the measurement of exchange of non-monetary assets and eliminates the
exception from fair-value measurement for non-monetary exchanges


of
similar productive assets in paragraph 21(b) of APB Opinion No. 29, "Accounting
for Non-monetary Transactions," and replaces it with an exception for exchanges
that do not have commercial substance. The adoption of SFAS No. 153 did not have
a material impact on the Company's financial statements.





FIN No.
46(R) revised FIN No. 46, "Consolidation of Variable Interest Entities,"
requiring the consolidation by a business of variable interest entities in which
it is the primary beneficiary. The adoption of FIN No. 46 did not have an impact
on the Company's financial statements.





The EITF
reached a consensus on Issue No. 04-8, "The Effect of Contingently Convertible
Debt on Diluted Earnings Per Share" ("EITF 04-8"), which addresses when the
dilutive effect of contingently convertible debt instruments should be included
in diluted earnings (loss) per share. EITF 04-8 is effective for reporting
periods ending after December 15, 2004. The adoption of EITF 04-8 did not have
an impact on diluted earnings (loss) per share.





(2)
Related Party Transactions





The
Company conducts its operations in a building rented by an affiliate. During the
twelve months ended September 30, 2008 and September 30, 2007, the Company
recorded rent expense of $ 66,900 and $59,500, respectively.





The
Company's affiliate pays certain expenses on its behalf. The Company reimburses
these expenses paid on its behalf by the affiliate at actual cost. Overhead
expenses and indirect labor incurred by the affiliate are allocated to the
Company based on management-approved estimates of time and effort. The Company
reviews the estimated rate from time-to-time.








F
- 12





FALCON
RIDGE DEVELOPMENT, INC.


Notes
to Consolidated Financial Statements





Indebtedness
to related parties consisted of the following at September 30,
2008:




Note
payable to Karen Duran &/or Fred Montano, bearing interest at Published
Prime plus 3%, payable in monthly installments of $20, 000.00 plus interest
commencing on October 1, 2007.  The note is secured by the land and
development costs of the Spanish Trails development.  To September 30,
2008, no principle or interest payments have been made.
  Total
financing under the agreement is $1,136,074.
 
 Karen
Duran and Fred Montano have advanced the Company funds for working capital
purposes during the year.  As of September 30, 2008, the amounts so
advanced total $13,
692.  The advances are not interest bearing.
 
 On August
25, 2008, the Company borrowed $5,000 for working capital, from Troy Duran,
director of the Company and the brother of Karen Duran.  The note is
due February 5, 2009 and has an interest rate of 11%.
 
 As of
September 30, 2008, total indebtedness to related parties was
$1,154,766.  As of September 30, 2007 related party indebtedness was
$1,136,074, which consisted of the secured note to Karen Duran &/or Fred
Montano.


(3) Fixed
Assets





Fixed
assets consist of the following at September 30, 2008 and 2007:





2008
            
            
            2007Website
      development
            
            $
            26,030
            
            
            $
            26,030Software
            
            
            6,319
            
            
            
            6,319Equipment
            
            
            10,694
            
            
            
            10,694Network
      computer system
            
            
            21,782
            
            
            
            -Fixed
      asset totals
            
            
            64,825
            
            
            
            43,043Accumulated
      depreciation
            
            
            19,614
            
            
            
            10,256Fixed
      assets, net
            
            $
            45,211
            
            
            $
            32,787





For the
twelve month periods ended September 30, 2008 and September 30, 2007, the
Company recorded depreciation expense of $9,359 and $6,308
respectively.





(4) Real
Estate Operations





The
Company completed development of Sierra Norte I and II subdivisions in Rio
Rancho, New Mexico in 2005. The Company is in the process of developing
approximately 139 +/- acres of raw land in the Belen, New Mexico referred to as
"Spanish Trails." Spanish Trails consists of 139 +/- acres of land which is
being re-plotted into approximately 530 lots.





Real
estate held for resale, consists of the following at September 30, 2008 and
2007:





2008
            
            
            2007Real
      estate held for development and sale
            
            $
            3,919,570
            
            
            $
            3,175,984




F
- 13





FALCON
RIDGE DEVELOPMENT, INC.


Notes
to Consolidated Financial Statements





Costs
incurred during fiscal 2008 were primarily for lot development.





(5) Notes
Payable





Note
payable consists of the following at September 30, 2008:





-
            Note
      payable Freedom Financial, with  interest payable at 10% per
      annum,conversation
      rights at maturity with 2% renewal fee, Conversation option at$0.75
      of current price of the Company’s common
stock.





-
            The
      principal balance on this note is
$200,000.





-
            Note
      payable Metro Loan Corp, with interest at 12 percent interest only
      payments in monthly installments of $11,100.00 collateralized by a First
      Mortgage due August 1, 2008.  Terms of the Loan Agreement
      describe an Extension Option.  Terms of the Extension Option are
      for two additional six (6) month periods at the higher of (i) eighteen
      percent (18%) interest or (ii) Prime Rate plus 1,000 basis
      points.  Option is NOT AUTOMATIC and is at the discretion of the
      Lender.  Fred Montano is a Guarantor of this
      mortgage.





-
            The
      mortgage was due August 1, 2008. Its extension is at the discretion of the
      mortgage holder who has not agreed to extend at the time of this
      filing.  The Company has stopped making payments and is in the
      process of evaluating its options, including deed in lieu of
      foreclosure.





-
            Total
      principal amount of the note is
$1,150,000





During
the three month period ending June 30, 2008, the Company issued several notes
with warrants.  The notes bear interest compounded monthly at 10% for
the first sixty days, 12% for the next 12 months, and 18% interest
thereafter.  The  maturity dates and amounts are as
follows:





Maturity
              Date
            
            Principal
              AmountsMay,
      2009
            
            $
            70,000October,
      2009
            
            
            60,000July,
      2010
            
            
            10,000May,
      2011
            
            
            67,123Total
            
            $
            207,123





In
September of 2008, the issued a note at an interest rate of 11% due February 5,
2009.





The
principal amount of the note is $10,000.





F
- 14





FALCON
RIDGE DEVELOPMENT, INC.


Notes
to Consolidated Financial Statements





(6)
Warrants





On
October 8, 2007, the Company issued 2,000,000 warrants with an estimated value
of $ 887,809 to Redwood Consulting LLC. The warrants have an exercise price of
$0.50 per share, the warrants become exercisable either twelve months after the
underlying common stock issuable in the exercise of these warrants is declared
registered and effective by the SEC in the Company’s current SEC registration
statement; or 5:30 P.M. Pacific Daylight Savings Time on October 8, 2015. The
warrants expire 5:30 PM Pacific Daylight Savings Time on October 8, 2015, or
twelve months after becoming exercisable. The Company has recorded consulting
fees relating to these options of $887,809.  As of the date of this
report, none of the warrants have vested.





The fair
value of these options was estimated at the date of grant using the
Black-Scholes option-pricing model with dividend yield of 0%; expected
volatility of 169%; risk-free interest rate of 4.12%; and expected life of 8
years.





During
the three month period ending June 30, 2008, the Company issued 1,344,000
warrants with an estimated value of $ 106,590 to several shareholders with notes
in the amount of $207,123. The warrants have an exercise price of $0.05 per
share, the warrants become exercisable at the effective date. The warrants
expire thirty months after becoming exercisable. The Company has recorded
interest expense relating to these options of $17,700.  All of the
warrants have vested.





The fair
value of these options was estimated at the date of grant using the
Black-Scholes option-pricing model with dividend yield of 0%; expected
volatility of 135%; risk-free interest rate of 4.12%; and expected life of 2.3
years.





A summary
of stock option and warrant activity for all plans follows:





Options
      Outstanding
            
            
            Warrants
      Outstanding
            
            
            Exercise
              priceGranted
            
            
            -
            
            
            
            5,244,000
            
            
            $
            .05-.050Exercised
            
            
            -
            
            
            
            -Canceled
            
            
            -
            
            
            
            +Balance,
      September 30, 2008
            
            
            -
            
            
            
            5,224,000
            
            
            $
            .05-.50





Following
      is a summary of the status of fixed options and warrants
      outstanding at September 30,2008:Outstanding
      Options and Warrants
            
            Exercisable
      Options and WarrantsExercise
      Price Range
            Number
            Weighted
      Average
              Remaining
      Contractual Life
            Weighted
      Average Exercise Price
            
            Number
              Exercisable
            Weighted
      Average Exercise Price$
      0.50
            2,000,000
            7.2
      years
            $
      0.50
            
            -
            $
      0.000.05
            3,244,000
            2.0
      years
            $
      0.05
            
            -
            $0.05










F
- 15





FALCON
RIDGE DEVELOPMENT, INC.


Notes
to Consolidated Financial Statements








(7)
Income Taxes and Change in Estimate





A
reconciliation of U.S. statutory federal income tax rate to the effective rate
follows for the period ended September 30, 2008:





U.S. statutory federal rate
            
            
            20.00
            %State
      income tax rate
            
            
            4.80
            %Net
      operating loss for which no tax benefit is currently
      available
            
            
            -24.80
            %


For the
year ended September 30, 2008 the company estimated that the company would have
a loss for income taxes purposes and therefore reported no
provision





(8)
Shareholders' Deficit





Preferred
Stock





On July
20, 2005, the Company established Series A Convertible Preferred Shares and
authorized 400,000 shares. The preferences are as follows:





·
            Shares
      are non-cumulative with a preference over common shares if and when a
      dividend is declared.





·
            Shares
      are convertible into common stock at any time on the basis of 100 common
      shares for 1 share of preferred stock. This conversion rate is subject to
      adjustments for forward or reverse splits or other capitalizations. The
      option was of no intrinsic benefit, at the commitment date, to the
      preferred shareholder.





·
            Shares
      have a priority over common shares upon
  liquidation.





·
            Shares
      are callable at any time by the Company at the original purchase price.
      The Preferred Shareholders will have thirty days thereafter to convert to
      common stock.





9)  Series B Preferred
Shares





The
features of our Series B Preferred Stock and determined that it falls within
SFAS 150 “Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity”. Due to redemption features of the securities, the
preferred shares are being classified as a liability in these financial
statements. The securities give the holder the option of a net cash settlement
or a settlement in common share based on a conversion rate.  The value
of the liability is fixed at the stated value of $485,000.  However,
the number of common shares into which the preferred shares are convertible is
inversely related to changes in the Company’s common stock.  Although
the potential conversion could conceivably require the Company to issue a number
of shares in excess of its authorized limit, the Company does not believe that
its liability recorded at September 30, 2007, associated with the Series B
preferred stock is appropriate in that such obligation would not exceed the
aggregate stated value.





On April
15, the Company established Series B Convertible Preferred Shares and authorized
400,000 shares. The preferences are as follows:





F
- 16





FALCON
RIDGE DEVELOPMENT, INC.


Notes
to Consolidated Financial Statements








·
            Shares
      are non-cumulative with a preference over common shares if and when a
      dividend is declared.





·
            Investor
      will receive a dividend of 12% per annum payable monthly for a period of
      eighteen months from the date of
purchase.





·
            Shares
      are convertible into common stock at any time on the basis of 75% of the
      average current bid price for the preceding 20 days of the Company's
      receipt of notice to convert. This conversion rate is subject to
      adjustments for forward or reverse splits or other capitalizations. The
      option was of no intrinsic benefit, at the commitment date, to the
      preferred shareholder.





·
            Shares
      have a priority over common shares upon
  liquidation.





·
            Shares
      are callable by the Company at any time after 12 months of issuance of
      Preferred B shares at the original purchase price. The Preferred
      Shareholders will have sixty days thereafter to convert to common stock.
      The shares will be repurchased after eighteen months for the original
      issue price.





(10)  Recent
sales of unregistered securities:





On June 29, 2007 the company issued
3,660,346 shares of restricted stock as compensation for future services related
to advertising, directors' fees, and financial and administrative services
performed by third parties. None of the issued shares contain warrants or option
rights.





On
October 8, 2007 the Company issued 350,000 restricted shares at $0.45 to Redwood
Consulting, LLC pursuant to their consulting contract valued at $ 157,500.





On
February 5, 2008 the Company issued 10,000,000 restricted shares at $0.10 to
Fred Montano for his services valued at $1,000,000.





On
February 5, 2008 the Company issued 10,000,000 restricted shares at $0.10 to
Karen Duran for her services valued at $1,000,000.





On
February 5, 2008 the Company issued 115,000 restricted shares at $0.10 to Gerry
Berg for his services valued at $11,500.





On
February 5, 2008 the Company issued 250,000 restricted shares at $0.10 to Troy
Duran for his services valued at $25,000.





On
February 5, 2008 the Company issued 250,000 restricted shares at $0.10 to
Sebastian Ramirez for his services valued at $25,000.





On
February 5, 2008 the Company issued 2,250,000 restricted shares at $0.10 to
Periscope  for consulting services valued at $225,000.




On
February 5, 2008 the Company issued 55,000 restricted shares at $0.10 to Robert
Malasek for consulting services valued at $5,500.





On March
3, 2008 the Company issued 358,000 restricted shares at $0.10 to Bismark
Consulting for consulting services valued at $35,800.





F
- 17





FALCON
RIDGE DEVELOPMENT, INC.


Notes
to Consolidated Financial Statements








On March
17, 2008 the Company issued 750,000 restricted shares at $0.10 to Periscope
Management  for consulting services valued at $75,000.





On March
17, 2008 the Company issued 3,000,000 restricted shares at $0.10 to Tamarack
Corporation for consulting services valued at $300,000.








(11) 
Subsequent Events





In
October of 2008 the company issued the following S-8 common shares:





2,222,222
and 500,000 shares were issued to consultants for services valued at $0.0045 and
$0.006 per share respectively for a combined value
of   $13,000.





1,416,666
shares were issued to employees for payroll.  These shares were valued
at $0.008 per share or a total value of $11,333.





4,400,000
shares were issued to employees under an Employee Stock Option
Plan.  The awarded shares vested immediately and the option price per
share was $0.008 or a total value of $35,200.





1,200,000
shares were issued to a consultant.  These shares were valued at
$0.006 per share or a total value of $7,200.





In October of 2008 the Company issued
the following restricted common shares:





21,000,000
shares were issued to officers and directors as a stock bonus.  These
shares were valued at $0.003 per share or a total value of $63,000.





F
- 18




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





We did
not have any disagreements on accounting and financial disclosures with our
present accounting firm during the reporting period.





On
February 9, 2007 we appointed Moore and Associates as our accountant. Our
agreement with our prior accountants expired.





Epstein
Weber & Conover, PLC as our accountant rendered an opinion on our audit for
the nine months ended September 30, 2006.There were no
disagreements between us and Epstein Weber & Conover, PLC.





Item
9A. Controls and Procedures





Management
is responsible is responsible for establishing and maintaining adequate internal
control over financial reporting. As of the end of the period covered by this
report, our chief executive officer and our chief financial officer evaluated
the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rule 13a-15b under the Securities Exchange Act of 1934.
Based on their review of our disclosure controls and procedures, they have
concluded that our disclosure controls and procedures are effective in timely
alerting each of them to material information relating to us that is required to
be included in our periodic SEC filings. Since our Company has been acquired as
a result of the Sierra Norte acquisition discussed above, and a new board and
management has been installed, we have been able to timely file our Form 10-QSBs
and our Form 8-Ks. Management is in the continuing process of analyzing and
adopting new policies and procedures to improve the design and operations of our
disclosure controls, We acknowledge that a change with respect to financial
controls has been made to alert us with respect to funding provided by related
parties and that the changes in disclosure controls, particularly recognizing
Form 8-K events, are ongoing. We expect these changes in internal controls will
have a significant effect on our disclosure controls after the evaluation date
and the date of this report.





Changes
to Internal Controls include a reorganization of available staff to better
segregate duties, acquisition and implementation of more sophisticated
accounting software and a personnel plan to hire additional accounting and
administrative staff. We continue to schedule training for employees and
management in critical areas to enhance their ability to perform the duties
assigned to them.





Item
9B. Other Information





There is
no information we were required to report on Form 8-K during our fourth fiscal
quarter of the year ended September 30, 2008 that was not so
reported.





-
17 -





Part
III





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





The
following reporting persons failed to Forms 4 and 5 required under Section 16(a)
of the Exchange Act for the year ended September 30, 2008 as
follows:





Reporting
      Person
            Number
      of Forms not filed
            Transactions not
      reportedFred
      M Montano
            One
      Form 4 and one Form 5
            One
      transaction not reported on Form 4.Karen
      Y. Duran
            One
      Form 4 and one Form 5
            One
      transaction not reported on Form 4.Sebastian
      Ramirez
            One
      Form 4 and one Form 5
            One
      transaction not reported on Form 4.Troy
      Duran
            One
      Form 4 and one Form 5
            One
      transaction not reported on Form 4.





The
following table provides information regarding our directors and executive
officers and key employees of Falcon Ridge Development, Inc. as of September 30,
2008:





Name
            Age
            PositionFred
      M. Montano CEO
            57
            Chief
      Executive Officer, President andChairman
      of the BoardKaren
      Y. Duran  CFO
            66
            Chief
      Financial Officer and Secretary/TreasurerSebastian
      Ramirez
            57
            DirectorTroy
      Duran
            43
            Director





Fred
Montano, has been our chairman of the board, chief executive officer and
president since May 2005. He also was our treasurer from May to June, 2005. Mr.
Montano holds a New Mexico real estate broker’s license. Since the late 1980’s,
he has concentrated on identification and acquisition of developable properties,
engineering land plans, obtaining entitlements for projects, and managing the
construction and sale of finished lots to builders. Until 1997, he performed
this service for developers and builders; thereafter, he acted on his own behalf
as managing member of Falcon Ridge Development, LLC, a private New Mexico real
estate development company. From 1977 to 1989, he acted as a broker in
commercial real state sales and management of income producing properties and
owned and operated a fee property management company. From 1977 to 1980, he
worked as a residential sales agent.





Karen
Duran, has been our secretary since May 2005 and our treasurer and chief
financial officer since June 2005. Since 1997, she has been an owner of Falcon
Ridge Development, LLC. Before that, she did real estate development on behalf
of client home builders. She is a licensed New Mexico real estate broker. Ms.
Duran is the mother of Troy Duran, a director of Falcon Ridge.





Troy
Duran, has been a director since June 2005. Mr. Duran is a communications and
marketing specialist, with more than 23 years experience in broadcast
advertising. He has owned a radio production company, specializing in imaging
and voice-over work, since 2002. From 2000 to 2002, he was the production
director for KMOX, news talk radio in St. Louis, Missouri. Mr. Duran is the son
of Ms. Duran, our secretary, treasurer and chief financial officer.





-
18 -





Sebastian
Ramirez, has been a director since June 2005. Since 1999, he has been president
of Sebastian R. Ramirez Advisors, a consulting firm specializing in market
research and analysis, market development, and strategic planning. Since 2004,
he has also been a partner in Cascade Design and Development, a company offering
professional architectural, engineering, and planning services to public and
private sectors in New Mexico. From 1993 to 1998, he was president of Rampart
Development Corporation, a diversified firm offering full service engineering,
land development, and financial planning services to public and private sector
clients in New Mexico. From 1996 to 2001, Mr. Ramirez served on the board of
trustees of the University of New Mexico. From 1991 to 1993, he served on the
New Mexico Quincentenary Commission. From 1991 to 1992, he was on the advisory
committee of the New Mexico Border Development Authority. Mr. Ramirez holds a
bachelor of arts in political science from the University of New Mexico, and has
done post-graduate work on a master’s degree from that same
institution.





Our Company does not have an
audit committee.





We are
not required to have an audit committee and we do not have an independent
financial expert. Our chief operating and financial officers oversee daily
operations and report directly to the board. Currently, we are conducting a
search for an independent financial expert to serve on the board and form an
audit committee.








Item
11.    Executive Compensation





The
following table sets forth information regarding the compensation paid by Falcon
Ridge Development to each of the following individuals for services rendered in
all capacities for the years indicated:




SUMMARY
      COMPENSATION TABLELong
      Term CompensationAnnual
      Compensation
            Awards
            Payouts(a)
            (b)
            (c)
            (d)
            (e)
            (f)
            (g)
            (h)
            (i)Name
      and Principle Position (1)
            Year
            Salary
              ($)
            Bonus
              ($)
            Other
              Annual
      Comp-
              sensation
              ($)
            Restricted
              Stock
              Award(s)
              ($)
            Securities
              Underlying
              Option/SARs
              (#)
            LTIP
              Payouts
              ($)
            All
              Other
              Comp-
              sensation
              ($)Fred
      M. Montano CEO
            2008
              2007
              2005
            $0.00
              $23,000
              $
      4,000
            $1,000,000
              $0.00
              $0.00Karen
      Y. Duran, CFO
            2008
              2007
              2005
            $0.00
              $23,000
              $24,000
            $1,000,000
              $0.00
              $0.00







(1)See Item 9 above which describes the principal positions of the named
executives.





Compensation
of Directors





Each of the outside
directors, Troy Duran andSebastian Ramirez, received compensation in the
form of 250,000 shares of restricted common stock valued at $$0.10 per share or
a total value of $25,000 per director.




-
19 -





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





Our
shareholders have not authorized the issuance of any common stock or preferred
stock under equity compensation plans. Nor do we plan on requesting the
shareholders to approve such compensation arrangements.





The
following table sets forth certain information regarding the beneficial
ownership of our common stock as of September 30, 2008, for (i) each stockholder
who is known by us to own beneficially more than 5% of our common stock, (ii)
each director and executive officer, and (iii) all of our directors and
executive officers as a group. Except as otherwise indicated, we believe, based
on information furnished by the persons named in this table, that such persons
have direct interest in and voting and investment power with respect to all
shares of common stock beneficially owned by them, subject to community property
laws, where applicable.





As of September 30, 2008,
there were 47,315,917 shares of our common stock outstanding and 160,000 shares
of our Series A convertible preferred stock outstanding. The convertible
preferred stock is convertible at the option of the holder into Ѕ to 1 a share
of common stock. The convertible preferred stock does not have a dividend but
has a preference in liquidation over our common stock.





As of
September 30, 2008, there were 194,000 shares of our Series B convertible
preferred stock outstanding. The Series B convertible preferred stock is
convertible at the option of the holder into common stock at 75% of the average
current bid price for the preceding 20 days of the Company's receipt of notice
to convert. The Series B convertible preferred stock is paid interest at 12% per
annum. The convertible preferred stock does not have a dividend but has a
preference in liquidation over our common stock.





Shares
are convertible into common stock at any time on the basis of 75% of the average
current bid price for the preceding 20 days of the Company's receipt of notice
to convert. This conversion rate is subject to adjustments for forward or
reverse splits or other capitalizations.





Number
      of Shares
            
            
            PercentageStockholder
            Common
            Preferred
            Common
            PreferredFred M. Montano(1)(2)
            13,291,250
            0
            28.09%
            0%Karen
      Y. Duran (1)(2)
            14,430,921
            0
            30.50%
            0%Sebastian
      Ramirez(1)
            500,000
            0
            1.59%
            0%Troy
      Duran(1)
            750,000
            0
            1.59%
            0%Marxton
      Consulting (3)
            3,000,000
            0
            6.37%
            0%All
      executive officers and directors as a group
            29,222,171
            0
            61.76%
            0%


_______________




(1)
            The
      business address is 5111 Juan Tabo Boulevard N.E., Albuquerque, New Mexico
      87111.





-
20 -








(2)
            Ms.
      Duran and Mr. Montano are co-owners of Real Estate Services, Inc., which
      holds of record 82,064 (post reverse split) shares of common stock. By
      virtue of Ms. Duran's 50% ownership of Real beneficial owner of all of the
      shares of Common Stock held of record by Real Estate Services, Inc.
      However, she expressly disclaims ownership of 50% of the shares of the
      common stock held of record by Real Estate Services, Inc. By virtue of Mr.
      Montano's 50% ownership of Real Estate Services, Inc. and his position
      with it as an officer, Mr. Montano may be deemed to be the beneficial
      owner of all of the shares of common stock held of record by Real Estate
      Services, Inc. However, he expressly disclaims ownership of 50% of the
      shares of the common stock held of record by Real Estate Services,
      Inc.




(3)
              Marxton Consulting, 700 Gardenview Ct, Ste 205, Encinitas, CA
  92024





Item
13. Certain Relationships and Related Transactions




On May 20,
2005, we completed an acquisition transaction. We acquired Sierra Norte, LLC, a
New Mexico limited liability company, which became our wholly-owned subsidiary.
Sierra Norte, LLC is a land development company in the Albuquerque, New Mexico
area. Our president and director, Mr. Fred Montano, and our secretary/treasurer,
Ms. Karen Duran, members of Sierra Norte, LLC, received, respectively, 165,000
(post reverse split) and 135,000 (post reverse split) shares of our common stock
as a result of the acquisition. Please see the discussion under “Change of
Control,” above. Mr. Troy Duran, one of our directors, is the son of Ms. Karen
Duran. He did not receive shares in the acquisition transaction.




On July 6,
2005, we acquired 100% of the ownership of Spanish Trails, LLC, a New Mexico
limited liability company. In exchange for that ownership, we issued 3,074,410
(post reverse split) shares of our common stock, 1,197,186 of which were issued
to our president and a director, Fred Montano, and 979,671 of which were issued
to our secretary, treasurer and chief financial officer, Karen Duran. Mr. Troy
Duran, one of our directors, is the son of Ms. Karen Duran. He did not receive
shares in the transaction.








-
21 -




Item
14. Principal Accountant Fees and Services
 
 The
Company's principal accountant,  Moore & Associates, Las Vegas
NV,  billed us $ 9,000 in fees during the year ended September 30,
2008,all of which were for audit fees. The Company's principal accountant
Epstein Weber & Conover LLP for the year ended September 30, 2007 billed us
$ 10,150 for audit fees. They billed us $ 4,500 for income tax compliance work
and $ 4,355 for audit-related fees.







Item
15. Exhibits




Exhibit
              Number
            Description2.1
            Agreement
      and Plan of Reorganization - Pocketspec Technologies, Inc. and Sierra
      Norte LLC (a)2.2
            Acquisition
      Agreement - Pocketspec Technologies, Inc. and Spanish Trails, LLC (b)3.1
            Articles
      of Incorporation of Falcon Ridge Development, Inc. previously
      filed.3.2
            Bylaws
      of Falcon Ridge Development, Inc. previously
  filed.3.3
            Articles
      of Organization of Sierra Norte, LLC previously
    filed.3.4
            Operating
      Agreement of Sierra Norte, LLC previously filed.3.5
            Articles
      of Organization of Spanish Trails, LLC previously
    filed.3.6
            Operating
      Agreement of Spanish Trails, LLC previously
filed.4.1
            Articles
      of Amendment - Establishment of Series of Preferred Stock previously
      filed.10.1
            Purchase
      Agreement - Spanish Trails, LLC and D.R. Horton (Confidential portions of
      this agreement noted by *** have been omitted and filed separately with
      the Securities and Exchange Commission pursuant to a request for
      confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934.)
      Previously filed.14.1
            Code of
      Ethics21.1
            List
      of Subsidiaries23.1
            Consents
      of experts31.1
            Certification
      of Chief Executive Officer pursuant to Rule
      13a-14(a)/15(d)-14(a)*31.2
            Certification
      of Chief Financial Officer pursuant to Rule
      13a-14(a)/15(d)-14(a)*32.1
            Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002*32.2
            Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002*99
            Additional
      Exhibits - None










-
22 -





SIGNATURES





Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.




FALCON RIDGE DEVELOPMENT, INC.Date: January 13, 2009
              By:
              /s/ Fred M. MontanoFred
      M. Montano
                Chief
      Executive Officer/DirectorBy:
              /s/
      Karen
      Y. DuranKaren
      Y. Duran
                Chief
      Financial Officer


Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated.


Signature
              
              Title
              Date/s/ Fred M. Montano
              
              Chairman
      of the Board
              January
      13 2009Fred
      M. Montano
              
              Directors
      and Chief Executive Officer/s/ Karen Y. Duran
              
              Chief
      Financial Officer
              January
      13, 2009Karen
      Y. Duran/s/ SebastianRamirez
              
              Director
              January
      13, 2009Sebastian
      Ramirez/s/ Troy Duran
              
              Director
              January
      13, 2009Troy
      Duran











-
23 -





EXHIBIT
INDEX




Exhibit
                Number
              Description2.1
              Agreement
      and Plan of Reorganization - Pocketspec Technologies, Inc. and Sierra
      Norte LLC (a)2.2
              Acquisition
      Agreement - Pocketspec Technologies, Inc. and Spanish Trails, LLC (b)3.1
              Articles
      of Incorporation of Falcon Ridge Development, Inc. previously
      filed.3.2
              Bylaws
      of Falcon Ridge Development, Inc. previously
  filed.3.3
              Articles
      of Organization of Sierra Norte, LLC previously
    filed.3.4
              Operating
      Agreement of Sierra Norte, LLC previously filed.3.5
              Articles
      of Organization of Spanish Trails, LLC previously
    filed.3.6
              Operating
      Agreement of Spanish Trails, LLC previously
filed.4.1
              Articles
      of Amendment - Establishment of Series of Preferred Stock previously
      filed.10.1
              Purchase
      Agreement - Spanish Trails, LLC and D.R. Horton (Confidential portions of
      this agreement noted by *** have been omitted and filed separately with
      the Securities and Exchange Commission pursuant to a request for
      confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934.)
      Previously filed.14.1
              Code of
      Ethics21.1
              List
      of Subsidiaries23.1
              Consents
      of experts31.1
              Certification
      of Chief Executive Officer pursuant to Rule
      13a-14(a)/15(d)-14(a)*31.2
              Certification
      of Chief Financial Officer pursuant to Rule
      13a-14(a)/15(d)-14(a)*32.1
              Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002*32.2
              Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002*99
              Additional
      Exhibits - None
   - 24
-