Falcon Ridge Development (PKSP) 10-Q 2009 Q1 Quarterly report

United States

Securities and Exchange Commission

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

Commission File Number 000-28789

Falcon Ridge Development Inc.

(Exact name of registrant as specified in its charter)

Nevada	84-1461919
(State or other jurisdiction of incorporation)	(IRS Employer File Number)
5111 Juan Tabo Boulevard N.E. Albuquerque, New Mexico	87111
(Address of principal executive offices)	(zip code)

(702) 386-5379 

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(Section 232.405 of this chapter) during the preceding 12 months(or such shorter period that the registrant was required to submit and post such files. Yes [x]  No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “small reporting company” in Rule 12b-2 of the Exchange Act.

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

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

The number of shares outstanding of the registrant's common stock, as of the latest practicable date, July 2, 2009 was 78,054,805.

Table of Contents

	Page
Part I – Financial Information
Item 1.  Condensed Consolidated Financial Statements	3
Condensed Consolidated Balance Sheet as of December 31, 2008 (unaudited) and September 30, 2008	3
Condensed Consolidated Statements of Operations (unaudited) for the three months ended December 31, 2008 and 2007	4
Condensed Consolidated Statement of Changes in Stockholders’ Deficit (unaudited) for the	5
Condensed Consolidated  Statement of Cash Flow (unaudited) for the three months ended December 31, 2008.	6
Item 2.  Management’s Discussion and analysis of Financial Condition and Results of Operations	19
Item 3.  Qualitative and Qualitative Disclosures about Market Risk	23
Item 4.  Controls and Procedures	23
Item 1.  Legal Proceedings	25
Item 1a.  Risk Factors	25
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.  Defaults Upon Senior Securities	25
Item 4.  Submission of Matters to a Vote of Security Holders	25
Item 5.  Other Information	25
Item 6.  Exhibits	26
Signaturres	27

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Part I – FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements

Falcon Ridge Development Inc., and Subsidiaries

Condensed Consolidated Balance Sheets

For the Periods Ended

					March 31,			September 30,
					2009			2008
Assets					(unaudited)			(audited)
	Current Assets:
		Cash		$	-		$	1,119
		Real estate held for development and sale			-			3,191,570
			Total  current assets		-			3,192,689
	Long Term Assets:
		Real estate held for development and sale			1,201,995			-
		Equipment, net of accumulated depreciation			38,428			45,211
			Total assets	$	1,240,423		$	3,237,900
Liabilities and Stockholders' Deficit
Liabilities
	Current Liabilities:
		Accounts payable		$	693,379		$	657,428
		Notes payable related parties			1,159,342			1,154,766
		Current portion of notes payable			1,493,300			1,554,123
		Retainage payable			90,000			90,000
		Accrued interest			550,675			363,430
		Accrued expenses			27,316			23,209
		Convertible Preferred stock, Series B, $.001 par value, 400,000 shares
		authorized, 160,000 shares outstanding; liquidation value $485,000			485,000			485,000
			Total current liabilities		4,499,012			4,327,956
	Long-term notes payable, net of current portion				77,123			15,000
Stockholders' Deficit
	Convertible Preferred Stock, $.001 par value; 1,000,000 shares authorized:
		Preferred Stock Series a $.001 par value, 400,000 shares authorized,			400,000			400,000
		160,000 shares issued and outstanding, aggregare liquidation preference of $400,000
	Common stock, $.001 par value, 900,000,000 shares authorized, 78,054,805 and 47,315,917
		shares issued and outstanding respectively			78,054			47,316
	Additional paid-in capital				5,985,147			5,886,152
	Unexpired warrants				(67,572	)		(88,890	)
	Accumulated deficit				(9,731,341	)		(7,349,634	)
			Total Stockholders' deficit		(3,335,712	)		(1,105,056	)
			Total Liabilities and Stockholders' Deficit	$	1,240,423		$	3,237,900

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

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Falcon Ridge Development Inc., and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)
	For the Three Months Ended						For the Six months Ended
	March 31,						March 31,
	2009			2008			2009			2008
Nert sales	$	0		$	35,143		$	0		$	82,453
EXPENSES
Cost of Goods sold		0			6,317			0			18,950
Payroll and related expenses		0			24,473			63,023			48,945
Depreciation		1,994			2,323			3,989			4,645
Consulting and stock-based compensation		0			2,917,700			86,200			3,303,146
Selling, general and administrative expenses		18,380			90,267			29,428			225,670
Total expenses		20,374			3,041,079			182,640			3,601,356
OTHER INCOME (EXPENSE)
Interest expense		105,135			38,909			208,563			77,817
Loss on umpairment of asset		0			0			1,989,576			0
Loss on sale of fixed asset		0			0			928			0
Other income		0			0			0			0
Total other income and (expense)		105,135			38,909			2,199,067			77,817
Loss before provision for income taxes		(125,509	)		(3,044,844	)		(2,381,707	)		(3,596,720	)
Income taxes					-			0
Net Loss	$	(125,509	)	$	(3,044,844	)	$	(2,381,707	)	$	(3,596,720	)
Basic loss per common share	$	(0.002	)	$	(0.117	)	$	(0.033	)	$	(0.138	)
Basic weighted average number of shares outstanding		78,054,805			26,129,612			72,931,657			26,129,612

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

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		Falcon Ridge Development, Inc., and Subsidiaries
		Condensed Consolidated Statement of Stockholders' Deficit
		Quarter Ended March 31, 2009
													Additional
		Preferred Stock					Common Stock						paid-in		Unexpensed			Accumulated
		Shares		Par value			Shares			Par value			capital		warrants			deficit			Total
Balance December 31, 2005			160,000	$	400,000			3,761,312		$	752,262		$	899,420	$	-		$	(1,068,850	)	$	982,832
Stock issuance for Cash			194,000		485,000			-			-			-		-			-			485,000
Reclassified to liabilities			-		(485,000	)		-			-			-		-			-			(485,000	)
Loss			-		-			-			-			-		-			(417,974	)		(417,974	)
	Balance September 30, 2006		354,000	$	400,000			3,761,312			752,262			899,420		-			(1,486,824	)		564,858
	Reclass common stock and APIC		-		-			(79	)		(748,501	)		748,501		-			-			-
	Issuance of common stock		-		-			14,698,104			14,698			365,526		-			-			380,224
	Net loss 9-30-2007		-		-			-			-			-		-			(1,290,190	)		(1,290,190	)
Balance September 30, 2007			354,000		400,000			18,459,337			18,459			2,013,447		-			(2,777,014	)		(345,108	)
	Stock issued for service							28,650,000			28,650			2,860,221								2,888,871
	Stock issued for debt							206,580			207			10,102								10,309
	Warrants issued with notes payable													115,090		(88,890	)					26,200
	Warrants issued for service													887,292		-						887,292
	Net loss 09-30-08																		(4,572,620	)		(4,572,620	)
Balance September 30, 2008			354,000	$	400,000			47,315,917		$	47,316		$	5,886,152	$	(88,890	)	$	(7,349,634	)	$	(1,105,056	)
	Stock issued for services							24,922,222			24,922			58,278								83,200
	Stock issued for payroll							5,816,666			5,816			40,717								46,533
	Accreation of unexpired warrants															10,659						10,659
	Net loss for quarter ended 12-31-08																		(2,256,198	)		(2,256,198	)
	`
Balance December 31, 2008			354,000	$	400,000			78,054,805		$	78,054		$	5,985,147	$	(78,231	)	$	(9,605,832	)	$	(3,220,863	)
	Accreation of unexpired warrants															10,659						10,659
	Net loss for the quarter ended 03-31-09																		(125,509	)		(125,509	)
Balance March 31, 2009		$	354,000	$	400,000		$	78,054,805		$	78,054		$	5,985,147	$	(67,572	)	$	(9,731,341	)	$	(3,335,713	)

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

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Falcon Ridge Development Inc., and Subsidiaries

Condensed Condolidated Statements of Cash Flows

(Unaudited)

			For the Six Months Ended
			March 31,
			2009			2008
OPERATING ACTIVITIES
		Net loss	$	(2,381,707	)	$	(3,596,720	)
		Adjustments to reconcile net loss to
		net cash used in operating activities:
		Stock issued for services and payroll		129,733			2,869,522
		Depreciation		3,989			4,645
		Warrants expensed		21,318			443,646
		Impairment of Real estate held for development and sale		1,989,576
		Changes in operating assets and liabilities:
		Real estate held for development and sale		0			(450	)
		Accounts payable		35,951			76,751
		Accrued interest		187,245			102,181
		Accrued liabilities		4,107			10,315
							-
Net cash used in operating activities				(9,788	)		(90,110	)
INVESTING ACTIVITIES
		Reclassification  of assets		1,993
		Purchase of capital assets		0			(2,833	)
		Proceeds from sale of fixed asset		800			0
Net cash provided by (used in) investing activities				2,793			(2,833	)
FINANCING ACTIVITIES
	*
		Notes converted to common stock		0			(10,000	)
		Repayment of notes payable		0			0
		Related party notes payable		4,576			20,692
		Notes payable issued		1,300			10,000
		Proceeds from shares to be issued		0			2,000
Net cash providec by financing activities				5,876			22,692
NET DECREASE IN CASH AND CASH EQUIVALENTS				(1,119	)		(70,251	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD				1,119			74,521
CASH AND CASH EQUIVALENTS AT END OF PERIOD			$	0		$	4,270
SUPPLEMENTAL DISCLOSURE OF INFORMATION
CASH PAID FOR:
		Income taxes	$	0		$	0
		Interest	$	0		$	17,850
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
		FINANCING ACTIVITIES:
		Warrants issued	$	0		$	157,500
		Stock issued for services and payroll	$	129,733		$	2,869,521

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

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FALCON RIDGE DEVELOPMENT, INC. and SUBSIDIARIES

Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies

Organization, Shell Merger and Principles of Consolidation

Organization

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

Going Concern

The Company experienced significant operating losses during fiscal years ended September 30, 2008 and 2007, of $4,572,620 and $1,290,190 respectively.  For the six months r ended March 31, 2009, the Company lost and additional $2,381,707 and had an accumulated deficit of $9,731,341 at that date.  In addition, the Company has a stockholders’ deficit of $3,335,712 as of March 31, 2009.     The Company incurred a negative cash flow from operating activities of $289,435 for the year ended September 30, 2008, and a negative cash flow from operating activities of $9,788 for the six months ended March 31, 2009.  Implementation of its business plan is dependent upon its ability to raise additional capital.  The Company is in default on its mortgage to Metro Loan Corp in principal amount of $1,150,000 secured by the Spanish Trails development.   In the event the lender initiates foreclosure proceedings and the Company is unable to resolve the situation in its favor, the Company’s major revenue producing asset will be lost.  Management will then have to locate and finance a profitable replacement business activity.  The Company is in default on its note to Freedom Financial in its principal amount of  $200,000.00.  These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management is searching for additional business opportunities to generate revenue sufficient to enable to Company to achieve profitable operations.  There is no guarantee that management will be successful in its endeavors.  The accompanying financial statements do not include any adjustments relating to the recoverability and classification of the recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

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FALCON RIDGE DEVELOPMENT, INC. and SUBSIDIARIES

Notes to Consolidated Financial Statements

Shell Merger

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

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

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

Basis of Presentation

In the opinion of management, the accompanying balance sheets and related interim statements of income, cash flows, and stockholders' equity include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may differ from management's estimates and assumptions.

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FALCON RIDGE DEVELOPMENT, INC. and SUBSIDIARIES

Notes to Consolidated Financial Statements

Interim results are not necessarily indicative of results for a full year. The information included in this Form lO-Q should be read in conjunction with information included in the Form IO-K.

Principles of Consolidation

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

Use of Estimates

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

Reclassifications

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

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

Revenue Recognition on Sales of Real Estate

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

Cash and Cash Equivalents

The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. The Company had no cash equivalents at Marc h 31, 2009

Real Estate Held for Development and Sale

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

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FALCON RIDGE DEVELOPMENT, INC. and SUBSIDIARIES

Notes to Consolidated Financial Statements

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

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

Interest

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

Fixed Assets and Depreciation

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

Earnings (loss) per Common Share

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

At  March 31, 2009 and 2008, there was no variance between basic and diluted loss per share as the convertible preferred stock outstanding, if converted, would be anti-dilutive.

Impairment or Disposal of Long-Lived Assets

The Company evaluates real estate projects and other long-lived assets on an individual basis for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" and SFAS 67 “Accounting for Costs and Initial Rental Operations of Real Estate Projects.” An asset is considered impaired if its carrying amount exceeds the future net cash flow the asset is expected to generate or its net realizable value. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair market value. We assess the recoverability of our real estate projects, long-lived and intangible assets by determining whether the unamortized balances can be recovered through undiscounted future net cash flows of the related assets. The amount of impairment, if any, is measured based on projected discounted future net cash flows. When impairment exists the carrying value of the asset will be reduced by an allowance for the amount of the impairment.  For the quarter ended December 31, 2008 the company recognized an impairment loss in the carrying value of its Real estate held for development and sale of $1,989,576.

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FALCON RIDGE DEVELOPMENT, INC. and SUBSIDIARIES

Notes to Consolidated Financial Statements

Stock-based Compensation

The Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS 123R), effective January 1, 2007. SFAS 123R requires the recognition of the fair value of stock-based compensation in net income. The Company has elected the modified prospective transition method for adopting SFAS 123R. Under this method, the provisions of SFAS 123R apply to all awards granted or modified after the date of adoption. In addition, the unrecognized expense of awards not yet vested at the date of adoption, determined under the original provisions of SFAS 123, shall be recognized in net income in the periods after the date of adoption. The Company had no unvested awards at March 31, 2009, and no awards were granted during the year ended September 30, 2008.

Income Taxes

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

Financial Instruments and Concentration of Credit Risk

The carrying amounts of the Company's financial assets and liabilities, including cash, accounts payable, and preferred shares with mandatory redemption at September 30, 2007, approximate fair value because of the short maturity of these instruments. The carrying amount of the Company's notes payable approximates fair value at March 31, 2009, since the notes are at floating rates or fixed rates that approximate current market rates for notes with similar risks and maturities.

Preferred Shares subject to mandatory redemption

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

New Accounting Standards

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

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FALCON RIDGE DEVELOPMENT, INC. and SUBSIDIARIES

Notes to Consolidated Financial Statements

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

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

SFAS No. 153, "Exchanges of Non-monetary Assets" - an amendment of APB Opinion No. 29, is effective for fiscal years beginning after June 15, 2005. This statement addresses the measurement of exchange of non-monetary assets and eliminates the exception from fair-value measurement for non-monetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, "Accounting for Non-monetary Transactions," and replaces it with an exception for exchanges that do not have commercial substance. The adoption of SFAS No. 153 did not have a material impact on the Company's financial statements.

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

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

(2) Related Party Transactions

The Company has been conducting its operations in a building rented by an affiliate. During the quarters ended March 31, 2009 and 2008, the Company recorded rent expense of $ 0 and $16,500, respectively.   The affiliate has suspended the lease for an indefinite period of time.

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

Indebtedness to related parties consisted of the following at March 31, 2009:

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FALCON RIDGE DEVELOPMENT, INC. and SUBSIDIARIES

Notes to Consolidated Financial Statements

Note payable  - to Karen Duran &/or Fred Montano, bearing interest at Published Prime plus 3%, payable in monthly installments of $20,000.00 plus interest commencing on October 1, 2007.  The note is secured by the land and development costs of the Spanish Trails development.  To March 31, 2009, no principle or interest payments have been made.

Total financing under the agreement is $1,136,074.

Karen Duran and Fred Montano have advanced the Company funds for working capital purposes during the year.  As of March 31, 2009, the amounts so advanced total $15,268.  The advances are not interest bearing.

On August 25, 2008, the Company borrowed $5,000 for working capital, from Troy Duran, director of the Company and the brother of Karen Duran.  The note was due February 5, 2009 and has an interest rate of 11%.

On December 10, 2008, the Company borrowed $3,000 from Sebastian Ramirez, a director of the Company.  The note bears interest at rates ranging from 15 to 25%.  The maturity date of the note is April 1, 2009. The note was issued with 100,000 warrants to purchase the Company’s common stock at a price of $.05 per share.  The warrants expire 30 months subsequent to the date of the note.  The Company computed the value of the warrants using the Black-Scholes model.  The discount rate was $1.620 and the computed volatility was 321.32%.  The term of the warrants is 2.5 years.  The computed value of the warrants was not material and no expense was recorded.

As of March 31, 2009, total indebtedness to related parties was $1,159,342.

(3) Fixed Assets

Fixed assets consist of the following at March 31, 2009:	Cost		Accumulated Depreciation
Computer Software & Hardware	$	24,496	$	4,356
Equipment		6,319		5,598
Website		26,030		8,463
Totals	$	56,845	$	18,417

Depreciation expense for the three months ended March 31, 2009 and 2008 was $1,994 and $3,989 respectively.

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FALCON RIDGE DEVELOPMENT, INC. and SUBSIDIARIES

Notes to Consolidated Financial Statements

(4) Real Estate Operations

The Company completed development of Sierra Norte I and II subdivisions in Rio Rancho, New Mexico in 2006. The Company is in the process of developing approximately 139 acres of raw land in the Belen, New Mexico referred to as "Spanish Trails." Spanish Trails consists of land platted into approximately 517 home sites. Home sites will be sold to different builders or developed by the Company.

Real estate held for development and sale, consists of the following at March 31, 2009:

Real estate held for development and sale $    1,201,995

During the quarter ended December 31, 2008, the Company became increasingly concerned regarding the carrying value of the Spanish Trails development.  As of September 30, 2008, consideration was given to reflecting impairment in the carrying value of $3,191,570.  However , due to market conditions in the New Mexico area and the targeted market price of our product in Spanish Trails, the Company determined that no material impairment of the asset had occurred in the period ending September 30, 2008.  In addition, steps taken by the US Government appeared to be stabilizing the real estate market.  However, in the quarter ending 12-30-08, the market continued to deteriorate and the pace of deterioration increased Management had also seen significant price reductions of real estate for sale in the surrounding area during the quarter ended December 31, 2008.  The company determined that the asset had in fact been impaired and an adjustment was made to reduce that carrying value by $1,989,577 resulting in a net carrying value of $1,200,000 as of December 31, 2009.  During the quarter ended March 31, 2009, the Company made a reclassification of $1,995 to the carrying value of Spanish Trails.

During the quarter ended March 31, 2009, the Company continued to evaluate the carrying value of Spanish Trails.  Most significant factors effecting the value of this project indicate the decrease in real estate values in the area has reached bottom and that no additional impairment of this assets is necessary as of March 31, 2009.

(5) Notes Payable

Note payable consists of the following at March 31, 2009:

Note payable Freedom Financial Note amount $200,000.00, interest payable at 10% per annum, conversation rights at renewal date with 2% renewal fee, Conversation option at $0.75

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

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FALCON RIDGE DEVELOPMENT, INC. and SUBSIDIARIES

Notes to Consolidated Financial Statements

Total financing under the agreement is $1,150,000.00.

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

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

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

In September of 2008, the issued a note payable at an interest rate of 11% due February 5, 2009.  The principal amount of the note is $10,000.

(6) Warrants

On October 8, 2007, the Company issued 2,000,000 warrants with an estimated value of $ 899,809 to Redwood Consulting LLC. The warrants have an exercise price of $0.50 per share, the warrants become exercisable either twelve months after the underlying common stock issuable in the exercise of these warrants is declared registered and effective by the SEC in the Company’s current SEC registration statement; or 5:30 P.M. Pacific Daylight Savings Time on October 8, 2015. The warrants expire 5:30 PM Pacific Daylight Savings Time on October 8, 2015, or twelve months after becoming exercisable. The Company has recorded consulting fees relating to these options of $443,646.  As of the date of this report, none of the warrants have vested.

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

During the three month period ending June 30, 2008, the Company issued 1,344,000 warrants with an estimated value of $ 106,590 to several shareholders with notes in the amount of $207,122. The warrants have an exercise price of $0.05 per share, the warrants become exercisable at the effective date. The warrants expire thirty months after becoming exercisable. The Company has recorded interest expense relating to these options of $6,352 for the quarter ended December 31, 2008.  As of the date of this report, all of the warrants have vested.

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FALCON RIDGE DEVELOPMENT, INC. and SUBSIDIARIES

Notes to Consolidated Financial Statements

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

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

Outstanding Options	Options Outstanding		Warrants Outstanding		Exercise Price
Granted		-		5,244,000	$	0.05 - 0.50
Exercised		-		-
Canceled		-		-
Balance, March 31, 2009		-		5,244,000	$	0.05 - 0.50

Following is a summary of the status of fixed options and warrants outstanding at March 31, 2009:

		Outstanding Options and Warrants					Exercisable Options and Warrants
Exercise Price Range		Number		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	0.50		2,000,000	7.4 years	$	0.50		-	$	0.00
	0.05		3,244,000	2.3 years	$	0.05		-	$	0.05

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FALCON RIDGE DEVELOPMENT, INC. and SUBSIDIARIES

Notes to Consolidated Financial Statements

(7) Income Taxes

A reconciliation of U.S. statutory federal income tax rate to the effective rate follows for the three month period ending June 30, 2008:

U.S. statutory federal rate	20.000	%
State income tax rate	4.80	%
Net operating loss for which no tax benefit is currently available	(24.800	)%
	0.00	%

For the three month period ending March 31, 2009 the Company estimated that it would have a loss for income taxes purposes and therefore reported no provision.

(8) Shareholders' Deficit

Preferred Stock

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

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

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

· Shares have a priority over common shares and other convertible preferred shares upon liquidation.

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

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FALCON RIDGE DEVELOPMENT, INC. and SUBSIDIARIES

Notes to Consolidated Financial Statements

On April 15, 2006, the Company established Series B Convertible Preferred Shares and authorized 400,000 shares. The preferences are as follows:

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

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

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

· Shares have a priority over common shares upon liquidation.

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

Preferred Shares subject to mandatory redemption

The features of our Series B Preferred Stock and determined that it falls within SFAS 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. Due to redemption features of the securities, the preferred shares are being classified as a liability in these financial statements. The securities give the holder the option of a net cash settlement or a settlement in common share based on a conversion rate.  The value of the liability is fixed at the stated value of $485,000.  However, the number of common shares into which the preferred shares are convertible is inversely related to changes in the Company’s common stock.  Although the potential conversion could conceivably require the Company to issue a number of shares in excess of its authorized limit, the Company does not believe that its liability recorded at December 31 2007, associated with the Series B preferred stock is appropriate in that such obligation would not exceed the aggregate stated value.

Classification of Real Estate Held for Development and Sale

At March 31, 2009, the classification of Real Estate Held for Development and Sale in the amount of $1,201,995 was removed from current assets and classified as a long-term asset.  Although the property is being held with the intend to develop or sell, due to the current difficulty in raising capital it is doubtful that the Company will be able to complete the development of Spanish Trails within its normal operating cycle of two-three years.

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Item 2.  Management’s Discussion and analysis of Financial Condition and Results of Operations

OVERVIEW

In mid to late 2008, conditions within the homebuilding industry became very challenging. Estimates are that home sales were down 15-20% at the end of period ending 9-30-08.  The downward trend has accelerated.  Despite current conditions, management believes that housing market conditions will improve.  This belief is based on many factors, not the least of which is the Government’s stimulus plan and their continued involvement. We estimate the improvement will occur over the long-term. In the short term, we expect that conditions will continue to be demanding, but the decline appears to be near the bottom. Several factors contributed to the difficult environment, including: lack of financing, continued high inventory levels for both new and existing homes, in addition to a glut of developed building lots, The result will be seen in continued downward pressure resulting in large price reductions and higher sales incentives. Adding to this stress is the credit tightening of the mortgage markets, along with increasing home foreclosures in many markets. These factors taken with other unforeseeable occurrences will result in lower gross profits for the industry in general

STRATEGY

We believe the long-term fundamentals, namely population growth and household formation, remain solid and will continue to support housing demand. This is especially true when put in the context of specific, targeted markets that the Company is in a position to enter. We also believe current market conditions are extremely challenging and demanding and will remain so for the near term. However, it will moderate over the long term. In the interim, we are exploring other areas related of real estate that could generate revenue for the Company. For instance, we are currently exploring potential merger(s) and/or acquisition(s) of related businesses and corporations.  Renegotiating or cancelling land option purchase contracts from current levels is also under serious consideration.  The ability to obtain financing, both for development and home building projects, and for home mortgages, remains extremely difficult to obtain. Any or all of these factors can predictably lower sales volume and gross profits significantly.   Management is also exploring how to best use its real estate and finance experience.  One area of focus is loan workouts. In this scenario the Company may create a division to help real estate owners in financial distress avoid foreclosure through the use of structured refinance and loan modifications.  Another, viable alternative is the purchase of financial instruments collateralized by real estate.  Falcon Ridge is in negotiations to purchase such instruments at a discount to their fair market value.  If successful the purchase of these instruments will be subject to financing which may be easier to obtain then financing for real-estate development at this time.  We believe if successful this can provide the Company a method to enhance shareholder value during this real estate downturn.  This would constitute a change in corporate strategy at least for the short term.

The following discussion of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and notes thereto included in Item 1 in this Quarterly Report on Form 10-QS. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements.

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Forward-Looking Statements

This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations, estimates, and projections about our industry, management beliefs, and certain assumptions made by our management. Words such as "anticipates," expects," "intends," "plans," "believes," "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the risk factors set forth in other reports and documents that we file from time to time with the Securities and Exchange Commission, particularly our Annual Reports on Form 10-KSB and any Current Reports on Form 8-K.

Overview and History

We are a Nevada corporation with two subsidiaries, Sierra Norte, LLC ("Sierra Norte") and Spanish Trails, LLC ("Spanish Trails"). We are in the real estate industry and acquire tracts of raw land and develop them into residential lots for sale to homebuilders. We plan to expand our operations in 2007 into homebuilding on our Spanish Trails lots. Our executive offices are located in the Albuquerque, New Mexico area.

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

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

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

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

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

Our Spanish Trails project is progressing through local real estate governmental clearance toward final approval of our platting plan. We anticipate the process should be completed by mid-2008. When our platting plan receives final approval, we will be able to begin construction of the first phase of development of approximately 517 lots for single family homes. Considerable up front costs in any real estate platting project must first be incurred and paid for, thus in the early stages of our real estate projects significant amounts of capital can be required until platting occurs, and lots are improved and sold. Predictably, greater revenues will be achieved as soon as a portion of the lots are improved and sold. When the lot development has been completed and accepted by the Valencia County, New Mexico, engineers and construction of the lots completed, the sale of those lots will be funded and closed. It is also our intention to initiate a home building division on some of the remaining developed Spanish Trails project lots not sold to homebuilders. We expect to have initial models open in the Spring of 2008. The sale of homes and, consequently, the pace of construction, will be determined by the rate of market absorption.

Results of Operations

Three  and Six Month Periods Ending March 31, 2009 Compared to Three and Six Month Periods Ending March 31, 2008

We had no revenue for the three and six month periods ended March 31, 2009.  For the corresponding periods ended March 31, 2008 we had revenues of $35,143 and $82,453 respectively.  This revenue was provided by our real estate services companies, which consisted of application, qualification and loan processing fees attributable to our mortgage division. The Mortgage division was incorporated in the State of New Mexico and its Certificate of Organization was issued on or about August 3, 2007, under the name Falcon Ridge Investments, LLC. It has been operating since as a wholly owned subsidiary of Falcon Ridge Development, Inc. We are in the process of exploring how to expand personnel, locations and licensing in other States.

To conserve cash the Company has used cash and stock issuances to compensate consultants and employees.  For the quarter needed March 31, 2009, the company did not make additional expenditure to consultants.  For three and six month periods ended March 31, 2008, the company compensated consultants and employees $2,917,700 and $3,303,146 respectively.  The reduction reflects the down turn in the real estate market.

Our selling, general and administrative expenses for the three and six month periods ending March 31, 2009 were $18,380 and 29,428 respectively.  This compares to $90,267 and 29,428 for the corresponding periods ended March 31, 2008.  The major components of these expenses are rent, utilities, office, and accounting and legal fees.. The reduction in selling general and administrative expenses is due to general down turn in the real estate industry and the Company has cut back on expenses.  An affiliate from whom the Company rents its office space has suspended the lease for an indefinite period of time.   In February of 2009, the Company moved its offices to the home of its president to further reduce overhead expenses.

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Our principal potential source of revenue in the near term is expected to be from 139 acres of land we own in the Spanish Trails project, which is being developed as discussed above. In this development, we plan to build homes as well as develop and construct the community. The timeframe over which developed lots and or homes will be sold may be several years.  As noted in notes payable, the Company on August 1, 2008 became in default on its mortgage of $1,150,000 to Metro Loan Corp .  The mortgage company has not initiated foreclosure proceedings to date.  The management of Falcon Ridge is considering its options which include tendering the deed in lieu of foreclosure. Should either of these two events occur, the Company could lose it major revenue producing asset.

The Spanish Trails development could be sold to another developer or to a builder and the Company is attempting to find buyer or buyers.  However, in the current depressed real estate market, the management to date had not located a buyer.  Unless management is able to raise sufficient funds to further develop this site, it future as a revenue producing asset is at risk.

Due to the continued economic depressed real estate market, particularly during the quarter ended December 31, 2008, the Company recorded an impairment adjustment to its carrying value of Spanish Trails of $1,989,576 reducing its carrying value to $1,200,000.

Liquidity and Capital Resources

At March 31, 2009, had a negative balance in its cash account of $1,051 which is included in accounts payable in the balance sheet.

Our net cash used in operating activities for the six months ending March 31, 2009 was $9,788  compared to $90,110 for the six months ending March 31, 2008.  The reduction in net cash used by operating activities was due primarily to a cut back in operations of the Company by its management.

Our net cash from investing activities was $2,973 for the six month period ending March 31, 2009, compared to $2,833 cash used by investing activities for the six month period ending March 31, 2008.

 Our net cash provided by financing activities was $5,876 for the quarter ended March 31, 2009, compared to $22m692 for the six month period ending March 31, 2008.

The timing of the completion of the platting of our Spanish Trails project is not certain, so we cannot assure the timing of cash flow from lot sales. We are faced with a severe working capital shortage. In our efforts to seek financing, it may not be available or, if available, it could be on terms which are cost prohibitive to us.  As noted above the Spanish Trails development is in foreclosure with Metro Loan Corp.  The mortgage amount is $1,150,000.  Unless the Company can negotiate a loan extension on favorable terms, the future revenue from this development is at high risk. To date the mortgage holders has not initiated foreclosure proceedings.

Management is currently searching for a business model which it could bring into the Company which would provide the opportunity to increase significantly its asset base and correspondingly its revenue producing ability.  While management is working diligently towards this goal, there is no assurance that it will succeed.   Please see “STRATEGY” section above for a more complete explanation of the business opportunities the Company is pursuing.

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Recently Issued Accounting Pronouncements

       We do not expect the adoption of any recently issued accounting pronouncements to have a significant impact on our net results of operations, financial position, or cash flows.

Critical Accounting Policies

       The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

       We believe that the estimates and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require our most difficult, subjective or complex judgments, form the basis for the accounting policies deemed to be most critical to us. These critical accounting policies relate to bad debts, impairment of intangible assets and long lived assets, contractual adjustments to revenue, and contingencies and litigation. We believe estimates and assumptions related to these critical accounting policies are appropriate under the circumstances; however, should future events or occurrences result in unanticipated consequences, there could impact on our future financial conditions or results of operations.

Item 3.  Qualitative and Qualitative Disclosures about Market Risk

There are none to report.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial (and principal accounting) Officer, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30, 2008.  Based upon that evaluation and the identification of the material weakness in the Company’s internal control over financial reporting as described below under “Management’s Report on Internal Control over Financial Reporting,” the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were ineffective as of the end of the period covered by this report.

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Management's Report on Internal Control over Financial Reporting 

A company’s internal control over financial reporting is a process designed by, or under the supervision of, a public company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”) including those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

 Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has assessed the effectiveness of our internal control over financial reporting as of September 30, 2008. In making this assessment, our management used the criteria established in  Internal Control—Integrated Framework  issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 

During this evaluation, the Company identified a material weakness in its internal control over financial reporting.  A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.  The identified material weakness consists of, as of the end of the period covered by this report, limited resources and limited number of employees, namely the lack of an audit committee, an understaffed financial and accounting function, and the need for additional personnel to prepare and analyze financial information in a timely manner and to allow review and on-going monitoring and enhancement of our controls.

Based on our assessment and the criteria discussed above, the Company has concluded that, as of September 30, 2008, the Company’s internal control over financial reporting was not effective as a result of the aforementioned material weakness.

Notwithstanding the material weakness in the Company’s internal control over financial reporting and the Company’s consequently ineffective disclosure controls and procedures discussed above, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented in accordance with the U. S. generally accepted accounting principles.

This quarterly report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.

Plan for Remediation of Material Weaknesses

In response to the identified material weakness, the Board of Directors planned to form an audit committee by the end the second fiscal quarter, March 31, 2009.   However, due to limited resources, the Company was unable to establish and audit committee as of that date.  Subject to additional funding the Company will for an audit committee as soon a reasonable practicable.  With oversight from this committee, we plan to improve our control environment and to remedy the identified material weakness by expanding the resources available to the financial reporting process.  These ongoing efforts are to include: (i) evaluating and improving our existing internal control documentation to develop clear identification of key financial and reporting controls; (ii) a restructuring of our existing personnel in order to achieve a full-time equivalent position in our accounting department to improve segregation of duties.

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Limitations on Effectiveness of Controls and Procedures

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

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter ended March 31, 2009 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.  Legal Proceedings

There are no current legal proceedings in which the Company is involved.

Item 1a.  Risk Factors

There have been no material changes in risk factors subsequent to September 30, 2008.  Please see the 10-K for a discussion of these factors.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

There were no shares of unregistered equity securities issued during the quarter ended March 31, 2009.

Item 3.  Defaults Upon Senior Securities

On August 1, 2008, the Company was in default on a loan in the amount of $1,150,000 to Metro Loan Corp.  The loan is secured by a first mortgage on its Spanish Trails development.   The lender has not initiated foreclosure proceedings at the date of this filing.   Please see Management’s Discussion and Analysis of the Results of Operations for further information.

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

During the quarter ended March 31, 2009, no matters were submitted to a vote of security holders.

Item 5.  Other Information

None

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Item 6.  Exhibits

Exhibit Number	Description
2.1	Agreement and Plan of Reorganization - Pocketspec Technologies, Inc. and Sierra Norte LLC
2.2	Acquisition Agreement - Pocketspec Technologies, Inc. and Spanish Trails, LLC
3.1	Articles of Incorporation of Falcon Ridge Development, Inc. previously filed.
3.2	Bylaws of Falcon Ridge Development, Inc. previously filed.
3.3	Articles of Organization of Sierra Norte, LLC previously filed.
3.4	Operating Agreement of Sierra Norte, LLC previously filed.
3.5	Articles of Organization of Spanish Trails, LLC previously filed.
3.6	Operating Agreement of Spanish Trails, LLC previously filed.
4.1	Articles of Amendment - Establishment of Series of Preferred Stock previously filed.
14.1	Code of Ethics
21.1	List of Subsidiaries
23.1	Consents of experts
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a)*
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a)*
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
99	Additional Exhibits - None

* Filed herewith

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Signatures

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

FALCON RIDGE DEVELOPMENT, INC.
By:	/s/ Fred M. Montano
	Fred M. Montano Chief Executive Officer

	By:	/s/ Karen Y. Duran
		Karen Y. Duran Chief Financial Officer
Date: July 6, 2009

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

Signature	Title	Date
/s/ Fred M. Montano	Chairman of the Board	July 6, 2009
Fred M. Montano
Directors and Chief Executive Officer
/s/ Karen Y. Duran	Chief Financial Officer	July 6, 2009
Karen Y. Duran
/s/ Sebastian Ramirez	Director	July 6, 2009
Sebastian Ramirez
/s/ Troy Duran	Director	July 6, 2009
Troy Duran

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