UNITED STATESSECURITIES
AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q(Mark One)

[ X ]Quarterly Report Pursuant To Section 13 Or 15(d) Of
The Securities Exchange Act Of 1934

For the quarterly period ended August 31, 2009

[   ] Transition Report Under Section 13 Or 15(d) Of
The Securities Exchange Act Of 1934 For the transition period ________ to
________

COMMISSION FILE NUMBER000-51376

RANCHO SANTA MONICA DEVELOPMENTS INC.(Exact name of small business issuer as specified in its
charter)

|NEVADA                                                               | 83-0414306                       
|-------------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (IRS Employer Identification No.)

802-610 Granville Street Vancouver, BC, Canada
V6C-3T3(Address of principal executive offices)

(604) 689-5661Issuer's telephone number

Not Applicable(Former name, former address and
former fiscal year, if changed since last report)

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

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

|Large accelerated filer o | Accelerated filer o | Non-accelerated filer o    | Smaller reporting company x
|------------------------- | ------------------- | -------------------------- | ---------------------------
|                          |                     | (Do not check if a smaller |                            
|                          |                     | reporting company)         |                            

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 30, 2009, the registrant had 8,918,426 shares of
Common Stock outstanding.

---

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

Certain statements contained in this Form 10-Q constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934 (the
Exchange Act). These statements, identified by words such as plan, "anticipate," "believe," "estimate," "should," "expect" and similar expressions, include our expectations and objectives regarding our future financial
position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause our actual results, performance or
achievements, or industry results, to be materially different from those described in the forward-looking statements. Such risks and uncertainties include those set forth under the caption "Management's Discussion and Analysis or Plan of Operation"
and elsewhere in this Form 10-Q. We do not intend to update the forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information. We advise you to carefully review the reports and documents
we file from time to time with the Securities and Exchange Commission (SEC), particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K. As used in this interim report, the terms "we", "us", "our", and our
company mean Rancho Santa Monica Developments, Inc., unless otherwise indicated. All dollar amounts in this Quarterly Report are in U.S. dollars unless otherwise stated.

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|RANCHO SANTA MONICA DEVELOPMENTS,
      INC.                                                                                                      |  
|------------------------------------------------------------------------------------------------------------------------------------------------- | -
|Consolidated Balance Sheets                                                                                                                       |  
|(Unaudited)                                                                                                                                       |  
|                                                                                                                                                  |  
|ASSETS                                                                                                                                            |  
|                                                                                                                                                  |  
|                                                                                                                                                  |  
|                                                                                                                                                  |  
|                                                                                                                                                  |  
|                                                                                                                                                  |  
|CURRENT ASSETS                                                                                                                                    |  
|Cash                                                                                                                                              | $
|Accounts receivable, net                                                                                                                          |  
|Total Current Assets                                                                                                                              |  
|                                                                                                                                                  |  
|PROPERTY AND EQUIPMENT, NET                                                                                                                       |  
|                                                                                                                                                  |  
|TOTAL ASSETS                                                                                                                                      | $
|                                                                                                                                                  |  
|LIABILITIES AND
      STOCKHOLDERS' EQUITY (DEFICIT)                                                                                              |  
|                                                                                                                                                  |  
|CURRENT LIABILITIES                                                                                                                               |  
|Accounts payable and accrued liabilities                                                                                                          | $
|Due to related parties                                                                                                                            |  
|Convertible debt, net                                                                                                                             |  
|Notes payable                                                                                                                                     |  
|Total Current Liabilities                                                                                                                         |  
|Commitments and contingencies                                                                                                                     |  
|                                                                                                                                                  |  
|STOCKHOLDERS' EQUITY (DEFICIT)                                                                                                                    |  
|Preferred stock; 100,000,000 shares
      authorized at $0.0001 par value, no shares issued or outstanding                                        |  
|Common stock; 100,000,000 shares authorized
      at $0.0001 par value, 8,918,426 and 7,846,999 shares issued and
      outstanding, respectively |  
|Additional paid-in capital                                                                                                                        |  
|Accumulated deficit                                                                                                                               |  
|Total Stockholders' Equity (Deficit)                                                                                                              |  
|                                                                                                                                                  |  
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
      (DEFICIT)                                                                                        | $

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

---



|RANCHO SANTA MONICA DEVELOPMENTS,
      INC.   
    Consolidated Statements of
      Operations   
     (Unaudited)
|-------------------------------------------------------------------------------------------------------------------
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|REVENUES                                                                                                           
|Hotel revenue, net                                                                                                 
|Hosting revenue, net                                                                                               
|Total Revenue                                                                                                      
|OPERATING EXPENSES                                                                                                 
|General and administrative                                                                                         
|Web hosting fees                                                                                                   
|Impairment loss                                                                                                    
|Depreciation expense                                                                                               
|Total Operating Expenses                                                                                           
|LOSS FROM OPERATIONS                                                                                               
|OTHER EXPENSE                                                                                                      
|Interest expense                                                                                                   
|Foreign currency loss                                                                                              
|Total Other Expense                                                                                                
|LOSS BEFORE INCOME TAXES                                                                                           
|PROVISION FOR INCOME TAXES                                                                                         
|NET LOSS                                                                                                           
|LOSS PER SHARE - BASIC AND DILUTED                                                                                 
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES
      OUTSTANDING - BASIC AND DILUTED                                     

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

---



|RANCHO SANTA MONICA
      DEVELOPMENTS, INC.   
     Consolidated Statements of
      Stockholders' Equity (Deficit)   
     (Unaudited)
|----------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                        
|                                                                                                                                        
|                                                                                                                                        
|                                                                                                                                        
|Balance, November 30, 2008
      (Restated)                                                                                             
|Stock issued to purchase subsidiary                                                                                                     
|Shares issued for cash                                                                                                                  
|Net loss                                                                                                                                
|Balance, August 31, 2009                                                                                                                
|                                                                                                                                        
|The accompanying
      notes are an integral part of these unaudited consolidated financial
      statements.                           
|                                                                                                                                        

---

RANCHO SANTA MONICA DEVELOPMENTS, INC.Consolidated
Statements of Cash Flows (Unaudited)

|                                                                                  |   | For the Nine Months Ended |  
|--------------------------------------------------------------------------------- | - | ------------------------- | -
|                                                                                  |   | August 31,                |  
|                                                                                  |   | 2009                      |  
|                                                                                  |   |                           |  
|                                                                                  |   |                           |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |   |                           |  
|                                                                                  |   |                           |  
|Net loss                                                                          | $ | (614,873                  | )
|Adjustments to reconcile net loss to net cash used by operating
      activities: |   |                           |  
|Impairment loss                                                                   |   | 477,847                   |  
|Depreciation and amortization                                                     |   | 5,770                     |  
|Amortization of embedded conversion feature                                       |   | 49,375                    |  
|Changes in operating
      assets and liabilities:                                |   |                           |  
|Accounts receivable                                                               |   | (16,545                   | )
|Accounts payable and accrued expenses                                             |   | 16,125                    |  
|                                                                                  |   |                           |  
|Cash Used In Operating
      Activities                                           |   | (82,301                   | )
|                                                                                  |   |                           |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |   |                           |  
|                                                                                  |   |                           |  
|Cash received from
      acquisition of subsidiary                                |   | 22,153                    |  
|Purchase of property and
      equipment                                          |   | (26,702                   | )
|                                                                                  |   |                           |  
|Cash Used In Investing
      Activities                                           |   | (4,549                    | )
|                                                                                  |   |                           |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |   |                           |  
|                                                                                  |   |                           |  
|Advances from related parties                                                     |   | 83,327                    |  
|Payments to related parties                                                       |   | -                         |  
|Proceeds from notes payable                                                       |   | -                         |  
|Proceeds from the sale of common stock                                            |   | 25,000                    |  
|                                                                                  |   |                           |  
|Cash Provided by Financing
      Activities                                       |   | 108,327                   |  
|                                                                                  |   |                           |  
|NET CHANGE IN CASH                                                                |   | 21,477                    |  
|CASH AT BEGINNING OF PERIOD                                                       |   | 4,217                     |  
|                                                                                  |   |                           |  
|CASH AT END OF PERIOD                                                             | $ | 25,694                    |  
|                                                                                  |   |                           |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION CASH PAID
      FOR:            |   |                           |  
|Interest                                                                          | $ | 3                         |  
|Income taxes                                                                      | $ | -                         |  

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

---

RANCHO SANTA MONICA DEVELOPMENTS, INC. Notes to the
Consolidated Financial Statements (Unaudited)

NOTE 1  SIGNFICANT ACCOUNTING POLICIES

The accompanying unaudited interim consolidated financial
statements of Rancho Santa Monica Developments, Inc. (the Company) have been
prepared in accordance with accounting principles generally accepted in the
United States of America and the rules of the Securities and Exchange Commission
and should be read in conjunction with the audited consolidated financial
statements and notes thereto contained in the Company's latest Annual Report
filed with the SEC on Form 10-K for the year ended November 30, 2008, as
restated herein (see Note 8). In the opinion of management, all adjustments,
consisting of normal recurring adjustments and restatement adjustments (see Note
8), necessary for a fair presentation of financial position and the results of
operations for the interim periods presented have been reflected herein. The
results of operations for interim periods are not necessarily indicative of the
results to be expected for the full year. Notes to the unaudited interim
consolidated financial statements that would substantially duplicate the
disclosures contained in the audited financial statements for the most recent
fiscal year as reported in the Form 10-K have been omitted.

Principles of Consolidation

The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary, AptHost Communications USA Ltd
(Apthost). All significant intercompany transactions and balances have been
eliminated in consolidation.

Certain reclassifications have been made to amounts in prior
periods to conform to the current period presentation. All reclassifications
have been applied consistently to the periods presented.

Use of Estimates

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

Accounts Receivable

Accounts receivable consist primarily of trade receivables, net
of a valuation allowance for doubtful accounts totaling $0 at August 31, 2009.
The Company regularly reviews outstanding receivables and provides for estimated
losses through an allowance for doubtful accounts. In evaluating the level of
established reserves, the Company makes judgments regarding its customers'
ability to make required payments, economic events and other factors. When the
Company determines that a customer may not be able to make required payments,
the Company increases the allowance through a charge to income in the period in
which that determination is made.

Foreign exchange and currency translation

For the periods presented, the Company maintained cash accounts
in Canadian and U.S. dollars, and incurred certain expenses denominated in
Canadian dollars. The Company's functional and reporting currency is the U.S.
dollar. Transactions denominated in foreign currencies are translated into U.S.
dollars at exchange rates in effect on the date of the transactions. Assets and
liabilities are translated using exchange rates at the end of each period.
Exchange gains or losses on transactions are included in earnings.

---

RANCHO SANTA MONICA DEVELOPMENTS, INC. Notes to the
Consolidated Financial Statements (Unaudited)

Impairment of Goodwill and Indefinite-Lived Intangible
Assets

The Company periodically reviews the carrying value of
intangible assets not subject to amortization, including goodwill, to determine
whether impairment may exist. Goodwill and certain intangible assets are
assessed annually for impairment using fair value measurement techniques.
Specifically, goodwill impairment is determined using a two-step process. The
first step of the goodwill impairment test is used to identify potential
impairment by comparing the fair value of a reporting unit with its carrying
amount, including goodwill. The estimates of fair value of a reporting unit,
generally the Companys operating segments, are determined using various
valuation techniques with the primary technique being a discounted cash flow
analysis. A discounted cash flow analysis requires one to make various
judgmental assumptions including assumptions about future cash flows, growth
rates, and discount rates. The assumptions about future cash flows and growth
rates are based on the Companys budget and long-term plans. Discount rate
assumptions are based on an assessment of the risk inherent in the respective
reporting units. If the fair value of a reporting unit exceeds its carrying
amount, goodwill of the reporting unit is considered not impaired and the second
step of the impairment test is unnecessary. If the carrying amount of a
reporting unit exceeds its fair value, the second step of the goodwill
impairment test is performed to measure the amount of impairment loss, if any.
The second step of the goodwill impairment test compares the implied fair value
of the reporting units goodwill with the carrying amount of that goodwill. If
the carrying amount of the reporting units goodwill exceeds the implied fair
value of that goodwill, an impairment loss is recognized in an amount equal to
that excess. The implied fair value of goodwill is determined in the same manner
as the amount of goodwill recognized in a business combination. That is, the
fair value of the reporting unit is allocated to all of the assets and
liabilities of that unit (including any unrecognized intangible assets) as if
the reporting unit had been acquired in a business combination and the fair
value of the reporting unit was the purchase price paid to acquire the reporting
unit.

The impairment test for other intangible assets not subject to
amortization consists of a comparison of the fair value of the intangible asset
with its carrying value. If the carrying value of the intangible asset exceeds
its fair value, an impairment loss is recognized in an amount equal to that
excess. The estimates of fair value of intangible assets not subject to
amortization are determined using various discounted cash flow valuation
methodologies. Significant assumptions are inherent in this process, including
estimates of discount rates. Discount rate assumptions are based on an
assessment of the risk inherent in the respective intangible assets.

Recent Accounting Pronouncements

In May 2009, the FASB issued FAS 165 (ASC 855-10), Subsequent
Events. This pronouncement establishes standards for accounting for and
disclosing subsequent events (events which occur after the balance sheet date
but before financial statements are issued or are available to be issued). FAS
165 (ASC 855-10) requires an entity to disclose the date subsequent events were
evaluated and whether that evaluation took place on the date financial
statements were issued or were available to be issued. It is effective for
interim and annual periods ending after June 15, 2009. The adoption of FAS 165
(ASC 855-10) did not have a material impact on the Companys financial condition
or results of operation.

In June 2009, the FASB issued SFAS No. 168 (ASC 105-10), The
FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles (SFAS 168 or ASC 105-10). SFAS 168 (ASC 105-10)
establishes the Codification as the sole source of authoritative accounting
principles recognized by the FASB to be applied by all nongovernmental entities
in the preparation of financial statements in conformity with GAAP. SFAS 168
(ASC 105-10) was prospectively effective for financial statements issued for
fiscal years ending on or after September 15, 2009, and interim periods within
those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did
not impact the Companys results of operations or financial condition. The
Codification did not change GAAP; however, it did change the way GAAP is organized and
presented. As a result, these changes impact how companies reference GAAP in
their financial statements and in their significant accounting policies. The
Company implemented the Codification in this Report by providing references to
the Codification topics alongside references to the corresponding standards.

---

RANCHO SANTA MONICA DEVELOPMENTS, INC.Notes to the
Consolidated Financial Statements(Unaudited)

In addition to the pronouncement noted above, there were
various other accounting standards and interpretations issued recently, none of
which are expected to a have a material impact on our consolidated financial
position, operations or cash flows. NOTE 2  GOING CONCERN

The accompanying unaudited consolidated financial statements
have been prepared in conformity with accounting principles generally accepted
in the United States of America, which contemplates continuation of the Company
as a going concern. The Company currently has a working capital deficit of
$342,720, a stockholders deficit of $25,374 and an accumulated deficit of
$923,079 as of August 31, 2009. In addition, the Company has generated net
losses of $614,873 during the nine months ending August 31, 2009. These
conditions raise substantial doubt as to the Companys ability to continue as a
going concern.

In order to continue as a going concern, the Company intends to
continue to develop its specialized web hosting technology. Until profitability
is reached, the Company will need, among other things, additional capital
resources. Managements plan is to obtain such resources for the Company by
obtaining capital from management and significant shareholders sufficient to
meet its minimum operating expenses and seeking equity and/or debt financing.
However, management cannot provide any assurances that the Company will be
successful in accomplishing any of its plans.

The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
possible inability of the Company to continue as a going concern.NOTE
3  SIGNIFICANT EVENTS

In December 2008, the Company acquired AptHost Communications
USA Ltd (Apthost), by acquiring all of the outstanding capital stock of
Apthost, valued at $250,000, by issuing 500,000 common shares (the shares had a
quoted market price of $0.50 per share on the date of acquisition). In May 2009,
the Company issued additional consideration for the purchase of Apthost whereby
the Company issued 500,000 shares of common stock, valued at $250,000 to the
former shareholders of AptHost. The total consideration of the 1,000,000 shares
of the Companys common stock issued for the purchase of Apthost was valued at
$500,000. In addition to the 1,000,000 shares that were issued to the former
shareholders of Apthost, the former shareholders of Apthost also signed
non-compete agreements with the Company. The 1,000,000 shares issued as
consideration are subject to a two year lock-up period.

The acquisition was accounted for in accordance with the
provisions of Statement of Financial Standards No. 141 (ASC 805), Business
Combinations. The total purchase price, net of cash received of $22,153 was
preliminarily allocated to goodwill based on the estimated fair values. No other
tangible or intangible assets were recorded. The preliminary allocation of the
purchase price was based upon valuation data as of December 1, 2008. During
August 2009, the Company determined that the goodwill and any intangible assets
acquired in the Apthost transaction were impaired and recorded an impairment
loss of $477,847.

---

RANCHO SANTA MONICA DEVELOPMENTS, INC. Notes to the
Consolidated Financial Statements (Unaudited)

Apthosts results of operations have been included in the
consolidated financial statements since the date of acquisition.

Due to the sale of Apthost on December 4, 2009 (see footnote 7)
the Company is unable to provide proforma information for prior periods.

NOTE 4  RELATED PARTY TRANSACTIONS

During the nine months ended August 31, 2009, non-interest
bearing due on demand advances were made to the Company by officers totaling
$83,327. These advances were made to assist in funding operations. As of August
31, 2009 and November 30, 2008, total advances were $187,084 and $103,757,
respectively.

NOTE 5  DEBT

As of November 30, 2008, the Company had notes payable of
$50,000 and convertible notes payable of $112,500 (a beneficial conversion
feature totaling $112,500 was recognized at inception of the convertible debt
that has been fully amortized as interest expense as of August 31, 2009). During
the nine months ended August 31, 2009, no payments were made on these notes. All
of the notes and convertible notes are currently past due and in default. All
loans are collateralized by the assets of the company.

NOTE 6  EQUITY

The Company is authorized to issue up to 100,000,000 shares of
Preferred Stock, $0.0001 par value per share.

The Company is authorized to issue up to 100,000,000 shares of
Common Stock, $0.0001 par value per share, of which no shares are currently
reserved for future contractual issuances.

On December 1, 2008, the Company issued 1,000,000 shares of
restricted common stock for all the outstanding shares of Apthost, valued at
$500,000.

On August 5, 2009, the Company issued 71,427 shares of
restricted common stock for net proceeds of $25,000.

NOTE 6  SEGMENT INFORMATIONWe have two
reporting segments:



Rancho Santa Monica Development - separately owns and operates
property (the Solidaridad Property) in Tulum, Mexico. The hotel has been open
since February 7, 2007. Rancho also manages the adjoining 11 hotel suites and
receives income from the supply of management services.



AptHost Communications USA Ltd - a wholly-owned subsidiary
that provides domain registration and web hosting services worldwide.

The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. The Company
evaluates the financial performance of its segments based on profit or loss from
operations before income taxes, not including nonrecurring gains and losses and
foreign exchange gains and losses. The Company's reportable segments are strategic business units that
are in different industries and require different marketing strategies.

---

RANCHO SANTA MONICA DEVELOPMENTS, INC. Notes to the
Consolidated Financial Statements (Unaudited)

Consolidated revenues from external customers, operating income
(loss), identifiable assets, depreciation, amortization and impairment expense,
and capital expenditures were as follows:

|                                                      |   | For
      the Three Months Ended |   |   | For
      the Nine Months Ended |  
|----------------------------------------------------- | - | -------------------------------- | - | - | ------------------------------- | -
|                                                      |   | August 31,                       |   |   | August 31,                      |  
|                                                      |   | 2009                             |   |   | 2008                            |  
|REVENUES:                                             |   |                                  |   |   |                                 |  
|Rancho Santa Monica
      Development                 | $ | 13,887                           |   | $ | 11,992                          |  
|AptHost Communications USA Ltd                        |   | 132,376                          |   |   | -                               |  
|Total Revenue                                         | $ | 146,263                          |   | $ | 11,992                          |  
|INCOME (LOSS)
      FROM                              |   |                                  |   |   |                                 |  
|OPERATIONS:                                           |   |                                  |   |   |                                 |  
|Rancho Santa Monica Development                       | $ | 2,051                            |   | $ | (24,668                         | )
|AptHost
      Communications USA Ltd                  |   | (522,138                         | ) |   | -                               |  
|Total Loss from Operations                            |   | (520,087                         | ) |   | (24,668                         | )
|OTHER EXPENSE                                         |   | (9,049                           | ) |   | (1,500                          | )
|NET LOSS                                              | $ | (529,136                         | ) | $ | (26,168                         | )
|                                                      |   |                                  |   |   |                                 |  
|                                                      |   |                                  |   |   |                                 |  
|                                                      |   |                                  |   |   |                                 |  
|                                                      |   |                                  |   |   |                                 |  
|INDENTIFIABLE
      ASSETS:                           |   |                                  |   |   |                                 |  
|Rancho Santa Monica
      Development                 |   |                                  |   |   |                                 |  
|AptHost Communications USA Ltd                        |   |                                  |   |   |                                 |  
|Total Identifiable Assets                             |   |                                  |   |   |                                 |  
|                                                      |   |                                  |   |   |                                 |  
|                                                      |   |                                  |   |   |                                 |  
|                                                      |   | For the Three Months Ended       |   |   | For the Nine Months Ended       |  
|                                                      |   | August 31,                       |   |   | August 31,                      |  
|                                                      |   | 2009                             |   |   | 2008                            |  
|DEPRECIATION,
      AMORTIZATION                      |   |                                  |   |   |                                 |  
|AND IMPAIRMENT:                                       |   |                                  |   |   |                                 |  
|Rancho Santa Monica Development                       | $ | 1,924                            |   | $ | 1,924                           |  
|AptHost
      Communications USA Ltd                  |   | 477,847                          |   |   | -                               |  
|Total Depreciation,
      Amortization and Impairment | $ | 479,771                          |   | $ | 1,924                           |  
|CAPITAL EXPENDITURES:                                 |   |                                  |   |   |                                 |  
|Rancho Santa Monica Development                       | $ | 26,702                           |   | $ | -                               |  
|AptHost
      Communications USA Ltd                  |   | -                                |   |   | -                               |  
|Total Capital Expenditures                            | $ | 26,702                           |   | $ | -                               |  



---

RANCHO SANTA MONICA DEVELOPMENTS, INC. Notes to the
Consolidated Financial Statements (Unaudited)

NOTE 7  SUBSEQUENT EVENTS

The Company evaluated subsequent events through November 30,
2009, which is the date the financial statements were issued and there were no
other significant subsequent events to report.

Effective December 4, 2009 the Company, entered into an
agreement to sell all of the assets, including but not limited to all
intellectual property, domain names and contracts, of AptHost Communications USA
Ltd (Apthost) to Hostgator.com LLC in exchange for $100,000.

NOTE 8  RESTATEMENT

The Company has restated the Statements of Operations for the
three and nine month periods ended August 31, 2008 for the correction to the
weighted average number of common shares outstanding - basic and diluted. The
August 31, 2008 financial statements erroneously reported 7,866,999 outstanding
shares at August 31, 2008 versus 7,846,999 shares that were actually
outstanding. The August 31, 2008 financial statements erroneously reported
7,866,999 and 7,854,499 weighted average number of common shares outstanding
versus 7,846,999 and 7,813,908 weighted average number of common shares that
were outstanding for the three and nine months ended August 31, 2008,
respectively. There was no effect on loss per share as a result of this error.

The Company has restated the Statement of Cash Flows for the
nine month period ended August 31, 2008 to properly present the $8,991 Due to
related parties as cash flows from financing activities versus cash flows from
operating activities as originally reported. As a result for the nine months
ended August 31, 2008, net cash used in operating activities decreased from
$10,196 to $1,205 and net cash provided by financing activities decreased from
$153,500 to $144,509.

The Company has restated the Balance Sheet as of November 30,
2008 for errors in applying the Companys common stock par value to its common
stock transactions. The resulting correction decreases common stock by $7,082 to
$785 and increases additional paid-in capital of $364,838 to $371,920 at
November 30, 2008.

NOTE 9  COMMITMENTS AND CONTINGENCIES

We commenced an action on February 3rd, 2009 against the
principals of AptHost and its affiliated companies for breach of contract,
intentional interference with business, fraudulent conveyance, and both
preliminary and permanent injunctive relief. On May 8, 2009 US Nevada Southern
District Court case 0902-224 was dismissed with prejudice. The parties entered
into a settlement agreement whereby the sellers received 1,000,000 shares in
RSDV and the buyers were fully entitled to ownership of AptHost.

---

ITEM 2.

MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

Cautionary Statement Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements as
that term is defined in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as "may",
"should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors" that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

Our unaudited interim financial statements are stated in United
States dollars and are prepared in accordance with United States generally
accepted accounting principles. The following discussion should be read in
conjunction with our unaudited interim financial statements and the related
notes that appear elsewhere in this quarterly report.

In this quarterly report, unless otherwise specified, all
references to "common shares" refer to common shares in the capital of our
company and the terms "we", "us" and "our" mean Rancho Santa Monica
Developments, Inc. and its wholly owned subsidiaries.

Corporate Background

Our company currently owns and operates a specialized web
hosting company, AptHost Communications USA Inc. (AptHost) (www.apthost.com). Our client base exceeds 3,000 clients
and estimated annual sales are over $500,000 with an average of two hundred new
signups a month. To service our growing client base, we have over 150 dedicated
servers and 33 Virtual Private Servers, Reseller, and Semi-Dedicated Servers. We
primarily host clients who require FFMPEG codex, a computer program that can
record, convert and stream digital audio and video in numerous formats.

In addition to our AptHost operation, we own a resort property
in Tulum, Mexico. The resort, named Hotel ParaYso, is an ocean front property
hotel located on the Caribbean beaches of Tulum, Quintana Roo, Mexico. Our
Company, in addition to the management of its resort property, has constructed
certain facilities and provides management services for apartment units
constructed on adjoining property.

Recent Corporate Developments

We experienced the following significant developments during
the nine months ended August 31, 2009:

|1. | On May 8, 2009, entered into a settlement agreement with
      the shareholders of AptHost whereby we issued an additional 500,000 shares
      of common stock (for cumulative sum of 1,000,000 shares) in Rancho to the
      former shareholders of AptHost.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | On May 8, 2009 Cody McLain was appointed as President and
      Director of AptHost and Joshuee Shang Ortiz as an Officer and Director of
      AptHost.                                                                                                       
|3. | On May 8, 2009 US Nevada Southern District Court case
      0902-224 was dismissed with prejudice.                                                                                                                                                             

---

AptHost Communications USA Inc. (www.apthost.com)

Summary

Founded in 2000 and based in Seattle, WA, AptHost provides
domain registration and web hosting services worldwide. This segment of our
company currently has sales totaling over $60,000 per month and hosts 3,000+
clients and services 18,000+ domains. AptHost.com plans to focus on the
following markets:

|(1) | FFMPEG Hosting for Shared, Reseller, VPS, Semi-Dedicated
      and Dedicated Servers
|--- | ------------------------------------------------------------------------------------
|(2) | Management Service for Dedicated Servers                                            
|(3) | Domain registration and management                                                  
|(4) | Digital streaming solutions                                                         
|(5) | Security products                                                                   

Our company was one of the first companies in the world to
bring shared FFMPEG hosting to the web hosting market. AptHosts customer base
includes personal use consumers as well as business customers. Our business
clients span all types of businesses, including start-ups.

Mission

The mission of AptHost.com provides a complete hosting solution
designed to meet the growing demands of the video hosting market. It aims to
service a wide range of clients and to make FFMPEG video hosting affordable for
anyone in need of a high quality video website.

AptHost.com has established a reputation for quality service at
an affordable price and plans to enhance its image in the industry as a top
solution provider. The company is also a developer of advanced software
applications that cater to the various market niches that offer vertical growth
opportunities. Below are a few of the opportunities our company has already
identified as targets to expand services to sub-markets within the web hosting
industry:

- Social Media/Video Sharing
- Tomacat Hosting
- Joomla Hosting
- Managed Hosting Automation Tools

Products and Services

AptHost.com currently provides Shared, Reseller, Virtual
Private Servers, Semi-Dedicated and Dedicated Hosting solutions. The company
currently hosts approximately 18,000 domains on its shared servers alone.
Additionally, the company hosts and manages over 150 dedicated servers which
have an unknown number of domains.

AptHost feels that the FFMPEG market segment has largely been
over looked by the larger hosting companies because of the amount of "specialty
support" required by this segment. AptHost.com has overcome this by developing
proprietary software that enables us to provide faster support with less staff.
We have, through this software, managed to keep our staffing levels down and
maintain higher quality of support at the same time.

With current staff, hardware and facilities, the company can do
the following:

- Provide shared hosting for over 3,000 clients
- Provide VPS Hosting for 150+ clients
- Design and build database driven web solutions
- Provide Managed Dedicated Server solutions to 500+ customers
- Offer domain registration services
- Offer SSL certificates

Results of Operations

Revenue for the three months ended August 31, 2009 of $146,263
was an increase of 1,120% over the same period ended August 31, 2008 of $11,992
due to the acquisition of AptHost which contributed $132,376 in revenue during
the three month period ended August 31, 2009. During the nine months ended
August 31, 2009 revenue increased by $537,175 or 881% over the nine month period ended August 31,
2008 again due to the acquisition of AptHost. During this nine month period,
AptHost contributed $501,468 in revenue.

---

During the three and nine months ended August 31, 2009 the
Company saw total operating expenses increase by $151,843 or 414% and $583,363
or 685% over the same periods ended August 31, 2008, respectively. These
increases are primarily related to the acquisition and operation of AptHost. The
Company also spent approximately $30,000 in litigation costs related to a
malicious code embedded by terminated employees. General and administrative
expenses declined as a percentage of revenue over the last two fiscal quarters.
The Company attributes this to the finalization of the acquisition of Apthost
and expects this trend to continue as management and employees are able to focus
on building each segment of the business.

Interest expense increased over the three and nine month
periods ended August 31, 2009, as compared to the same periods ended August 31,
2008, by $5,253 or 350% and $59,503 or 1,322%, respectively, due to amortization
of debt discount related to the beneficial conversion feature of our convertible
debt.

Since the acquisition of AptHost, the Company has gone through
a litigation process involving the discovery of malicious code on its servers
and network. The code has since been removed and involved employees that are no
longer with the company. AptHost has since moved to a new datacenter to fulfill
its customer needs for better service and uptime. As a result, the Company can
now report its services have been expanded to offer 24/7 online support and an
upgrade of its Hosting Services with the addition of using The Planet Internet
Services to provide web hosting services. Due to these improvements, the company
expects an upward trend in both sales and customer base, even without
significant advertising increases. In other words, even if the status quo is
maintained, with no advertising injection, we do still expect a positive upwards
trend.

Liquidity and Capital Resources

We anticipate spending approximately $250,000 in the next 12
months in pursuing our plan of operations. Currently, we have cash of $25,694
which is insufficient to allow us to meet our current commitments and to
complete our plan of operation. We will require substantial additional financing
in order to implement our long term business strategy and plan of operation. It
is anticipated that any additional financing will likely be in the form of
equity financing as substantial debt financing is not expected to be available
at this stage of our business. AptHost plans to devote $200,000 to the
development and advertising budget for the 2010 fiscal year. The company
primarily needs capital to fund three areas of controlled growth in the company:

- Increased personnel to handle increased sales and service.
- Increase advertising for the purpose of branding and increase sales.
- Research and development to bring new products to the market.

Our actual expenditures and business plan may differ from the
one stated above. Our Board of Directors may decide not to pursue this plan. In
addition, we may modify the plan based on available financing.

As of August 31, 2009 we had cash on hand of $25,694. Since
inception, we have issued common stock to raise money for operations and for
property acquisitions.

We anticipate continuing to rely on equity sales of our common
stock in order to continue to fund our business operations. Issuances of
additional shares will result in dilution to our existing stockholders. There is
no assurance that we will achieve any additional sales of our equity securities
or arrange for debt or other financing for to fund our planned business
activities.

Cash flow from operations. For the nine months ended
August 31, 2009, cash flow used in operations was $82,301, compared to cash flow
used in operations of $1,205 during the same period in 2008. Our net loss of
$137,026 for the nine months ended August 31, 2009 included non-cash expenses of
$55,145, including depreciation and amortization of $5,770 and amortization of
debt discount of $49,375.

Cash flow from investing activities. Our investing
activities used cash of $4,549 during the nine month period ended August 31,
2009, as a result of cash received from the purchase of Apthost of $22,153,
offset by the purchase of property and equipment of $26,702. This is compared to cash
used by investing activities during the same period in the prior year in the
amount of $140,500, as a result of the purchase of property and equipment.

---

Cash flow from financing activities. During the nine
months ended August 31, 2009, our financing activities provided cash of $108,327
compared to cash provided of $144,509 during the same period in 2008. During the
nine month period ended August 31, 2009, we received proceeds from the issuance
of stock of $25,000 and from related party advances of $83,327. During the 2008
period, we received net proceeds from the issuance of debt of $112,500 and from
sale of stock of $41,000. We made net payments of $8,991 on advances from
related parties during the nine month period ended August 31, 2008.

Monthly New Sign Ups

A result of the litigation and the discovery of the malicious
code on our servers and network, there was a decrease in new signups. The code
has since been removed and the employees involved are no longer with the
company. We expect to reestablish a positive trend of new signups in the months
to come.

Market Analysis

Industry analysts predict that the future of out-sourced web
hosting is positive. Research by top ranked industry analysts International Data
Corporation, Forrester Research and Ing Barings, indicates that custom hosting
solutions such as dedicated, co-located, and managed services are the key growth
areas of the future. Furthermore, research by Deutsche Bank states that managed
services carry 45% margins and are considered the most important future source
for web host providers.

AptHost.com is already providing a wide selection of hosting
services but what sets us apart are the specialty features we provide with them.
Management feels that FFMPEG Hosting is going to see growth as more and more
scripts become available that allow people with little or no experience to
publish sites. Combined with our custom built automation processes, clients will
be able to have a site setup and offering videos in a matter of minutes. These
sites can have individual themes that cater to special interests and will all
have the ability to earn money from advertising.

With this opportunity, people are publishing social media
sites. Below are articles describing the current market conditions and helps
demonstrate the potential growth within the industry.

By Georg Szalai/The Hollywood
ReporterNEW YORKThe global entertainment and media
industry will expand at a 6.4 percent compound annual growth rate over five
years to hit $2 trillion in 2011, according to PricewaterhouseCoopers Global
Entertainment and Media Outlook: 2007-2011.

One estimate likely to cause a stir
includes the prediction that U.S. spending on Internet advertising and access
will surpass spending on newspaper publishing in 2009.Globally, PwC expects
Internet advertising and access spending to grow from an estimated $177 billion
in 2006 to $332 billion in 2011, making for a 13.5 percent compound annual
growth rate.Source -http://bussola.wordpress.com/2007/06/22/global-media-outlook-2-tril-by-2011/

There are 94 million Internet users
in Japan (representing 73.8% of the population), according to Internet World
Stats in June 2008. This was up 99.7% compared to 2000. (Internet World Stats, August 2008) (source -
http://www.etcnewmedia.com/review/default.asp?SectionID=11&CountryID=65)

Customers and Target Markets

The company's customer base includes all consumers and all
small- to medium-sized businesses, including start-ups. They are mainly focused
on developing video sharing and social media sites, with the potential to branch
out into live streaming and eventually have their own online TV station.

---

Target Market Segment Strategy

AptHosts primary market niche was pursued due to its rapid
growth potential. As a recently new market, it has shown potential opportunities
to grow business within the FFMPEG market as well as significant opportunity to
grow the company vertically into related markets.

Our secondary market is VPS and dedicated servers. This is a
natural fit for us as many of our clients will outgrow their shared plans
quickly due high demand for bandwidth and other server resources for their
sites. Our company anticipated this need and has secured sufficient VPS and
dedicated server capacity to accommodate this need seamlessly for our clients.
Although it is our secondary market, it is fast growing with expected margins in
the 40% to 60% range.

The third market for us is managed services. This market is, as
is our secondary market, a derivative of the current strengths of the company.
As clients move from shared to dedicated servers, most will not have the in
house expertise to manage their own servers. AptHost offers 3 management plans
to match the needs of each client.

Competition - Web hosting operations

Competition comes from established hosts currently offering
similar hosting solutions and by new companies attempting to gain market
share.

Key competitors are detailed as follows:

Cirtex & HostV - An established company located in
New York, NY. The owner of Cirtex started offering FFMPEG before us by a few
months but only to VPS and dedicated server clients. They offer a shared
platform as well. They have recently launched a second site called HostV that
handles only Dedicated and VPS clients.



Glowhost - Entered the FFMPEG market in October of 2007.
Similar to AptHost, they also offer a full selection of hosting platforms and
are becoming known for supporting FFMPEG.



---

Vistapages - A Canadian owned and operated company,
Vistapages has similar roots to AptHost.com, focusing on the Canadian
market.



AptHost.comInorder to compare AptHost with its
competitors, below is our companysAlexa ranking for reach, traffic, and
page views.



Sales Strategy

AptHost markets to a diverse base of customers. We aim to
provide end to end services and support combined with competitive pricing. Our
main focus is a value product, the combination of quality and affordability. As
a provider of a complete solution, we are positioned to form a longstanding
partnership with our clients through our ability to tailor our service to meet
our customers evolving needs.

Positioning

AptHost has been involved in the development of FFMPEG hosting
in a shared server environment. We have added to our hosting service free script
installation and quality support on the varied scripts clients desire for their
sites. We intend to increase our position in the FFMPEG market through the
continued development of software and support for the creation and maintenance
of websites, the additional development of products and scripts, and the ability
to support customers long term through vertical integration of related services.

Promotion

Affiliate programs have become a popular way to get others to
promote products. Our affiliate program will be strengthened with larger payouts
to entice affiliates to send traffic to apthost.com. Word of mouth has always
been a powerful way to promote our business and we will continue employ the
talents of professionals to promote through word of mouth advertising on
industry related forums, blogs and review sites where they are respected
members.

---

Pricing

Our products and services are priced to initially attract the
lower end, beginner users within the market with incentives to move the client
into higher revenue, longer term agreements. Since moving to this pricing
structure on our shared plans, we have seen an increase in monthly revenue and
new signups. We carry similar incentives on all our plans, but we have seen the
most success with signing up customers on basic plans first and then selling add
on services as they see everything AptHost can offer their companies.

On the dedicated server plans, we moved to a price-match model
the retail pricing of our main dedicated server vendor. This is with the intent
that when our clients compare pricing, ours compares favorably. It has been a
successful strategy to have the same aggressive pricing as one of the most
well-advertised, dedicated server providers on the Internet.

Glossary of terms

- FFmpeg hostingis a term that is used to refer to any "assortment
  of software which is available, which helps in recording, converting and
  streaming a digital video or an audio"[1], and to those domain
  registrars and web hosting companies which provide the above assortment of
  software to video hosting services.
- Virtual private server,also known as Virtual Dedicated Server
  (VDS), a type of web hosting based on the concept of partitions on mainframes
  and advanced resource scheduling to divide a computer into many virtually
  isolated servers. It is a server that runs inside another server. Each VDS
  acts like a dedicated server but shares the same hardware.
- Dedicated hosting service, dedicated server,or Managed hosting
  serviceare types of Internet hosting where the client leases an entire
  server not shared with anyone. This is more flexible than shared hosting, as
  organizations have full control over the server(s), including choice of
  operating system, hardware, etc. Server administration can usually be provided
  by the hosting company as an add-on service. In some cases a dedicated server
  can offer less overhead and a larger return on investment.
- Apache Tomcatis the servlet container that is used in the official
  Reference Implementation for the Java Servlet and JavaServer Pages
  technologies.
- Joomlais an Open Source Content Management Systems on the planet.
  It is used all over the world for everything from simple websites to complex
  corporate applications. Joomla is easy to install, simple to manage, and
  reliable.
- Social Mediadescribes the online tools and platforms that people
  use to share opinions, insights, experiences, and perspectives with each
  other. Social media can take many different forms, including text, images,
  audio, and video. Popular social mediums include blogs, message boards,
  podcasts, wikis, and vlogs.

Hotel ParaYso Resort, Tulum, Quintana Roo, Mexico

Our company separately owns and operates property (the
Solidaridad Property) in Tulum, Mexico as noted in Figure 1. The property
consists of two developable pods where an additional 15 hotel units can be
built. The hotel has been open since February 7, 2007. We also manage the
adjoining 11 hotel suites and receive income from the supply of management
services. In November 29, 2005, the Company entered into an agreement with
Monica Galan-Rios for the purchase of certain lands located in Solidaridad,
Mexico consisting of approximately 1,220 square meters, See Figure 1 below.

Location of Hotel ParaYso Resort, Tulum, Quintana Roo,
Mexico

The property consists of the Western half of the fraction of
Lot #10 located at Km 8, Carretara a Tulum-Boca Paila Ejido Jose Maria Pino
Suarez Municipality of Solidaridad, Quintana Roo, Mexico in the city of Tulum,
Mexico. See Figure 1 below. Solidaridad is one of the eight municipalities that
make up the Mexican state of Quintana Roo. Quintana Roo is located on the
eastern part of the Yucatán Peninsula. It borders the Mexican states of Yucatán
and Campeche to the north and west, the Caribbean Sea to the east, and the
nation of Belize to the south.

---

Figure 1 Property
Location



Competition - Hotel operations

There are a number of hotels with which the Company will be
forced to compete with in the downtown Financial District in order to obtain
sufficient occupancy and room rental rates. Competition from other real estate
developers and real estate services companies may adversely affect our ability
to:

|1. | Attract purchasers         
|-- | ---------------------------
|2. | Sell undeveloped rural land

The presence of competing real estate development companies in
Mexico may impact on our ability to raise additional capital in order to fund
our property acquisitions or property developments in Mexico if investors are of
the view that investments in competitors are more attractive. Competition could
also reduce the availability of properties of merit or increase the cost of
acquiring the properties.

OFF-BALANCE SHEET ARRANGEMENTS

We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources.

---

RISKS AND UNCERTAINTIES

Going Concern and Liquidity.

The Company currently has a working capital deficit of
$342,720, a stockholders deficit of $25,374 and an accumulated deficit of
$923,079 as of August 31, 2009. In addition, the Company has generated net
losses of $614,873 during the nine months ending August 31, 2009. These
conditions raise substantial doubt as to the Companys ability to continue as a
going concern.

In order to continue as a going concern, the Company intends to
continue to develop its specialized web hosting technology. Until profitability
is reached, the Company will need, among other things, additional capital
resources. Managements plan is to obtain such resources for the Company by
obtaining capital from management and significant shareholders sufficient to
meet its minimum operating expenses and seeking equity and/or debt financing.
However, management cannot provide any assurances that the Company will be
successful in accomplishing any of its plans.

Our operating results may be adversely impacted by
worldwide political and economic uncertainties and specific conditions in the
markets we address. As a result, the market price of our common stock decline.

Recently general worldwide economic conditions have experienced
a deterioration due to credit conditions resulting from the recent financial
crisis affecting the banking system and financial markets and other factors,
slower economic activity, concerns about inflation and deflation, volatility in
energy costs, decreased consumer confidence, reduced corporate profits and
capital spending, the ongoing effects of the war in Iraq and Afghanistan, recent
international conflicts and terrorist and military activity, and the impact of
natural disasters and public health emergencies. These conditions make it
extremely difficult for both us and our customers to accurately forecast and
plan future business activities, and they could cause U.S. and foreign
businesses to slow spending on our services, which could delay and lengthen our
new customer sales cycle and cause existing customers to do one or more of the
following:

- Cancel or reduce planned expenditures for our services;
- Seek to lower their costs by renegotiating their contracts with us;
- Move their hosting services in-house; or
- Switch to lower-priced solutions provided by us or our competitors.

Customer collections are our primary source of cash. We have
historically grown through a combination of an increase in new customers and
revenue growth from our existing customers. We have experienced a decrease in
revenue from our existing customer base, and if the current market conditions
continue to deteriorate we may experience continued or more substantial decrease
in revenue from our customer base, including through reductions in their
commitments to us, and/or longer new customer sales cycles. If these events were
to occur, we could experience a decrease in revenues and reduction in operating
margins. Furthermore, during challenging economic times our customers may face
issues gaining timely access to sufficient credit, which could result in an
impairment of their ability to make timely payments to us. We have experienced
an increase in our allowance for doubtful accounts already. If our customers
ability to pay is further challenged, we may be required to further increase our
allowance for doubtful accounts. We cannot predict the timing, strength or
duration of any economic slowdown or subsequent economic recovery. If the
economy or markets in which we operate do not continue at their present levels
or continue to deteriorate, we may record additional charges related to the
impairment of goodwill and other long-lived assets, and our business, financial
condition and results of operations could be materially and adversely
affected.

Finally, like many other stocks, our stock price decreased
during the onset of the economic downturn. Although our stock price has recently
increased, if investors have concerns that our business, financial condition and
results of operations will be negatively impacted by a continued worldwide
economic downturn, our stock price could decrease again.

---

If we are unable to manage our growth effectively our
financial results could suffer and our stock price could decline.

The growth of our business and our service offerings has
strained our operating and financial resources. Further, we intend to continue
to expand our overall business, customer base, headcount, and operations.
Creating a global organization and managing a geographically dispersed workforce
requires substantial management effort and significant additional investment in
our operating and financial system capabilities and controls. If our information
systems are unable to support the demands placed on them by our growth, we may
be forced to implement new systems which would be disruptive to our business. We
may be unable to manage our expenses effectively in the future due to the
expenses associated with these expansions, which may negatively impact our gross
margins or operating expenses. If we fail to improve our operational systems or
to expand our customer service capabilities to keep pace with the growth of our
business, we could experience customer dissatisfaction, cost inefficiencies, and
lost revenue opportunities, which may materially and adversely affect our
operating results.

Our physical infrastructure is concentrated in very few
facilities and any failure in our physical infrastructure or services could lead
to significant costs and disruptions and could reduce our revenues, harm our
business reputation and have a material adverse effect on our financial results.

Our network and power supplies and data centers are subject to
various points of failure, and a problem with our generators, uninterruptible
power supply, or UPS, routers, switches, or other equipment, whether or not
within our control, could result in service interruptions for some or all of our
customers or equipment damage. Because our hosting services do not require
geographic proximity of our data centers to our customers, our hosting
infrastructure is consolidated into a few large facilities. Accordingly, any
failure or downtime in one of our data center facilities could affect a
significant percentage of our customers. While data backup services are included
in our hosting services, the majority of our customers do not elect to pay the
additional fees required to store their backup data offsite in a separate
facility. The total destruction or severe impairment of any of our data center
facilities could result in significant downtime of our services and the loss of
vast amounts of customer data. Since our ability to attract and retain customers
depends on our ability to provide customers with highly reliable service, even
minor interruptions in our service could harm our reputation. The services we
provide are subject to failure resulting from numerous factors, including:

- Human error or accidents (such as an airplane crash into one of our
  facilities, some of which are located near major airports);
- Power loss;
- Equipment failure;
- Internet connectivity downtime;
- Improper building maintenance by the landlords of the buildings in which
  our facilities are located;
- Physical or electronic security breaches;
- Fire, earthquake, hurricane, tornado, flood, and other natural disasters;
- Water damage;
- Terrorism;
- Sabotage and vandalism; and
- Failure by us or our vendors to provide adequate service to our equipment.

---

Additionally, in connection with the expansion or consolidation
of our existing data center facilities from time to time, there is an increased
risk that service interruptions may occur as a result of server relocation or
other unforeseen construction-related issues.

We have experienced interruptions in service in the past, due
to such things as power outages, power equipment failures, cooling equipment
failures, routing problems, hard drive failures, database corruption, system
failures, software failures, and other computer failures.

Any future interruptions could:

- Cause our customers to seek damages for losses incurred;
- Require us to replace existing equipment or add redundant facilities;
- Damage our reputation as a reliable provider of hosting services;
- Cause existing customers to cancel or elect to not renew their contracts;
  or
- Make it more difficult for us to attract new customers.

Any of these events could materially increase our expenses or
reduce our revenues, which would have a material adverse effect on our operating
results.

If we are unable to maintain a high level of customer
service, customer satisfaction and demand for our services could
suffer.

We believe that our success depends on our ability to provide
customers with quality service that not only meets our stated commitments, but
meets and then exceeds customer service expectations. If we are unable to
provide customers with quality customer support in a variety of areas, we could
face customer dissatisfaction, decreased overall demand for our services, and
loss of revenues. In addition, our inability to meet customer service
expectations may damage our reputation and could consequently limit our ability
to retain existing customers and attract new customers, which would adversely
affect our ability to generate revenue and negatively impact our operating
results.

We may not be able to continue to add new customers and
increase sales to our existing customers, which could adversely affect our
operating results.

Our growth is dependent on our ability to continue to attract
new customers while retaining and expanding our service offerings to existing
customers. Growth in the demand for our services may be inhibited and we may be
unable to sustain growth in our customer base, for a number of reasons, such
as:

- Our inability to market our services in a cost-effective manner to new
  customers;
- The inability of our customers to differentiate our services from those of
  our competitors or our inability to effectively communicate such distinctions;
- Our inability to successfully communicate to businesses the benefits of
  hosting;
- The decision of businesses to host their Internet sites and web
  infrastructure internally or in colocation facilities as an alternative to the
  use of our hosting services;
- Our inability to penetrate international markets;
- Our inability to expand our sales to existing customers;
- Our inability to strengthen awareness of our brand; and
- Reliability, quality or compatibility problems with our services.

---

A substantial amount of our past revenue growth was derived
from purchases of service upgrades by existing customers. Our costs associated
with increasing revenues from existing customers are generally lower than costs
associated with generating revenues from new customers. Therefore, a reduction
in the rate of revenue increase or a rate of revenue decrease from our existing
customers, even if offset by an increase in revenues from new customers, could
reduce our operating margins.

Any failure by us to continue attracting new customers or grow
our revenues from existing customers for a prolonged period of time could have a
material adverse effect on our operating results.

Our existing customers could elect to reduce or terminate
the services they purchase from us because we do not have long-term contracts
with our customers, which could adversely affect our operating results.

Our customer contracts for our services typically have initial
terms of one to two years, which unless terminated, may be renewed or
automatically extended on a month-to-month basis. Our customers have no
obligation to renew their services after their initial contract periods expire.
Moreover, our customers could cancel their service agreements before they
expire. Our costs associated with maintaining revenue from existing customers
are generally much lower than costs associated with generating revenue from new
customers. Therefore, a reduction in revenue from our existing customers, even
if offset by an increase in revenue from new customers, could reduce our
operating margins. Any failure by us to continue to retain our existing
customers could have a material adverse effect on our operating results.

If we fail to hire and retain qualified employees and
management personnel, our growth strategy and our operating results could be
harmed.

Our growth strategy depends on our ability to identify, hire,
train, and retain IT professionals, technical engineers, operations employees,
and sales and senior management personnel who maintain relationships with our
customers and who can provide the technical, strategic, and marketing skills
required for our company to grow. There is a shortage of qualified personnel in
these fields, specifically in the San Antonio, Texas area, where we are
headquartered and a majority of our employees are located, and we compete with
other companies for this limited pool of potential employees. There is no
assurance that we will be able to recruit or retain qualified personnel, and
this failure could cause our operations and financial results to be negatively
impacted.

Our success and future growth also depends to a significant
degree on the skills and continued services of our management team, especially
Graham Alexander, our Chairman, and Cody McLain, our Chief Executive Officer and
President.

Our operating results may fluctuate significantly, which
could make our future results difficult to predict and could cause our operating
results to fall below investor or analyst expectations.

Our operating results may fluctuate due to a variety of
factors, including many of the risks described in this section, which are
outside of our control. As a result, comparing our operating results on a
period-to-period basis may not be meaningful. You should not rely on our
operating results for any prior periods as an indication of our future operating
performance. Fluctuations in our revenue can lead to even greater fluctuations
in our operating results. Our budgeted expense levels depend in part on our
expectations of long-term future revenue. Given relatively fixed operating costs
related to our personnel and facilities, any substantial adjustment to our
expenses to account for lower than expected levels of revenue will be difficult
and take time. Consequently, if our revenue does not meet projected levels, our
operating expenses would be high relative to our revenue, which would negatively
affect our operating performance.

Increased Internet bandwidth costs and network failures
may adversely affect our operating results.

Our success depends in part upon the capacity, reliability, and
performance of our network infrastructure, including the capacity leased from
our Internet bandwidth suppliers. We depend on these companies to provide
uninterrupted and error-free service through their telecommunications networks.
Some of these providers are also our competitors.

---

We exercise little control over these providers, which
increases our vulnerability to problems with the services they provide. We have
experienced and expect to continue to experience interruptions or delays in
network service. Any failure on our part or the part of our third-party
suppliers to achieve or maintain high data transmission capacity, reliability or
performance could significantly reduce customer demand for our services and
damage our business.

As our customer base grows and their usage of
telecommunications capacity increases, we will continue to need to make
additional investments in our capacity to maintain adequate data transmission
speeds, the availability of which may be limited or the cost of which may be on
terms unacceptable to us. If adequate capacity is not available to us as our
customers usage increases, our network may be unable to achieve or maintain
sufficiently high data transmission capacity, reliability or performance. In
addition, our business would suffer if our network suppliers increased the
prices for their services and we were unable to pass along the increased costs
to our customers.

Many of our current and potential competitors have
substantially greater financial, technical and marketing resources, larger
customer bases, longer operating histories, greater brand recognition, and more
established relationships in the industry than we do. As a result, some of these
competitors may be able to:

- Develop superior products or services, gain greater market acceptance, and
  expand their service offerings more efficiently or more rapidly;
- Adapt to new or emerging technologies and changes in customer requirements
  more quickly;
- Bundle hosting services with other services they provide at reduced
  prices;
- Take advantage of acquisition and other opportunities more readily;
- Adopt more aggressive pricing policies and devote greater resources to the
  promotion, marketing, and sales of their services; and
- Devote greater resources to the research and development of their products
  and services.

Our acquisitions may divert our managements attention,
result in dilution to our stockholders and consume resources that are necessary
to sustain our business.

We have made acquisitions and, if appropriate opportunities
present themselves, we may make additional acquisitions or investments or enter
into joint ventures or strategic alliances with other companies. Risks commonly
encountered in such transactions include:

- The difficulty of assimilating the operations and personnel of the
  combined companies;
- The risk that we may not be able to integrate the acquired services or
  technologies with our current services, products, and technologies;
- The potential disruption of our ongoing business;
- The diversion of management attention from our existing business;
- The inability of management to maximize our financial and strategic
  position through the successful integration of the acquired businesses;
- Difficulty in maintaining controls, procedures, and policies;
- The impairment of relationships with employees, suppliers, and customers
  as a result of any integration;
- The loss of an acquired base of customers and accompanying revenue; and
- The assumption of leased facilities, other long-term commitments or
  liabilities that could have a material adverse impact on our profitability and
  cash flow.

---

As a result of these potential problems and risks, businesses
that we may acquire or invest in may not produce the revenue, earnings, or
business synergies that we anticipated. In addition, there can be no assurance
that any potential transaction will be successfully identified and completed or
that, if completed, the acquired business or investment will generate sufficient
revenue to offset the associated costs or other potential harmful effects on our
business.

We have and will continue to incur significant increased
costs as a result of operating as a public company, and our management will be
required to devote substantial time to new compliance initiatives.

As a public company, we have and will continue to incur
significant legal, accounting, and other expenses that we did not incur as a
private company. In addition, the Sarbanes-Oxley Act of 2002, or the
Sarbanes-Oxley Act, as well as rules subsequently implemented by the Securities
and Exchange Commission, or the SEC, have imposed various requirements on public
companies, including requiring changes in corporate governance practices. Our
management and other personnel will need to devote a substantial amount of time
to these new compliance initiatives. Moreover, these rules and regulations will
increase our legal and financial compliance costs and will make some activities
more time-consuming and costly. For example, these new rules and regulations to
make it more difficult and more expensive for us to obtain director and officer
liability insurance, and we may be required to accept reduced policy limits and
coverage or incur substantial costs to maintain the same or similar coverage.
These rules and regulations could also make it more difficult for us to attract
and retain qualified persons to serve on our board of directors, our board
committees or as executive officers.

In order to respond to additional regulations applicable to
public companies, such as Section 404 of the Sarbanes-Oxley Act, we have hired a
number of finance and accounting personnel. We use independent contractors to
fill certain positions and provide certain accounting functions. In the future,
we may be required to hire additional full-time accounting employees to fill
these and other related finance and accounting positions. Some of these
positions require candidates with public company experience, and we may be
unable to locate and hire such individuals as quickly as needed, if at all. In
addition, new employees will require time and training to learn our business and
operating processes and procedures. If our finance and accounting organization
is unable for any reason to respond adequately to the increased demands
resulting from being a public company, the quality and timeliness of our
financial reporting may suffer and we could experience internal control
weaknesses. Any consequences resulting from inaccuracies or delays in our
reported financial statements could have an adverse effect on the trading price
of our common stock as well as an adverse effect on our business, operating
results, and financial condition.

Property Ownership Risk of Tulum Hotel ParaYso
Property

Under the terms of the property purchase agreement for our
Solidaridad Property, Ms. Galan-Rios assigned to us her interest in an
occupation order issued by the Ejidal Commissariat of the Ejido NCPE Jose Maria
Pino Suarez for the use and possession of the Solidaridad Property. Under
Mexican law we own the right to possess and make use of our Solidaridad Property
but do not own title to the property until a legal survey is completed by the
Mexican government. Because we do not own legal title to our Solidaridad
Property we are subject to the risk that: (i) conditions may be imposed on our
occupation order for the property and/or the order may be cancelled; (ii) the
Mexican government may delay the implementation of a legal survey or decide not
to undertake a survey of the property; and (iii) if a legal survey is completed
there is no assurance that we will not be required to pay additional fees for
the transfer of legal title to the property or that the property boundaries will
be identical to those granted in the occupation order issued by the Ejidal
Commissariat. The occurrence of any of the above risks would have a material
adverse effect our business, results of operations or financial condition.

Environmental And Other Regulations

Our present operations and development activities in Mexico are
subject to Mexican state and local laws and regulations, respectively, relating
to the protection of the environment, including those concerning water supply,
wastewater, noise, soil pollution and generation and handling of hazardous waste
and materials and environmental impact.

We believe that we are in compliance in all material respects
with all Mexican state and local laws and regulations relating to water,
atmospheric pollution, hazardous wastes or substances. We have not been notified
by any environmental authority or any third party, of any material
noncompliance, liability or claim related to those environmental matters in connection with any of our present
properties. The possibility exists that in the future that our facilities and
operations will encounter: (i) newer and stricter state or local environmental
laws and regulations, (ii) more rigorous interpretations of existing
environmental laws and regulations, and/or (iii) stricter enforcement of
federal, state and local environmental law regulations.

---

The Solidaridad Property is subject to federal, state and local
regulations and restrictions that may impose significant limitations on our
ability to develop them. In addition, our ownership and operation of real
property is subject to extensive and evolving federal, state and local
environmental laws and other regulations. The provisions and enforcement of
these environmental laws and regulations may become more stringent in the
future. Violations of these laws and regulations can result in:

|1. | Civil penalties;            
|-- | ----------------------------
|2. | Remediation expenses;       
|3. | Natural resource damages;   
|4. | Personal injury damages;    
|5. | Potential injunctions;      
|6. | Cease and desist orders; and
|7. | Criminal penalties.         

In addition, some of these environmental laws impose strict
liability, which means that we may be held liable for any environmental damages
on our property regardless of our fault. The presence of hazardous substances on
a property may also adversely affect our ability to sell or develop the property
or to borrow using the property as collateral.

Changes in laws or the interpretation thereof, new enforcement
of laws, the identification of new facts or the failure of other parties to
perform remediation could all lead to new or greater liabilities that could
materially adversely affect our business, results of operations or financial
condition.

The Occurrence In Mexico Of Natural Disasters

Our property is located in Mexico. The occurrence of natural
disasters, such as fires, hurricanes, floods, unusually heavy or prolonged rain
and droughts in Mexico could have a material adverse effect on our ability to
develop properties or realize income from our property.

We Do Not Carry Comprehensive Liability Insurance for the
Mexico Property.

We do not currently carry comprehensive liability, fire,
hurricane, storm, earthquake, and business interruption insurance with respect
to our business operations in Mexico. Should an uninsured loss occur, we could
lose our capital invested in the Solidaridad Property, as well as the
anticipated future revenues from such property and would continue to be
obligated on any indebtedness or other obligations related to the property. Any
such loss could have a material adverse effect on Rancho.

ITEM 3. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), we have evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Act))
as of August 31, 2009. Based on this evaluation, our CEO and CFO concluded that,
as of August 31, 2009, our disclosure controls and procedures were not
effective. This conclusion was based on the existence of the material weaknesses
in our internal control over financial reporting previously disclosed and
discussed below.

No changes in our internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during
the fiscal quarter ended August 31, 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

---

A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the companys annual or
interim financial statements will not be prevented or detected on a timely
basis.

We identified and continue to have the following material
weakness in our internal controls over financial reporting:

There is a lack of segregation of duties and technical
accounting expertise. Our financial reporting and all accounting functions are
performed by an external consultant with no oversight by a professional with
accounting expertise. Our management does not possess accounting expertise and
hence our controls over the selection and application of accounting policies in
accordance with generally accepted accounting principles were inadequate and
constitute a material weakness in the design of internal control over financial
reporting. This weakness is due to the Companys lack of working capital to hire
additional staff.



PART II - OTHER INFORMATION

ITEM 1.

LEGAL
PROCEEDINGS.

We commenced an action on February 3rd, 2009 against the
principals of AptHost and its affiliated companies for breach of contract,
intentional interference with business, fraudulent conveyance, and both
preliminary and permanent injunctive relief. On May 8, 2009 US Nevada Southern
District Court case 0902-224 was dismissed with prejudice. The parties entered
into a settlement agreement whereby the sellers received 1,000,000 shares in
RSDV and the buyers were fully entitled to ownership of AptHost.

ITEM 2.

UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.

DEFAULTS UPON
SENIOR SECURITIES.

As of November 30, 2008, the Company had notes payable of
$50,000 and convertible notes payable of $112,500 (a beneficial conversion
feature totaling $112,500 was recognized at inception of the convertible debt
that has been fully amortized as interest expense as of August 31, 2009). During
the nine months ended August 31, 2009, no payments were made on these notes. All
of the notes and convertible notes are currently past due and in default. All
loans are collateralized by the assets of the company.

ITEM 4.

SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 5.

OTHER
INFORMATION.

None.

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ITEM 6.

EXHIBITS.

|Exhibit |                              
|------- | -----------------------------
|Number  | Description of Exhibits      
|3.1     | Articles of Incorporation.(1)
|3.2     | Bylaws, as amended.(1)       

|4.1  | Form of Share
      Certificate.(1)                                                                                                                                                             
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.6 | Purchase Agreement dated for reference November
      29, 2004 between Monica Galan-Rios and Rancho Santa Monica Developments
      Inc.(1)                                                     
|10.7 | Promissory Note dated November
      29, 2004 Monica Galan-Rios and Rancho Santa Monica Developments
      Inc.(1)                                                                              
|31.1 | Certification of Chief Executive Officer and
      Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
      of 2002.                                                     
|32.1 | Certification of Chief
      Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
      Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.

|(1) | Filed with the SEC as an exhibit to our Registration
      Statement on Form SB-2 originally filed on January 29, 2005, as
      amended.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

SIGNATURES

In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                         | RANCHO SANTA MONICA DEVELOPMENTS
      INC.
|------------------------ | -------------------------------------------
|                         |                                            
|                         |                                            
|                         |                                            
|Date: December 9th, 2009 | By:                                        
|                         |                                            
|                         |                                            
|                         |                                            
|                         |                                            
|                         |                                            

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