UNITED STATES SECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549




Form 10-Q




(Mark One)


|(X) |  | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|--- |  | ---------------------------------------------------------------------------------



For the quarterly period ended September 30, 2009
 
OR


|[  ] |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|---- |  | ----------------------------------------------------------------------------------



For the transition period from _______________ to
______________




COMMISSION FILE NUMBER 333-142076




ARIA INTERNATIONAL HOLDINGS, INC.(Exact Name of small business issuer as specified in its
charter)


|Nevada                          |  |  |  | 26-1650042         
|------------------------------- |  |  |  | -------------------
|(State or other
jurisdiction of |  |  |  | (I.R.S. Employer   
|incorporation
or organization)  |  |  |  | Identification No.)



4821 29th Street, Arlington, VA 22207 (Address of principal executive offices) (Zip Code)




Registrants telephone number: (703)
835-9693




Indicate by check mark whether the registrant (1) has 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 [
]




Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [
]




Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated file
 accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check
one):


|Large accelerated
filer [ ]                                           |  |  |  | Accelerated filer [ ]        
|--------------------------------------------------------------------- |  |  |  | -----------------------------
|Non-accelerated
filer [ ] (do not check if smaller reporting company) |  |  |  | Smaller reporting company [X]



Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]




As of November 20, 2009, the issuer had 148,829,360 outstanding
shares of common stock.


---



ARIA INTERNATIONAL HOLDINGS, INC.  FORM 10-Q for September
30, 2009




INDEX







|        |  |  |  |                                                                                                                                                                                             |  | Page
|------- |  |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|        |  |  |  | Cautionary Statement Concerning Forward-Looking Statements                                                                                                                                  |  |     
|PART
I  |  |  |  | FINANCIAL INFORMATION                                                                                                                                                                       |  |     
|Item
1  |  |  |  | Condensed Consolidated Balance Sheets at September 30, 2009 (unaudited) and December 31, 2008                                                                                               |  |     
|        |  |  |  | Condensed Consolidated Statements of Losses for the Three and Nine Months ended September 30, 2009 and for the period from Inception (July
10, 2008) through September 30, 2008 (unaudited) |  |     
|        |  |  |  | Condensed Consolidated Statements of Stockholders Deficit for the Nine Months ended September 30, 2009 (unaudited)                                                                         |  |     
|        |  |  |  | Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2009 and for the period from Inception (July 10, 2008)
through September 30, 2008 (unaudited)       |  |     
|        |  |  |  | Notes
to Unaudited Condensed Consolidated Financial Statements                                                                                                                              |  |     
|Item
2  |  |  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                                       |  |     
|Item
3  |  |  |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                  |  |     
|Item
4T |  |  |  | Controls and Procedures                                                                                                                                                                     |  |     
|PART
II |  |  |  | OTHER INFORMATION                                                                                                                                                                           |  |     
|Item
1  |  |  |  | Legal
Proceedings                                                                                                                                                                           |  |     
|Item
1A |  |  |  | Risk
Factors                                                                                                                                                                                |  |     
|Item
2  |  |  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                                                 |  |     
|Item
3  |  |  |  | Defaults Upon Senior Securities                                                                                                                                                             |  |     
|Item
4  |  |  |  | Submission of Matters to a Vote of Security Holders                                                                                                                                         |  |     
|Item
5  |  |  |  | Other
Information                                                                                                                                                                           |  |     
|Item
6  |  |  |  | Exhibits                                                                                                                                                                                    |  |     
|        |  |  |  | Signature Page                                                                                                                                                                              |  |     

---



ARIA INTERNATIONAL HOLDINGS, INC. SEC FORM 10-Q FOR
SEPTEMBER 30, 2009




Cautionary Statement Concerning Forward Looking
Statements:




The information in this report contains
forward-looking statements. All statements other than statements of historical fact made in this report are forward looking. In particular, the
statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These
forward-looking statements can be identified by the use of words such as believes, estimates, could,
possibly, probably, anticipates, projects, expects, may, will, or
should or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking
statements will be achieved. Forward-looking statements reflect managements current expectations and are inherently uncertain. Our actual results
may differ significantly from managements expectations.




The following discussion and analysis
should be read in conjunction with our financial statements, included herewith. This discussion should not be construed to imply that the results
discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating
results in the future. Such discussion represents only the best present assessment of our management.




The registrant completed a reverse
merger and recapitalization agreement in March 2009. The accounting acquirer and successor entity, Aria International Incorporated, was formed in July
2008 (see Note 1 to the accompanying financial statements). Accordingly comparative statements of losses and cash flows presented are the operating
results from inception (July 2008) through September 30, 2008.


---





PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




ARIA INTERNATIONAL HOLDINGS, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS







|                                                                                                                                                                                                                                                                               |  |  |  | September 30, 2009 |            | December 31, 2008
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  | ------------------ | ---------- | -----------------
|
|Current
Assets                                                                                                                                                                                                                                                                 |  |  |  |                    |            |                  
|Cash                                                                                                                                                                                                                                                                           |  |  |  | $                  | 20,632     |                  
|Capitalized
contract costs (Note 1)                                                                                                                                                                                                                                            |  |  |  |                    | 10,018,906 |                  
|Total Current
Assets                                                                                                                                                                                                                                                           |  |  |  |                    | 10,039,538 |                  
|                                                                                                                                                                                                                                                                               |  |  |  |                    |            |                  
|Property and
Equipment, at cost                                                                                                                                                                                                                                                |  |  |  |                    |            |                  
|Furniture and
equipment                                                                                                                                                                                                                                                        |  |  |  |                    | 8,044      |                  
|Accumulated
deprecation                                                                                                                                                                                                                                                        |  |  |  |                    | 3,051      |                  
|Total Property
and Equipment, net                                                                                                                                                                                                                                              |  |  |  |                    | 4,993      |                  
|                                                                                                                                                                                                                                                                               |  |  |  |                    |            |                  
|Other assets
(Note 1)                                                                                                                                                                                                                                                          |  |  |  |                    | 485,000    |                  
|Total
Assets                                                                                                                                                                                                                                                                   |  |  |  | $                  | 10,529,531 |                  
|                                                                                                                                                                                                                                                                               |  |  |  |                    |            |                  
|Current
Liabilities                                                                                                                                                                                                                                                            |  |  |  |                    |            |                  
|Accounts payable
and accrued liabilities                                                                                                                                                                                                                                       |  |  |  | $                  | 6,722,711  |                  
|Other
payable                                                                                                                                                                                                                                                                  |  |  |  |                    | 6,000      |                  
|Deferred
revenues (Note 1)                                                                                                                                                                                                                                                     |  |  |  |                    | 6,790,000  |                  
|Notes payable to
related party (Note 4)                                                                                                                                                                                                                                        |  |  |  |                    | 2,893,652  |                  
|Notes payable
(Note 4)                                                                                                                                                                                                                                                         |  |  |  |                    | 525,000    |                  
|Total Current
Liabilities                                                                                                                                                                                                                                                      |  |  |  |                    | 16,937,363 |                  
|                                                                                                                                                                                                                                                                               |  |  |  |                    |            |                  
|Award
repayable (Note 3)                                                                                                                                                                                                                                                       |  |  |  |                    | 145,000    |                  
|Total Long-term
liabilities                                                                                                                                                                                                                                                    |  |  |  |                    | 145,000    |                  
|Total
Liabilities                                                                                                                                                                                                                                                              |  |  |  |                    | 17,082,363 |                  
|Deficiency in
Stockholders Equity (restated for effect of reverse merger with Aria International Incorporated)                                                                                                                                                                |  |  |  |                    |            |                  
|Preferred stock,
par value $.0001 per share; 10,000,000 and 1,200,000 shares authorized at September 30, 2009 and December 31, 2008, respectively; none issued and
outstanding at September 30, 2009 and December 31, 2008 (Note 6)                                            |  |  |  |                    |           |                  
|Common stock,
par value $.0001 per share; 300,000,000 and 100,000,000 shares authorized at September 30, 2009 and December 31, 2008, respectively; 148,829,360 and
59,003,192 shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively (Note 6) |  |  |  |                    | 14,883     |                  
|Subscription
payable                                                                                                                                                                                                                                                           |  |  |  |                    | 58,000     |                  
|Additional
paid-in Capital                                                                                                                                                                                                                                                     |  |  |  |                    | 193,089    |                  
|Accumulated
deficit                                                                                                                                                                                                                                                            |  |  |  |                    | (6,818,804 | )                
|                                                                                                                                                                                                                                                                               |  |  |  |                    | (6,552,832 | )                
|Deferred
compensation                                                                                                                                                                                                                                                          |  |  |  |                    |           |                  
|Stockholders Deficiency                                                                                                                                                                                                                                                       |  |  |  |                    | (6,552,832 | )                
|Total
Liabilities and Deficiency in Stockholders Equity                                                                                                                                                                                                                       |  |  |  | $                  | 10,529,531 |                  



The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.




2


---



ARIA INTERNATIONAL HOLDINGS, INC. CONDENSED
CONSOLIDATED STATEMENTS OF LOSSES (Unaudited)


|                                                    |  |  |  | For the three months ended September 30,
2009 |             | For the nine months ended September 30,
2009 |  | For the period from inception (July 10,
2008) through September 30, 2008
|--------------------------------------------------- |  |  |  | --------------------------------------------- | ----------- | -------------------------------------------- |  | ------------------------------------------------------------------------
|Sales                                               |  |  |  | $                                             |            |                                              |  | $                                                                       
|Cost of
Sales                                       |  |  |  |                                               |            |                                              |  |                                                                         
|Gross
profit                                        |  |  |  |                                               |            |                                              |  |                                                                         
|Operating
Expenses:                                 |  |  |  |                                               |             |                                              |  |                                                                         
|Selling, General
and Administrative                 |  |  |  |                                               | 2,305,733   |                                              |  |                                                                         
|Depreciation                                        |  |  |  |                                               | 372         |                                              |  |                                                                         
|Total Operating
Expense                             |  |  |  |                                               | 2,306,105   |                                              |  |                                                                         
|Loss from
Operations                                |  |  |  |                                               | (2,306,105  | )                                            |  |                                                                         
|Other Income
(Expenses):                            |  |  |  |                                               |             |                                              |  |                                                                         
|Loss on
settlement of debt (Note 5 and 6)           |  |  |  |                                               |            |                                              |  |                                                                         
|Interest
expense, net                               |  |  |  |                                               | (365,572    | )                                            |  |                                                                         
|Total Other
(Expenses)                              |  |  |  |                                               | (365,572    | )                                            |  |                                                                         
|Provision for
Income Tax                            |  |  |  |                                               |            |                                              |  |                                                                         
|Net
Loss                                            |  |  |  | $                                             | (2,671,677  | )                                            |  | $                                                                       
|Loss per common
share (basic and assuming dilution) |  |  |  | $                                             | (0.02       | )                                            |  | $                                                                       
|Weighted average
common shares outstanding          |  |  |  |                                               | 148,829,360 |                                              |  |                                                                         



The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.




3


---



ARIA INTERNATIONAL HOLDINGS, INC. CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009(Unaudited)







|                                                                                                          |  |  |  | Common Shares |             | Common Share Amount |  | Additional Paid in Capital |        | Stock Subscription Payable |  | Deferred Compensation |          | Accumulated Deficit |  | Total
|--------------------------------------------------------------------------------------------------------- |  |  |  | ------------- | ----------- | ------------------- |  | -------------------------- | ------ | -------------------------- |  | --------------------- | -------- | ------------------- |  | -----
|Balance at
December 31, 2008 (restated for effect of reverse merger with Aria International Incorporated) |  |  |  |               | 59,003,192  |                     |  | $                          | 5,900  |                            |  | $                     | 182,796  |                     |  | $    
|Issuance of
common stock in exchange for accounts payable and services                                    |  |  |  |               | 71,700      |                     |  |                            | 7      |                            |  |                       | 5,729    |                     |  |      
|Amortization of
deferred compensation                                                                     |  |  |  |               |            |                     |  |                            |       |                            |  |                       |         |                     |  |      
|Recapitalization
pursuant to reverse merger                                                               |  |  |  |               | 88,815,000  |                     |  |                            | 8,882  |                            |  |                       | (188,525 | )                   |  |      
|Issuance of
common stock in connection with short-term loan                                               |  |  |  |               | 750,000     |                     |  |                            | 75     |                            |  |                       | 59,925   |                     |  |      
|Stock
subscription payable                                                                                |  |  |  |               |            |                     |  |                            |       |                            |  |                       |         |                     |  |      
|Amortization of
deferred compensation                                                                     |  |  |  |               |            |                     |  |                            |       |                            |  |                       |         |                     |  |      
|                                                                                                          |  |  |  |               |             |                     |  |                            |        |                            |  |                       |          |                     |  |      
|Operating
expenses contributed by shareholders                                                            |  |  |  |               |            |                     |  |                            |       |                            |  |                       | 22,500   |                     |  |      
|Common stock
contributed by shareholders in connection with settlement of debt (Note 5)                   |  |  |  |               | (281,961    | )                   |  |                            | (28    | )                          |  |                       | 28       |                     |  |      
|Issuance of
common stock in exchange for settlement of debt (Note 5)                                      |  |  |  |               | 471,429     |                     |  |                            | 47     |                            |  |                       | 37,667   |                     |  |      
|Issuance of
warrants in exchange for interest expense                                                     |  |  |  |               |            |                     |  |                            |       |                            |  |                       | 72,969   |                     |  |      
|Net
loss                                                                                                  |  |  |  |               |            |                     |  |                            |       |                            |  |                       |         |                     |  |      
|Balance at
September 30, 2009                                                                             |  |  |  |               | 148,829,360 |                     |  | $                          | 14,883 |                            |  | $                     | 193,089  |                     |  | $    



The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.




4


---



ARIA INTERNATIONAL HOLDINGS, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)







|                                                                                 |  |  |  | Nine months ended September 30, 2009 |             | For the period from inception (July 10,
2008) through September 30, 2008
|-------------------------------------------------------------------------------- |  |  |  | ------------------------------------ | ----------- | ------------------------------------------------------------------------
|INCREASE IN CASH
AND EQUIVALENTS                                                 |  |  |  |                                      |             |                                                                         
|CASH FLOWS FROM
OPERATING ACTIVITIES:                                            |  |  |  |                                      |             |                                                                         
|Net
loss                                                                         |  |  |  | $                                    | (5,910,213  | )                                                                       
|Depreciation                                                                     |  |  |  |                                      | 869         |                                                                         
|Operating
expenses contributed by shareholders                                   |  |  |  |                                      | 22,500      |                                                                         
|Common stock
issued in exchange for interest expenses                            |  |  |  |                                      | 60,000      |                                                                         
|Recapitalization
costs                                                           |  |  |  |                                      | 27,864      |                                                                         
|Amortization of
deferred compensation                                            |  |  |  |                                      | 124,333     |                                                                         
|Amortization and
write-off of debt discount                                      |  |  |  |                                      | 5,719       |                                                                         
|Loss on
settlement of debt                                                       |  |  |  |                                      | 28,714      |                                                                         
|Warrants issued
In exchange for interest expense                                 |  |  |  |                                      | 72,969      |                                                                         
|Adjustments to
reconcile net loss to cash used for operating activities:         |  |  |  |                                      |             |                                                                         
|Changes in
assets and liabilities:                                               |  |  |  |                                      |             |                                                                         
|Prepaids and
other assets                                                        |  |  |  |                                      | (10,503,906 | )                                                                       
|Accounts payable
and accrued expenses                                            |  |  |  |                                      | 6,462,870   |                                                                         
|Deferred
revenues                                                                |  |  |  |                                      | 6,790,000   |                                                                         
|NET CASH USED IN
OPERATING ACTIVITIES                                            |  |  |  |                                      | (2,818,281  | )                                                                       
|                                                                                 |  |  |  |                                      |             |                                                                         
|NET CASH USED IN
INVESTING ACTIVITIES                                            |  |  |  |                                      |            |                                                                         
|                                                                                 |  |  |  |                                      |             |                                                                         
|CASH FLOWS FROM
FINANCING ACTIVITIES:                                            |  |  |  |                                      |             |                                                                         
|Proceeds from
sale of common stock and stock subscription, net of costs and fees |  |  |  |                                      | 58,000      |                                                                         
|Proceeds from
subsidiary common stock subscription                               |  |  |  |                                      | 98          |                                                                         
|Proceeds from
notes payable, net of repayments                                   |  |  |  |                                      | 2,767,652   |                                                                         
|NET CASH
PROVIDED BY FINANCING ACTIVITIES                                        |  |  |  |                                      | 2,825,750   |                                                                         
|                                                                                 |  |  |  |                                      |             |                                                                         
|NET INCREASE IN
CASH AND EQUIVALENTS                                             |  |  |  |                                      | 7,469       |                                                                         
|                                                                                 |  |  |  |                                      |             |                                                                         
|Cash and cash
equivalents at the beginning of the period                         |  |  |  |                                      | 4,343       |                                                                         
|Cash acquired in
merger                                                          |  |  |  |                                      | 8,820       |                                                                         
|Cash and cash
equivalents at the end of the period                               |  |  |  | $                                    | 20,632      |                                                                         
|                                                                                 |  |  |  |                                      |             |                                                                         
|Supplemental
Disclosures of Cash Flow Information                                |  |  |  |                                      |             |                                                                         
|Cash paid during
the period for interest                                         |  |  |  | $                                    |            |                                                                         
|Income taxes
paid                                                                |  |  |  | $                                    |            |                                                                         



The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.




5


---





ARIA INTERNATIONAL HOLDINGS, INC. NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 (Unaudited)




NOTE 1  SUMMARY OF ACCOUNTING
POLICIES




A summary of the significant accounting policies applied in
the preparation of the accompanying unaudited condensed consolidated financial statements follows.




General




The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.




In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have been included. Accordingly, the results from operations for the three
and nine-month period ended September 30, 2009, are not necessarily indicative of the results that may be expected for the year ending December 31,
2009.




The consolidated financial statements as of December 31,
2008 have been derived from the audited consolidated financial statements at that date but do not include all disclosures required by the accounting
principles generally accepted in the United States of America.




Business and Basis of Presentation




Aria International Holdings, Inc. (the Company)
was incorporated pursuant to the laws of the State of Nevada on November 21, 2007 under the name TriCord Hurricane Holdings, Inc. On November 30, 2007,
pursuant to the terms of a share exchange agreement, it acquired control of its now wholly-owned subsidiary, TriCord Hurricane Products,
Inc.




TriCord Hurricane Products, Inc. was originally organized
under the laws of the State of Oklahoma on January 3, 2006. On July 1, 2007, it merged with TriCord Hurricane Products, LLC, a Florida limited
liability company. On November 19, 2007, TriCord Hurricane Products LLC filed a Certificate of Conversion with the Secretary of State of Florida
whereby it was converted to a Florida corporation and renamed TriCord Hurricane Products, Inc.




On March 3, 2009, TriCord Hurricane Holdings, Inc. entered
into an Agreement and Plan of Merger (the Merger Agreement) with Aria Acquisition, Inc., a Nevada corporation and wholly-owned subsidiary
of the Company (the Aria Acquisition) and Aria International Incorporated, a Delaware corporation (Aria Incorporated) formed in
July 2008. Pursuant to the Merger Agreement, Aria Acquisition merged into Aria Incorporated, resulting in Aria Incorporateds becoming a wholly
owned subsidiary of TriCord Hurricane Holdings, Inc. (the Merger). On March 9, 2009, TriCord Hurricane Holdings, Inc. changed its name to
Aria International Holdings, Inc. The primary business and market focus of the Company, after the Merger, has been specialized surveillance and
communications solutions to a broad range of customers. The corporate offices of the Company are in Arlington, Virginia.




Merger and Recapitalization:




The acquisition of Aria Incorporated by the Company
(formerly TriCord Hurricane Holdings, Inc.) (TriCord) resulted in a change in control of the Company and was accounted for as a reverse
merger whereby Aria Incorporated was the accounting acquirer for financial statement purposes. Accordingly, for all periods subsequent to the
reverse merger transaction, the financial statements of the Company reflect the historical financial statements of Aria Incorporated from
its inception (July 2008) and the operations of Aria International Holdings, Inc. (formerly TriCord Hurricane Holdings, Inc.) subsequent to the March
3, 2009 transaction date. A reverse-merger transaction is considered, and accounted for as a capital transaction in substance; it is equivalent to the
issuance of Aria Incorporated securities for TriCords net monetary assets, which are de minimis, accompanied by a recapitalization;
TriCords liabilities exceeded its assets on the day of the transaction and additional paid capital was adjusted. Accordingly, the Company did not
recognize any goodwill or other intangible assets in connection with this reverse merger transaction. Aria Incorporated is the surviving
entity.




6


---



Following the Merger, the Company has focused on the
development of business of Aria Incorporated, the provision of specialized surveillance and communications solutions. The Company no longer actively
pursues the TriCord Hurricane Products business and will likely divest the TriCord Hurricane Products business once an acquirer is identified and terms
acceptable to the Company are agreed upon.




The accompanying unaudited condensed consolidated financial
statements present the historical financial condition, results of operations and cash flows of Aria Incorporated prior to the Merger. Since Aria
Incorporated was formed in July 2008, comparative statements of losses and cash flows presented for comparative periods in 2008 are the operating
results of Aria Incorporated for the period from inception (July 10, 2008) through September 30, 2008. All reference to common stock shares and per
share amounts have been retroactively restated to effect the Merger as if the transaction had taken place as of the beginning of the earliest period
presented.




Fair Value of Financial Instruments




Accounting Standards Codification subtopic 825-10,
Financial Instruments (ASC 825-10) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and
cash equivalents, accounts payable and accrued liabilities, and short-term borrowings, as reflected in the condensed consolidated balance sheets,
approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and
equity instruments of the Company are either recognized or disclosed in the condensed consolidated financial statements together with other information
relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial
assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been
disclosed.




Effective January 1, 2008, the Company adopted Accounting
Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (ASC 820-10) and Accounting Standards Codification subtopic
825-10, Financial Instruments (ASC 825-10), which permits entities to choose to measure many financial instruments and certain other items
at fair value. Neither of these statements had an impact on the Companys consolidated financial position, results of operations or cash
flows.




Revenue Recognition




For revenue from product sales, the Company recognizes
revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (ASC 605-10). ASC 605-10 requires that
four basic criteria must be met before revenue can be recognized: (1) Persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the
selling price is fixed and determinable; and (4) collectibility is reasonably assured. Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for
which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product
has been delivered or no refund will be required. ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element
Arraignments (ASC 605-25). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple
products, services and/or rights to use assets.




In April 2009, the Company entered into a sales contract
with the Royal Thai Army, pursuant to which the Company sells surveillance and communications equipment to the Royal Thai Army. The total contract
amount was $9,700,000, which includes delivery and installation of the equipment, as well as providing training to the buyer. The Company recognizes
revenues from the equipment portion upon shipment and installation, and the service portion upon completion of the training programs. Revenues from
this type of multiple deliverable arrangements are accounted for in accordance with ASC 605-10, which incorporates Accounting Standards Codification subtopic
605-25 separate units of accounting based on the relative fair value of the delivered units. As of September 30, 2009, the Company had received
payments from the Royal Thai Army in the amount of $6,790,000 and the payments received were accounted for as deferred revenues. In connection with
this contract, the Company also had incurred costs and expenses in an aggregate amount of $10,018,906.




These costs and expenses were capitalized as of September
30, 2009, and will be charged to costs of sales upon the delivery of the equipment and services. The Company was also required to deposit with the
buyer cash in the amount of $485,000 to guaranty the performance of this contract and warrant against the defects and malfunctions of the equipment.
The buyer shall return the cash to the Company after a period of 365 days from the acceptance of the equipment. The Company had accounted for the
refundable amount of $485,000 as a non-current asset as of September 30, 2009.




7


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New Accounting Pronouncements




With the exception of those stated below, there have been
no recent accounting pronouncements or changes in accounting pronouncements during the nine months ended September 30, 2009, as compared to the recent
accounting pronouncements described in the Annual Report that are of material significance, or have potential material significance, to the
Company.




In May 2009, the FASB issued SFAS No. 165, Subsequent
Events, which is included in ASC Topic 855, Subsequent Events. ASC Topic 855 established principles and requirements for evaluating and reporting
subsequent events and distinguishes which subsequent events should be recognized in the financial statements versus which subsequent events should be
disclosed in the financial statements. ASC Topic 855 also required disclosure of the date through which subsequent events are evaluated by management.
ASC Topic 855 was effective for interim periods ending after June 15, 2009 and applies prospectively. Because ASC Topic 855 impacted the disclosure
requirements, and not the accounting treatment for subsequent events, the adoption of ASC Topic 855 did not impact the Companys results of
operations or financial condition. See Note 11 for disclosures regarding our subsequent events.




Effective July 1, 2009, the Company adopted the Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 105-10, Generally Accepted Accounting
PrinciplesOverall (ASC 105-10). ASC 105-10 establishes the FASB Accounting Standards Codification (the Codification) as
the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial
statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of
authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification
superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the
Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force
Abstracts. Instead, it will issue Accounting Standards Updates (ASUs). The FASB will not consider ASUs as authoritative in their own right.
ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the
change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.




In August 2009, the FASB issued ASU No. 2009-05, Measuring
Liabilities at Fair Value, which provides additional guidance on how companies should measure liabilities at fair value under ASC 820. The ASU
clarifies that the quoted price for an identical liability should be used. However, if such information is not available, an entity may use, the quoted
price of an identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities traded as assets, or another
valuation technique (such as the market or income approach). The ASU also indicates that the fair value of a liability is not adjusted to reflect the
impact of contractual restrictions that prevent its transfer and indicates circumstances in which quoted prices for an identical liability or quoted
price for an identical liability traded as an asset may be considered level 1 fair value measurements. This ASU is effective October 1, 2009. The
Company is currently evaluating the impact of this standard, but would not expect it to have a material impact on the Companys consolidated
results of operations or financial condition.




In September 2009, the FASB issued ASU No. 2009-12,
Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), that amends ASC 820 to provide guidance on measuring the
fair value of certain alternative investments such as hedge funds, private equity funds and venture capital funds. The ASU indicates that, under
certain circumstance, the fair value of such investments may be determined using net asset value (NAV) as a practical expedient, unless it is probable
the investment will be sold at something other than NAV. In those situations, the practical expedient cannot be used and disclosure of the remaining
actions necessary to complete the sale is required. The ASU also requires additional disclosures of the attributes of all investments within the scope
of the new guidance, regardless of whether an entity used the practical expedient to measure the fair value of any of its investments. This ASU is
effective October 1, 2009. The Company is currently evaluating the impact of this standard, but would not expect it to have a material impact on the
Companys consolidated results of operations or financial condition.




In October 2009, the FASB issued ASU No. 2009-13,
Multiple-Deliverable Revenue Arrangements-a consensus of the FASB Emerging Issues Task Force, that provides amendments to the criteria for separating
consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in
more circumstances than under existing U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling price of a
deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if
vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence
is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the
price to sell the deliverable on a standalone basis. This ASU also eliminates the residual




8


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method of allocation and will require that arrangement
consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any
discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and
quantitative information regarding application of the multiple-deliverable revenue arrangement guidance are also required under the ASU. The ASU does
not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software
transactions. ASU No. 2009-13 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its
consolidated results of operations and financial condition.




In October 2009, the FASB issued ASU No. 2009-14, Certain
Revenue Arrangements That Include Software Elements-a consensus of the FASB Emerging Issues Task Force, that reduces the types of transactions that
fall within the current scope of software revenue recognition guidance. Existing software revenue recognition guidance requires that its provisions be
applied to an entire arrangement when the sale of any products or services containing or utilizing software when the software is considered more than
incidental to the product or service. As a result of the amendments included in ASU No. 2009-14, many tangible products and services that rely on
software will be accounted for under the multiple-element arrangements revenue recognition guidance rather than under the software revenue recognition
guidance. Under the ASU, the following components would be excluded from the scope of software revenue recognition guidance: the tangible element of
the product, software products bundled with tangible products where the software components and non-software components function together to deliver
the products essential functionality, and undelivered components that relate to software that is essential to the tangible products
functionality. The ASU also provides guidance on how to allocate transaction consideration when an arrangement contains both deliverables within the
scope of software revenue guidance (software deliverables) and deliverables not within the scope of that guidance (non-software deliverables). ASU No.
2009-14 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its consolidated results of
operations and financial condition.




NOTE 2  GOING CONCERN
MATTERS




The accompanying condensed consolidated financial
statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal
course of business. As shown in the unaudited condensed consolidated financial statements for the nine-month period ended September 30, 2009, the
Company incurred net losses of $5,910,213. The Companys current liabilities exceeded its current assets by $6,897,825 as of September 30, 2009.
These factors among others may indicate that the Company may be unable to continue as a going concern for a reasonable period of time.




The Companys existence is dependent upon
managements ability to develop revenues and profitable operations and resolve its liquidity problems. Management anticipates the Company will
attain profitable status and improve its liquidity through continued growth, distribution and sale of its products and services, and additional equity
investment in the Company. The accompanying condensed consolidated financial statements do not include any adjustments that might result should the
Company be unable to continue as a going concern.




In order to improve the Companys liquidity, the
Company is actively pursuing additional debt or equity financing through discussions with investment bankers and private investors. Management expects
to continue this practice and believes that the Merger with Aria Incorporated further increases the potential for private placement of its convertible
securities and/or equity. Outside investment banking services have been arranged to assist and support the future financing requirements of the
Company. However, there can be no assurance the Company will be successful in its effort to secure additional financing.




By adjusting the Companys operations and development
to the level of capitalization, management believes it has sufficient capital resources to meet projected cash flow deficits for the next twelve
months. However, if during that period or thereafter, the Company is not successful in generating sufficient liquidity from operations or in raising
sufficient capital resources, on terms acceptable to the Company, this could have a material adverse effect on the Companys business, results of
operations liquidity and financial condition. If operations and cash flows continue to improve through these efforts, management believes that the
Company can continue to operate. However, no assurance can be given that managements actions will result in profitable operations or the
resolution of its liquidity problems.




9


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NOTE 3  AWARD
REPAYABLE




In July 2007, the Company, while conducting the prior
business of TriCord Hurricane Holdings, Inc., entered into an award agreement under the Oklahoma Center for the Advancement of Science and Technology
(OCAST) Technology Business Finance Program funded by the Oklahoma legislature. By the terms of the agreement, TriCord was advanced $100,000 of
matching funds for sales and marketing activities and short-term working capital requirements.




The Company is required to repay the award based on
attaining certain milestones under the award agreement, but in no case later than five years from the date of the award, which is July 2012. In
addition, repayment may be made anytime by the Company prior to the full repayment date in July 2012 in the amount of the award receipt plus one-fifth
(1/5) of the award for each of the year the award is outstanding, as illustrated in the following schedule:




First year from the award receipt: $100,000 + $20,000 =
$120,000 Second year from the award receipt: $100,000 + $40,000 = $140,000 Third year from the award receipt: $100,000 + $60,000= $160,000
Fourth year from the award receipt: $100,000 + 80,000 = $180,000 Fifth year from the award receipt: $100,000 + $100,000 = $200,000




The Company has not pledged any assets as security under
the award agreement. The Company accounted for the amount to be repaid in addition to the original award receipt as accrued interest. Subsequent to the
Merger, the original award of $100,000 was accounted for as long-term liabilities on a consolidated basis and accrued interest in connection with this
award was $45,000 as of September 30, 2009.




NOTE 4  NOTES
PAYABLE




Notes payable as of September 30, 2009 and December 31,
2008 are as follows:


|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |  |  | September 30, 2009 |            | December 31, 2008
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | ------------------ | ---------- | -----------------
|Note payable to Company significant shareholder in monthly installments of interest at 12% per annum; maturity date is on
December 31, 2009. Original loan agreement defines maximum borrowing capacity is up to $1,000,000. During the period ended September 30, 2009, the
noteholder verbally agreed to increase the borrowing exceeding the original borrowing capacity. The company granted the note holder a security interest
in all accounts, chattel paper, documents, equipment, fixtures, general intangibles, instrument and inventories, whether now owned by the Company or
hereafter acquired, and all proceeds thereof, of the Company. |  |  |  | $                  | 2,450,535  |                  
|Note payable to the Companys Chief Executive Officer in monthly installments of interest at 12% per annum; maturity
date is on December 31, 2009. Maximum borrowing capacity is up to $500,000 on a note executed on April 1, 2009. The Company granted the noteholder
a security interest in all accounts, chattel paper, documents, equipment, fixtures, general intangibles, instrument and inventories, whether now owned
by the Company or hereafter acquired, and all proceeds thereof, of the Company.                                                                                                                                          |  |  |  |                    | 443,117    |                  
|Notes payable to six non-affiliated individuals in an aggregate amount of $525,000; extended maturity date is December 31, 2009.
Interest is accrued monthly on an agreed-upon basis with the noteholders at approximately 15%.                                                                                                                                                                                                                                                                                                                                                                                                                         |  |  |  |                    | 525,000    |                  
|Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |  |                    | 3,418,652  |                  
|Less: Current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |  |                    | (3,418,652 | )                
|Long-term portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |  | $                  | 0        |                  



On April 30, 2009, the Company also entered into a
short-term loan agreement with a third party. The loan amount was $2,000,000, and the Company granted the lender a security interest equal to the first
$2 million in contract proceeds from the Royal Thai Army (Note 1). The loan provided for a maturity no later than 60 days from execution, and the
Company was required to pay the lender a fee




10


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of $100,000 and issue to the lender 750,000 shares of
its common stock. The loan was repaid in full as of September 30, 2009, and the Company had accounted for the $100,000 of fees and the fair value of
the 750,000 shares of common stock issued (Note 6), or $60,000, as interest expenses during the nine months ended September 30, 2009.




NOTE 5  SUBORDINATED CONVERTIBLE
DEBENTURES




In June 2008, the Company, while conducting the prior
business of TriCord Hurricane Holdings, Inc., issued an aggregate of $9,000 of convertible subordinated debentures. The debentures bear interest at 10%
per annum and mature two years after issuance. The debentures are convertible at the debenture holders option to common stock at $0.0525 per
share and are subordinated to the Award Repayable to the Oklahoma Center for the Advancement of Science and Technology. Additionally, the debenture
holders received warrants to purchase the Companys common stock which may be exercised into a number of shares equal to three times the number of
shares of common stock into which the debentures are convertible at an exercise price of $0.0525 per share. The warrants expire five years from date of
issuance.




In accordance with Accounting Standards Codification
subtopic 470-20, Debt, Debt with Conversions and Other Options, the Company recognized an imbedded beneficial conversion feature present in the
convertible debenture. A portion of the proceeds equal to the intrinsic value of that feature was allocated to additional paid in capital. The Company
recognized and measured an aggregate of $1,893 of the proceeds, which is equal to the intrinsic value of the imbedded beneficial conversion feature, to
additional paid in capital and a discount against the convertible debenture at the time the debentures were issued. The debt discount attributed to the
beneficial conversion feature is amortized over the convertible debentures maturity period (two years) as interest expense.




In connection with the placement of the convertible
debenture, the Company, while conducting the prior business of TriCord Hurricane Holdings, Inc., issued warrants granting the holders the right to
acquire 514,286 shares of the Companys common stock at $0.0525 per share. In accordance with Accounting Standards Codification subtopic 470-10,
Debt (ASC 470-10), the Company recognized the value attributable to the warrants in the amount of $7,107 to additional paid in capital and
a discount against the convertible debenture at the time the debentures were issued. The warrants were valued in accordance with EITF 00-27 using the
Black-Scholes pricing model and the following assumptions: contractual terms of 5 years, an average risk free interest rate of 0.875%, a dividend yield
of 0%, and volatility of 160%. The debt discount attributed to the value of the warrants issued is amortized over the convertible debentures
maturity period (two years) as interest expense.




Subsequent to the Merger, the subordinated convertible
debentures were accounted for as long-term liabilities on a consolidated basis. In May 2009, the Company entered into a Stock Adjustment Agreement with
the debenture holders, pursuant to which the Company agreed to issue an aggregate of 471,429 shares of its common stock to the debenture holders in
exchange for settlement of the $9,000 of convertible debentures and 514,286 outstanding warrants. Upon the execution of the Stock Adjustment Agreement,
the Company issued an aggregate of 471,429 shares of its common stock to the debenture holders, of which 281,961 shares were contributed by three
significant shareholders of the Company, and the remaining 189,468 shares of common stock were new issuances (Note 6).




The Company amortized the convertible debenture debt
discount attributed to the beneficial conversion feature and the value of the attached warrants over the term of the debentures. Upon the settlement of
debentures and warrants in May 2009, all unamortized debt discount was charged to interest expense for the period ended September 30,
2009.




NOTE 6  CAPITAL STOCK




Recapitalization pursuant to Merger




The Merger between the Company and Aria Incorporated was
consummated on March 3, 2009, by exchanging 88,815,000 shares of the Companys common stock for 100% of the outstanding common stock of Aria
Incorporated. As a result of the exchange, the stockholders of Aria Incorporated became the controlling stockholders of the Company. The acquisition
has been accounted for as a capital transaction as a result of the reverse merger. Under this method, Aria Incorporated (the accounting
acquirer) is considered to have acquired the Company (the accounting acquiree) on the date of the transaction and continued as the reporting entity
thereafter. The net assets of the Company were recorded at carrying value with no recognition of goodwill.




Preferred Stock




In January 2009, the Company increased its authorized
preferred stock from 1,200,000 shares to 10,000,000 shares, with a par value of $0.0001 per share. At September 30, 2009 and December 31, 2008, there
were no preferred shares issued and outstanding.




11


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Common Stock




In January 2009, the Company increased its authorized
common stock from 100,000,000 shares to 300,000,000 shares, with a par value of $0.0001 per share. At September 30, 2009 and December 31, 2008, the
Company had 148,829,360 and 59,003,192 shares of common stock issued and outstanding, respectively.




Prior to the Merger, the Company issued an aggregate of
71,700 shares of common stock to a consultant in exchange for $4,800 of accrued services fees and $936 of services rendered, which approximated the
fair value of the shares issued during the period services were completed and rendered.




Upon the Merger on March 3, 2009, the Company issued an
aggregate of 88,815,000 shares of the Companys common stock in exchange for 100% of the outstanding common stock of Aria
Incorporated.




In prior year, the Company issued common stock to
consultants in exchange for services to be rendered in fiscal 2009. The value of the common shares issued was approximately $171,000 and was accounted
for as deferred compensation. The Company had amortized $46,667 of the deferred compensation prior to the Merger and an additional $124,333 was
amortized after the completion of the Merger. The deferred compensation is amortized over the period that the services was provided.




During the second quarter of 2009, the Company issued an
aggregate of 750,000 shares of its common stock in connection with a short-term loan agreement with a third party (Note 4). The Company had accounted
for the fair value of the 750,000 shares of common stock issued, or $60,000, as interest expenses during the nine months ended September 30, 2009. In
addition, upon the execution of a Stock Adjustment Agreement the Company entered into with its convertible debenture holders in May 2009 (Note 5), the
Company agreed to issue an aggregate of 471,429 shares of its common stock to the debenture holders, of which 281,961 shares were contributed by three
significant shareholders of the Company, and the remaining 189,468 shares of common stock were new issuances. The fair value of the 471,429 shares of
common stock was $37,714 at that time of issuance, the Company accounted for the conversion of $9,000 debenture and the remaining $28,714 was charged
to operations as loss on settlement of debt during the period ended September 30, 2009.




Subsequent to the Merger, the Company received an aggregate
of $58,000 for approximately 232,000 shares of common stock subscribed. The shares have not been issued as of September 30, 2009, and the Company had
accounted for the proceeds received as stock subscription payable.




NOTE 7  STOCK OPTIONS AND
WARRANTS




Stock Options


|                                  |  |  |  | Number of Shares |         | Weighted Average Price Per Share
|--------------------------------- |  |  |  | ---------------- | ------- | --------------------------------
|Outstanding
at January 1, 2007    |  |  |  |                  |        |                                 
|Granted                           |  |  |  |                  | 19,500  |                                 
|Exercised                         |  |  |  |                  |        |                                 
|Cancelled or
expired              |  |  |  |                  |        |                                 
|Outstanding
at December 31, 2007  |  |  |  |                  | 19,500  |                                 
|Granted                           |  |  |  |                  | 17,500  |                                 
|Exercised                         |  |  |  |                  | (19,500 | )                               
|Cancelled or
expired              |  |  |  |                  | (7,500  | )                               
|Outstanding
at December 31, 2008  |  |  |  |                  | 10,000  |                                 
|Granted                           |  |  |  |                  |        |                                 
|Exercised                         |  |  |  |                  |        |                                 
|Cancelled or
expired              |  |  |  |                  | (10,000 | )                               
|Outstanding
at September 30, 2009 |  |  |  |                  |        |                                 



12


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There was no stock based compensation charged to operations
during the three and nine months ended September 30, 2009. All previously granted stock options have been exercised or expired as of September 30,
2009.




Warrants




In connection with the placement of the convertible
debenture (Note 5), the Company issued warrants granting the holders the right to acquire 514,286 shares of the Companys common stock. In May
2009, the Company entered into a Stock Adjustment Agreement with the debenture holders, pursuant to which the Company agreed to issue an aggregate of
471,429 shares of its common stock to the debenture holders in exchange for settlement of the $9,000 of convertible debentures and 514,286 outstanding
warrants (Note 5). Upon the execution of the Stock Adjustment Agreement, 514,286 warrants of the Company were terminated.




Transactions involving warrants issued to note holders are
summarized as follows:


|                                  |  |  |  | Number of Shares |           | Weighted Average Price Per Share
|--------------------------------- |  |  |  | ---------------- | --------- | --------------------------------
|Outstanding
at January 1, 2007    |  |  |  |                  |          |                                 
|Granted                           |  |  |  |                  |          |                                 
|Exercised                         |  |  |  |                  |          |                                 
|Cancelled or
expired              |  |  |  |                  |          |                                 
|Outstanding
at December 31, 2007  |  |  |  |                  |          |                                 
|Granted                           |  |  |  |                  | 514,286   |                                 
|Exercised                         |  |  |  |                  |          |                                 
|Cancelled or
expired              |  |  |  |                  |          |                                 
|Outstanding
at December 31, 2008  |  |  |  |                  | 514,286   |                                 
|Granted                           |  |  |  |                  | 1,503,328 |                                 
|Exercised                         |  |  |  |                  |          |                                 
|Cancelled or
expired              |  |  |  |                  | (514,286  | )                               
|Outstanding
at September 30, 2009 |  |  |  |                  | 1,503,328 |                                 



The warrants granted in September 2008 were accounted for
as debt discount in accordance with Accounting Standards Codification subtopic 470-10, Debt (ASC 470-10).




On September 9, 2009, the Company issued 1,503,328 warrants
to purchase the Companys common stock at $0.001 per share exercisable within two years from grant. These warrants were issued to six non-affiliate individuals in
connection with its debt financing (Note 4). The fair value of the warrants in the amount of $72,969 was determined using
the Black Scholes Option Pricing Model based on the following assumptions. The value of the warrants was accounted for as a debt discount to the notes. The debt discount was amortized based on the original
maturity date, which is in September 2009, and charged to interest expense during the period ended September 30, 2009.




Significant assumptions: Risk-free interest rate at
grant date        2.31 % Expected stock price
volatility        160.0 % Expected dividend
payout         Expected warrant life (a):        2 years


|(a) |  | The expected warrant life is based on contractual expiration
dates.
|--- |  | -------------------------------------------------------------------



NOTE 8  FAIR VALUE
MEASUREMENT




The Company adopted the provisions of ASC 825-10 on January
1, 2009. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or
permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers
assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of
nonperformance. ASC 825-10 establishes a fair value hierarchy that requires
an entity to




13


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maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three
levels of inputs that may be used to measure fair value:




Level 1  Quoted prices in active markets for
identical assets or liabilities.




Level 2  Observable inputs other than Level 1 prices
such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active
markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable
market data for substantially the full term of the assets or liabilities.




Level 3  Unobservable inputs to the valuation
methodology that are significant to the measurement of fair value of assets or liabilities.




To the extent that valuation is based on models or inputs
that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to
measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value
hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value
measurement.




Upon adoption of ASC 825-10, there was no cumulative effect
adjustment to the beginning retained earnings and no impact on the consolidated financial statements.




The carrying value of the Companys cash and cash
equivalents, accounts payable, short-term borrowings, and other current assets and liabilities approximate fair value because of their short-term
maturity. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the
consolidated financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk
and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only
available information pertinent to fair value has been disclosed.




The Companys long-term debt is the only item that is subject
to SFAS 157 as of September 30, 2009 as follows:




Notes payable to related parties (level 1)     $2,893,652Notes payable (level 1):     $525,000
Award repayable (level 1)     $145,000




NOTE 9  COMMITMENTS AND
CONTINGENCIES




Securities Act Violations




On April 3, 2009, the Company terminated Hogan Taylor LLP
f/k/a Hogan & Slovacek, A Professional Corporation, CPAs (Hogan) as the Companys independent registered public accounting
firm effective immediately. The Company terminated Hogan after it was informed by Hogan that Hogan was not independent with respect to the
Companys financial statements issued during the period January 3, 2006 (date of inception) through September 30, 2008 included in an initial
registration statement.




In the event that any of the exemptions from registration
with respect to the issuance of the Companys common stock under federal and applicable state securities laws were not available, the Company may
be subject to claims by federal and state regulators for any such violations. In addition, if any purchaser of the Companys common stock were to
prevail in a suit resulting from a violation of federal or applicable state securities laws, the Company could be liable to return the amount paid for
such securities with interest thereon, less the amount of any income received thereon, upon tender of such securities, or for damages if the purchaser
no longer owns the securities. As of the date of these financial statements, the Company is not aware of any alleged specific violation or the
likelihood of any claim. There can be no assurance that litigation asserting such claims will not be initiated, or that the Company would prevail in
any such litigation.




The Company is unable to predict the extent of its ultimate
liability with respect to any and all future securities matters. The costs and other effects of any future litigation, government investigations, legal
and administrative cases and proceedings, settlements, judgments and investigations, claims and changes in this matter could have a material adverse
effect on the Companys financial condition and operating results.




The consolidated financial statements of the Company,
reflecting the prior business of Tricord, for the year ended December 31, 2007, have been fully restated by the Company and audited by the
Companys current independent registered public accounting firm. These restated consolidated financial statements are included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2008.




14


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Litigation




The Company is subject to legal proceedings and claims,
which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final
disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity.




The Company is currently a party to two legal proceedings.
The first involves an action filed by Lehmann Group, LLC. The Lehmann Group is seeking to collect a commission, it has alleged to be owed to it,
pursuant to the terms of a contract that Aria Incorporated was awarded by the Royal Thai Army. In this action the Lehman Group alleges that it was a
party to the business development efforts that supported this contract award and seeks three percent (3%) of the total contract value, or $291,000. The
Company believes that this action is without merit and that it has viable defenses to the Lehman Groups claims and intends to vigorously defend
itself against the claims. Management believes that this action will not have a material adverse effect on the Companys consolidated financial
position or results of operations, regardless of its ultimate outcome.




The second action involves an action filed by the Company
against the Companys former accounting firm, Hogan Taylor LLP. As noted above, Hogan Taylor LLP reported that it had performed auditing services
relating to the Companys consolidated financial statements, even though it was not independent. The Company filed this action seeking
compensation in the amount of $5,000,000 for damages relating to Hogan Taylors actions.




Employment Agreement




On March 3, 2009 the Company entered into executive
employment agreements with two of its senior officers, Michael A. Crosby, CEO and Richard A. Smith, COO. The agreements provide for base salaries as
well as milestone equity incentives. The term of each of these agreements is two years, with an automatic renewal of one additional year unless
terminated by either applicable party with written notice.




NOTE 10  RELATED PARTY
TRANSACTIONS




As described in Note 4, significant shareholders of the
Company have advanced funds to the Company for working capital purposes. Aggregate amounts due to these shareholders was $2,450,535 and $660,000 as of
September 30, 2009 and December 31, 2008, respectively. Accrued interest during the nine months ended September 30, 2009 in connection with these loans
was $95,935.




As described in Note 5, in May 2009 the Company entered
into a Stock Adjustment Agreement with its convertible debenture holders, pursuant to which the Company agreed to issue an aggregate of 471,429 shares
of its common stock to the debenture holders in exchange for settlement of the $9,000 of convertible debentures and 514,286 outstanding warrants. Upon
the execution of the Stock Adjustment Agreement, the Company issued an aggregate of 471,429 shares of its common stock to the debenture holders, of
which 281,961 shares were contributed by three significant shareholders of the Company, and the remaining 189,468 shares of common stock were new
issuances (Note 6).




The Company leases from a significant shareholder a 50-foot
Mikelson Persistence slipped at Marina Village B-23, for purposes of providing support for personnel, office and meeting space, as well as
sleeping quarters for employees. The monthly rent is $2,500, effective December 1, 2008 through December 31, 2009. Rental expense charged to operations
in connection with this lease was $7,500 and $22,500, respectively, for the three and nine months ended September 30, 2009.




The Company also uses office space in the residence of the
Companys officer and significant shareholder on a month-to-month basis in Arlington, Virginia. In accordance with Staff Accounting Bulletin Topic
5-T, the Company accounted for the occupancy expenses as a current expenses and a corresponding capital contribution. Rental expenses charged to
operations in connection with this arrangement was $7,500 and $22,500, respectively, for the three and nine months ended September 30, 2009, with a
corresponding capital contribution of $22,500 as of September 30, 2009.




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NOTE 11  SUBSEQUENT EVENTS




Management has performed an evaluation of subsequent events
through November 23, 2009 and reports the following matters:




On October 14, 2009, financial assistance in the amount of
$350,000 was provided by a shareholder. This loan required a ten percent (10%) fee and will be repaid on or before December 14, 2009.




Effective November 1, 2009, Aria International was awarded
a support services contract with Riley Solutions, Inc. to examine advanced lightweight armor applications in the federal sector. This contract is
valued at $240,000 for one year.




On November 4, 2009, the Company secured a loan from Regent
Private Capital LLC in the amount of $2,750,000 to support the acquisition of surveillance equipment that will be provided to the Royal Thai Army. The
loan origination fee associated with this loan is $100,000 and will be repaid within the next twelve months. The assigned interest rate is 12% per
annum.




On November 7, 2009, the Company secured private party
financing in the amount of $2,910,000 to support the acquisition of surveillance equipment for the Royal Thai Army (RTA). The loan origination fee is
$100,000 and there is no interest associated with this loan. This loan will be repaid on or before December 31, 2009, and is secured by the
Companys contract with the RTA.




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS




Forward-Looking Statements




Certain statements contained in this quarterly report
concerning expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements
which are other than statements of historical facts are forward-looking statements within the meaning of the federal securities laws.
Although the Company believes that the expectations and assumptions reflected in these statements are reasonable, there can be no assurance that these
expectations will prove to be correct. These forward-looking statements involve a number of risks and uncertainties, and actual results may differ
materially from the results discussed in the forward-looking statements. Any such forward-looking statements should be considered in light of such
important factors and in conjunction with other documents of the Company on file with the SEC.




New factors that could cause actual results to differ
materially from those described in forward-looking statements emerge from time to time, and it is not possible for the Company to predict all of such
factors, or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any
forward-looking statement. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no
obligations to update the information contained in such statement to reflect subsequent developments or information.




Overview and Organizational History




Aria International Holdings, Inc. (the Company)
was incorporated pursuant to the laws of the State of Nevada on November 21, 2007 under the name TriCord Hurricane Holdings, Inc. On November 30, 2007,
pursuant to the terms of a share exchange agreement, it acquired control of its now wholly-owned subsidiary, TriCord Hurricane Products,
Inc.




TriCord Hurricane Products, Inc. was originally organized
under the laws of the State of Oklahoma on January 3, 2006. On July 1, 2007, it merged with TriCord Hurricane Products, LLC, a Florida limited
liability company. On November 19, 2007, TriCord Hurricane Products LLC filed a Certificate of Conversion with the Secretary of State of Florida
whereby it was converted to a Florida corporation and renamed TriCord Hurricane Products, Inc.




On March 3, 2009, TriCord Hurricane Holdings, Inc. entered
into an Agreement and Plan of Merger (the Merger Agreement) with Aria Acquisition, Inc., a Nevada corporation and wholly-owned subsidiary
of the Company (the Aria Acquisition) and Aria International Incorporated, a Delaware corporation (Aria Incorporated) formed in
July 2008. Pursuant to the Merger Agreement, Aria Acquisition merged into Aria Incorporated, resulting in Aria Incorporateds becoming a wholly
owned subsidiary of TriCord Hurricane Holdings, Inc. (the Merger). On March 9, 2009, TriCord Hurricane Holdings, Inc. changed its name to
Aria International Holdings, Inc.




The acquisition of Aria Incorporated by the Company
(formerly TriCord Hurricane Holdings, Inc.) (TriCord) resulted in a change in




16


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control of the Company and was accounted for as a
reverse merger whereby Aria Incorporated was the accounting acquirer for financial statement purposes. Accordingly, for all periods
subsequent to the reverse merger transaction, the financial statements of the Company reflect the historical financial statements of Aria
Incorporated from its inception (July 2008) and the operations of Aria International Holdings, Inc. (formerly TriCord Hurricane Holdings, Inc.)
subsequent to the March 3, 2009 transaction date.




Following the Merger, the Company has focused on the
development of business of Aria Incorporated, the provision of specialized surveillance and communications solutions. The Company no longer actively
pursues the TriCord Hurricane Products business and will likely divest the TriCord Hurricane Products business once an acquirer is identified and terms
acceptable to the Company are agreed upon.




Aria International Incorporated Business




Aria Incorporated is a wholly-owned subsidiary of the
Company and was formed in Delaware in July 2008. Aria Incorporated is focused on providing specialized surveillance and communications solutions to its
customers. Aria Incorporated operates as a solutions provider, a systems integrator, and as an operator of such surveillance and communications
systems. Working closely with clients in a flexible and responsive fashion, Aria Incorporated has been able to constantly adapt as demanded by the
customers environment to changing requirements and provide effective solutions. The founders of Aria Incorporated previously worked on projects
with the United Stated Marine Corps, the United Arab Emirates Air Force, Kuwait Ministry of Interior, Royal Thai Army, Air Force and Marines and the
Indian Ministry of Interior. In addition, the founders of Aria Incorporated have firsthand experience and explicit operational expertise in
surveillance and communications solutions. Aria Incorporation intends to apply that experience and operational expertise to provide engineering, data
collection and fusion, data-virtualization, and provide support for the tactical response to threats and to specific acts of terrorism against ports,
borders and high-value infrastructure.




Liquidity and Capital Resources




As of September 30, 2009, we had working capital deficit of
$6,897,825. For the nine-month period ended September 30, 2009, we used cash flow in operating activities of $2,818,281 consisting primarily of the net
loss of $5,910,213, net with $869 of depreciation, $5,719 of amortization and write-off of debt discount, $27,864 of recapitalization costs, $22,500 of
operating expenses contributed by subsidiary shareholders, $124,333 of amortization of deferred compensation charged to operations post merger, $28,714
of loss on settlement debt, $60,000 of common stock issued for interest expenses, $72,969 of warrants granted in exchange for interest expense and the changes in the balances of assets and liabilities. Assets
increased $10,503,906, net with an increase in liabilities of $13,252,870.




There was no cash used in investing activities for the nine
months ended September 30, 2009.




We met our cash requirements during the nine months ended
September 30, 2009 through $58,098 of proceeds from subscription of the Companys common stock and $2,767,652 of proceeds (net of repayments) from
related and third party loans.




Exploitation of potential revenue sources will be financed
primarily through the sale of securities and convertible debt, issuance of notes payable and other debt or a combination thereof, depending upon the
transaction size, market conditions and other factors.




While we have raised capital to meet our working capital
and financing needs in the past, additional financing is required in order to meet our current and projected cash flow deficits from operations and
development. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all.




By adjusting our operations and development to the level of
capitalization, we believe we have sufficient capital resources to meet projected cash flow deficits for the next twelve months. However, if during
that period or thereafter, we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on
terms acceptable to us, this could have a material adverse effect on our business, results of operations liquidity and financial
condition.




Our registered independent certified public accountants
have stated in their report that we have incurred significant operating losses and that we are dependent upon managements ability to develop
profitable operations. These factors, among others, may raise substantial doubt about our ability to continue as a going concern. As a result this may
impede our ability to raise additional capital.




Critical Accounting Policies




The discussion and analysis of financial condition and
results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial




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statements requires us
to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. We continuously evaluate, our estimates and judgments, including those related to revenue recognition, sales returns, bad
debts, excess inventory, impairment of goodwill and intangible assets, income taxes, contingencies and litigation. Our estimates are based on
historical experience and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.




We believe the following critical accounting policies,
among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.




Revenue recognition




For revenue from product sales, the Company recognizes
revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (ASC 605-10). ASC 605-10 requires that
four basic criteria must be met before revenue can be recognized: (1) Persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the
selling price is fixed and determinable; and (4) collectibility is reasonably assured. Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for
which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product
has been delivered or no refund will be required. ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element
Arraignments (ASC 605-25). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple
products, services and/or rights to use assets.




In April 2009, the Company entered into a sales contract
with the Royal Thai Army, pursuant to which the Company sells surveillance and communications equipment to the Royal Thai Army. The total contract
amount was $9,700,000, which includes delivery and installation of the equipment, as well as providing training to the buyer. The Company recognizes
revenues from the equipment portion upon shipment and installation, and the service portion upon completion of the training programs. Revenues from
this type of multiple deliverable arrangements are accounted for in accordance with ASC 605-10 incorporates Accounting Standards Codification subtopic
605-25 separate units of accounting based on the relative fair value of the delivered units. As of September 30, 2009, the Company had received
payments from the Royal Thai Army in the amount of $6,790,000 and the payments received were accounted for as deferred revenues. In connection with
this contract, the Company also had incurred costs and expenses in an aggregate amount of $10,018,906. These costs and expenses were capitalized as of
September 30, 2009, and will be charged to costs of sales upon the delivery of the equipment and services. The Company was also required to deposit
with the buyer cash in the amount of $485,000 to guaranty the performance of this contract and warrant against the defects and malfunctions of the
equipment. The buyer shall return the cash to the Company after a period of 365 days from the acceptance of the equipment. The Company had accounted
for the refundable amount of $485,000 as a non-current asset as of September 30, 2009.




Stock-Based Compensation




The Company accounts for its stock based compensation under
ASC 718 Compensation  Stock Compensation which was adopted in 2006, using the fair value based method. Under this method,
compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting
period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or
services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of
the entitys equity instruments or that may be settled by the issuance of those equity instruments.




The Company does not have any employee stock options and
stock purchases plans at September 30, 2009.




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Computation of Net Income (Loss) per
Share




Basic earnings (loss) per common share is computed using
the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is computed using the combination of
dilutive common share equivalents, which include convertible preferred shares, options and warrants and the weighted-average number of common shares
outstanding during the period. During the three and nine months ended September 30, 2009 and for the period from inception (July 10, 2008 through
September 30, 2008), common stock equivalents are not considered in the calculation of the weighted average number of common shares outstanding because
they would be anti-dilutive, thereby decreasing the net loss per common share.




Fair Value of Financial Instruments




Accounting Standards Codification subtopic 825-10,
Financial Instruments (ASC 825-10) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and
cash equivalents, accounts payable and accrued liabilities, and short-term borrowings, as reflected in the condensed consolidated balance sheets,
approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and
equity instruments of the Company are either recognized or disclosed in the condensed consolidated financial statements together with other information
relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial
assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been
disclosed.




Effective January 1, 2008, the Company adopted Accounting
Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (ASC 820-10) and Accounting Standards Codification subtopic
825-10, Financial Instruments (ASC 825-10), which permits entities to choose to measure many financial instruments and certain other items
at fair value. Neither of these statements had an impact on the Companys consolidated financial position, results of operations or cash
flows.




New Accounting Pronouncements




With the exception of those stated below, there have been
no recent accounting pronouncements or changes in accounting pronouncements during the nine months ended September 30, 2009, as compared to the recent
accounting pronouncements described in the Annual Report that are of material significance, or have potential material significance, to the
Company.




In May 2009, the FASB issued SFAS No. 165, Subsequent
Events, which is included in ASC Topic 855, Subsequent Events. ASC Topic 855 established principles and requirements for evaluating and reporting
subsequent events and distinguishes which subsequent events should be recognized in the financial statements versus which subsequent events should be
disclosed in the financial statements. ASC Topic 855 also required disclosure of the date through which subsequent events are evaluated by management.
ASC Topic 855 was effective for interim periods ending after June 15, 2009 and applies prospectively. Because ASC Topic 855 impacted the disclosure
requirements, and not the accounting treatment for subsequent events, the adoption of ASC Topic 855 did not impact the Companys results of
operations or financial condition. See Note 11 for disclosures regarding our subsequent events.




Effective July 1, 2009, the Company adopted the Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 105-10, Generally Accepted Accounting
PrinciplesOverall (ASC 105-10). ASC 105-10 establishes the FASB Accounting Standards Codification (the Codification) as
the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial
statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of
authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification
superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the
Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force
Abstracts. Instead, it will issue Accounting Standards Updates (ASUs). The FASB will not consider ASUs as authoritative in their own right.
ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the
change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.




In August 2009, the FASB issued ASU No. 2009-05, Measuring
Liabilities at Fair Value, which provides additional guidance on how companies should measure liabilities at fair value under ASC 820. The ASU
clarifies that the quoted price for an identical liability should be used. However, if such information is not available, an entity may use, the quoted
price of an identical liability when traded as an asset, quoted prices for similar




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liabilities or
similar liabilities traded as assets, or another valuation technique (such as the market or income approach). The ASU also indicates that the fair
value of a liability is not adjusted to reflect the impact of contractual restrictions that prevent its transfer and indicates circumstances in which
quoted prices for an identical liability or quoted price for an identical liability traded as an asset may be considered level 1 fair value
measurements. This ASU is effective October 1, 2009. The Company is currently evaluating the impact of this standard, but would not expect it to have a
material impact on the Companys consolidated results of operations or financial condition.




In September 2009, the FASB issued ASU No. 2009-12,
Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), that amends ASC 820 to provide guidance on measuring the
fair value of certain alternative investments such as hedge funds, private equity funds and venture capital funds. The ASU indicates that, under
certain circumstance, the fair value of such investments may be determined using net asset value (NAV) as a practical expedient, unless it is probable
the investment will be sold at something other than NAV. In those situations, the practical expedient cannot be used and disclosure of the remaining
actions necessary to complete the sale is required. The ASU also requires additional disclosures of the attributes of all investments within the scope
of the new guidance, regardless of whether an entity used the practical expedient to measure the fair value of any of its investments. This ASU is
effective October 1, 2009. The Company is currently evaluating the impact of this standard, but would not expect it to have a material impact on the
Companys consolidated results of operations or financial condition.




In October 2009, the FASB issued ASU No. 2009-13,
Multiple-Deliverable Revenue Arrangements-a consensus of the FASB Emerging Issues Task Force that provides amendments to the criteria for separating
consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in
more circumstances than under existing U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling price of a
deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if
vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence
is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the
price to sell the deliverable on a standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement
consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any
discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and
quantitative information regarding application of the multiple-deliverable revenue arrangement guidance are also required under the ASU. The ASU does
not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software
transactions. ASU No. 2009-13 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its
consolidated results of operations and financial condition.




In October 2009, the FASB issued ASU No. 2009-14, Certain
Revenue Arrangements That Include Software Elements-a consensus of the FASB Emerging Issues Task Force that reduces the types of transactions that fall
within the current scope of software revenue recognition guidance. Existing software revenue recognition guidance requires that its provisions be
applied to an entire arrangement when the sale of any products or services containing or utilizing software when the software is considered more than
incidental to the product or service. As a result of the amendments included in ASU No. 2009-14, many tangible products and services that rely on
software will be accounted for under the multiple-element arrangements revenue recognition guidance rather than under the software revenue recognition
guidance. Under the ASU, the following components would be excluded from the scope of software revenue recognition guidance: the tangible element of
the product, software products bundled with tangible products where the software components and non-software components function together to deliver
the products essential functionality, and undelivered components that relate to software that is essential to the tangible products
functionality. The ASU also provides guidance on how to allocate transaction consideration when an arrangement contains both deliverables within the
scope of software revenue guidance (software deliverables) and deliverables not within the scope of that guidance (non-software deliverables). ASU No.
2009-14 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its consolidated results of
operations and financial condition.




Results of Operations




The Company completed a reverse merger and recapitalization agreement in March 2009. The
accounting acquirer and successor entity, Aria International Incorporated, was formed in July 2008. Accordingly comparative operating results presented are for the period from
inception (July 2008) through September 30, 2008.




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Revenues




The Company generated no revenues
during the three and nine months ended September 30, 2009, as compared to minimal revenues of $36,000 for the period from inception (July 2008) through
September 30, 2008. In April 2009, the Company entered into a contract with the Royal Thai Army, pursuant to which the Company sells surveillance and
communications equipment to the Royal Thai Army. The total contract amount was $9,700,000, which includes delivery and installation of the equipment,
as well as providing training to the buyer. The Company recognizes revenues from the equipment portion upon shipment and installation, and the service
portion upon completion of the training programs. Revenues from this type of multiple deliverable arrangements are accounted for in accordance with
EITF 00-21 separate units of accounting based on the relative fair value of the delivered units. As of September 30, 2009, the Company had received
payments from the Royal Thai Army in the amount of $6,790,000 and the payments received were accounted for as deferred revenues. The equipment is
scheduled to be delivered, installed, and accepted by the buyer in December 2009, at that time that the revenues related to the equipment portion will
be recognized.




Costs of Sales




The Company recorded no costs of
sales during the three and nine months ended September 30, 2009. In connection with the sales contract with the Royal Thai Army, the Company had
incurred costs and expenses in an aggregate amount of $10,018,906. These costs and expenses were capitalized as of September 30, 2009, and will be
charged to costs of sales upon the delivery of the equipment and services. The cost of sale for sales of equipment for period from inception (July
2008) through September 30, 2008 was approximately $34,000.




Operating Expenses




Operating expenses for the three
and nine months ended September 30, 2009 were $2,306,105 and $5,265,699, respectively. The operating expenses for the three months ended September 30,
2009 consist primarily of $437,973 in personnel costs, $322,958 in professional fees, and $278,357 for promotional, travel and entertainment. The
operating expenses for the nine months ended September 30, 2009 consist primarily of $1,380,580 in personnel costs, $1,716,074 in professional fees,
and $629,631 for promotional, travel and entertainment. Operating expenses for the period from inception (July 2008) through September 2008 were
$31,099, consisting of primarily general administrative expenses.




Other Expenses




Interest expense was $365,572 and
$615,800, respectively, for the three and nine months ended September 30, 2009. This includes mainly accrued interest for the OCAST award and notes
payable to related parties, as well as $100,000 cash and issuance of 750,000 shares of the Companys common stock, valued at $60,000, to a third
party in connection with a short-term loan the Company entered into in April 2009. The Company also accounted for and charged to interest expense the amount of $72,969
for warrants issued in connection with its debt financing in September 2009. The Company had no other income or expenses for the period from
inception (July 2008) through September 30, 2008.




Inflation




In the opinion of management,
inflation will not have an impact on our financial condition and results of operations.




Off-Balance Sheet Arrangements




The Company does not have any off
balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of
operations, liquidity or capital expenditures.




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.




Not Applicable.




ITEM 4T. CONTROLS AND
PROCEDURES.




Evaluation of Disclosure Controls and
Procedures




We maintain disclosure controls and procedures that are
designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as
amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SECs rules and forms and to
ensure that such information is accumulated and communicated to our management, including our principal executive officer and principal financial
officer as appropriate, to allow timely decisions regarding required disclosure. During the quarter ended September 30, 2009 we carried out an
evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial
officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act.
 Based on this evaluation, because of the Companys limited resources and limited number of employees, management concluded that our disclosure controls
 and procedures were ineffective as of September 30, 2009.




Limitations on Effectiveness of Controls and
Procedures




Our management, including our principal executive officer
and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all
fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls
must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are
not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the
control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no
assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and not be detected.




Changes in Internal Control over Financial
Reporting.




During the most recent quarter ended September 30, 2009,
there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) ) that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.




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PART II: OTHER INFORMATION




ITEM 1.    LEGAL
PROCEEDINGS.




The Company is a party to two legal proceedings which first
became reportable during the quarterly period ended September 30, 2009.




The first involves an action filed by Lehmann Group, LLC.
The Lehmann Group is seeking to collect a commission, it has alleged to be owed to it, pursuant to the terms of a contract that Aria Incorporated was
awarded by the Royal Thai Army. In this action the Lehman Group alleges that it was a party to the business development efforts that supported this
contract award and seeks three percent (3%) of the total contract value, or $291,000. The Company believes that this action is without merit and that
it has viable defenses to the Lehman Groups claims and intends to vigorously defend itself against the claims. Management believes that this
action will not have a material adverse effect on the Companys consolidated financial position or results of operations, regardless of its
ultimate outcome.




The second action involves an action filed by the Company
against the Companys former accounting firm, Hogan Taylor LLP. Hogan Taylor LLP reported that it had performed auditing services relating to the
Companys consolidated financial statements for the period from January 3, 2006 (date of inception) through September 30, 2008, even though it was
not independent. The Company filed this action seeking compensation in the amount of $5,000,000 for damages relating to Hogan Taylors
actions.




ITEM 1A.    RISK
FACTORS.




Not applicable.




ITEM 2.    UNREGISTERED SALES OF
EQUITY SECURITIES AND USE OF PROCEEDS.




On September 8, 2009, the Company granted common stock
purchase warrants to purchase an aggregate of 1,503,328 shares of common stock at an exercise price of $0.001 per share, in connection with debt
financing obtained during the quarter ended September 30, 2009. These warrants were granted to six non-affiliated individuals. The issuance of these common stock purchase warrants
was made in reliance on the exemptions provided pursuant to Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as
amended.




ITEM 3.    DEFAULTS UPON SENIOR
SECURITIES.




None.




ITEM 4.    SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS.




None.




ITEM 5.    OTHER
INFORMATION.




Please see Item 2 above for information of unregistered
sales of equity securities during the quarter ended September 30, 2009. In addition, the following material events occurred during such quarterly
period that were not previously reported in a Current Report on Form 8-K:




Entry into Material Definitive Agreement; Unregistered
Sale of Equity Securities




On September 9, 2009, the Company
entered into a Note and Warrant Purchase Agreement (the Purchase Agreement) with six non-affiliated individuals, all of whom are
signatories to the Purchase Agreement, a copy of which is filed as an exhibit to this report. Under the terms of the Purchase Agreement, the Company
agreed to issue promissory notes to each of these individuals, in the form of the Promissory Note which also is filed as an exhibit to this report, in
an aggregate amount of $525,000. These promissory notes, each of which initially had a maturity date of September 15, 2009, have been subsequently
extended through and until December 31, 2009. Interest on these promissory notes accrues monthly on an agreed-upon basis with the noteholders at a rate
of approximately 15%. Information relating to the common stock purchase warrants issued by the Company in connection with this debt financing
is set forth in Item 2 above.




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Regent Private Capital, LLC (Regent Capital), a
principal shareholder of the Company, and Michael Crosby, the Chief Executive Officer of the Company, each entered into a Subordination Agreement with the lenders, dated September 8, 2009, pursuant to which
each of them subordinated its right to the repayment of all outstanding indebtedness owed to it by the Company, to the lenders right to repayment of
the debt financing provided by the Company under the terms of the Purchase Agreement. This subordination also includes a subordination of Regent
Capitals and Mr. Crosbys security interests in all assets and property of the Company. A copy of the Subordination Agreements are filed as exhibits to this
report. Additionally, each of the Companys subsidiaries have guaranteed the repayment of the debt financing pursuant to the terms of a Subsidiary
Guaranty, dated as of September 9, 2009, a copy of which also is filed as an exhibit to this report.




Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.




The Board of Directors appointed Lawrence Field as a
director on August 3, 2009. Since January 1989, Mr. Field has worked for Regent Private Capital, LLC, a Tulsa, Oklahoma based private investment
company, as a Partner between January 1989 and June 2004 and as Managing Director since June 2004. Regent Private Capital, as a result of its ownership
of the Companys securities, is deemed to be an affiliate of the Company. Mr. Field also serves on the board of directors of WellQuest Medical
& Wellness Corporation and 3Dicon Corporation. Mr. Field received his Bachelor of Science degree from the University of Texas at Austin in
1982.




In addition to the events described above that occurred
during the quarter ended September 30, 2009, the Company, at its option, provides the following information concerning an other event
occurring subsequent to the quarter ended September 30, 2009:




Stephen R. Soden, a partner in the law firm of Soden &
Steinberger, LLP, resigned as the Companys general counsel and Secretary, effective as of November 2, 2009.




ITEM
6.    EXHIBITS.







|Exhibit Number |  |  |  | Description of Exhibits                                                                                                                       
|-------------- |  |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|4.3            |  |  |  | Form
of Promissory Note                                                                                                                       
|               |  |  |  |                                                                                                                                               
|4.4            |  |  |  | Form
of Common Stock Purchase Warrant                                                                                                         
|               |  |  |  |                                                                                                                                               
|10.4           |  |  |  | First Amended Note
and Warrant Purchase Agreement dated as of September 9, 2009                                                               
|               |  |  |  |                                                                                                                                               
|10.5           |  |  |  | Subordination Agreement dated September 8, 2009 by Regent Private Capital, LLC                                                                
|               |  |  |  |                                                                                                                                               
|10.6           |  |  |  | Subordination Agreement dated September 8, 2009 by Michael A. Crosby                                                                          
|               |  |  |  |                                                                                                                                               
|10.7           |  |  |  | Subsidiary Guaranty dated as of September 9, 2009                                                                                             
|               |  |  |  |                                                                                                                                               
|31.1           |  |  |  | Certification of Principal Executive Officer required by Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002    
|               |  |  |  |                                                                                                                                               
|31.2           |  |  |  | Certification of Principal Financial Officer required by Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002    
|               |  |  |  |                                                                                                                                               
|32.1           |  |  |  | Certification of Principal Executive Officer pursuant to 18 U.S.C.§ 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|               |  |  |  |                                                                                                                                               
|32.2           |  |  |  | Certification of Principal Financial Officer pursuant to 18 U.S.C.§ 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002



24


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SIGNATURES




Pursuant to the requirements 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.







|                  |  |  |  | ARIA
INTERNATIONAL HOLDINGS, INC.            
|----------------- |  |  |  | ---------------------------------------------
|                  |  |  |  | /s/ Michael A. Crosby                        
|November 23,
2009 |  |  |  | Michael A.
Crosby Principal Executive Officer



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