Rogue One, Inc. - Quarter Report: 2009 September (Form 10-Q)

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

FORM 10-Q

_______________


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

For the quarterly period ended September 30, 2009


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

MOD HOSPITALITY, INC.

(Exact name of registrant as specified in Charter)

NEVADA

000-24723

88-0393257

(State or other jurisdiction of

incorporation or organization)

(Commission File No.)

(IRS Employee Identification No.)

11710 Old Georgetown Road, Suite 808

North Bethesda, MD 20852

(Address of Principal Executive Offices)

(301) 230-9674

(Issuer Telephone number)

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

Yes S 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes £ No S

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


Large Accelerated Filer £		Accelerated Filer £
Non-Accelerated Filer £		Smaller Reporting Company S


Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.	Yes £ No S

State the number of shares outstanding of each of the issuer’s classes of common equity, as of November 13, 2009: 63,304, 829 shares of Common Stock.

MOD HOSPITALITY, INC.

FORM 10-Q

September 30, 2009

INDEX

PART I -- FINANCIAL INFORMATION


Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4T.	Controls and Procedures	24

PART II -- OTHER INFORMATION


Item 1	Legal Proceedings	24
Item 1A	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Submission of Matters to a Vote of Security Holders	25
Item 5.	Other Information	25
Item 6.	Exhibits	25

SIGNATURE		25

MOD HOSPITALITY, INC. F/K/A PSPP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


Assets
		September 30,		December 31,
		2009		2008
		Unaudited		Audited

Current assets
Cash and cash equivalents	$	752,629	$	728,349
Accounts receivable		320,852		157,791
Inventory		6,900		-
Prepaid Expenses		157,450		183,223
Total current assets		1,237,831		1,069,363

Property and equipment
Furniture, fixtures and equipment, net of depreciation		4,012,403		2,742,877
Total property and equipment		4,012,403		2,742,877

Other assets
Franchise fees, net of amortization		135,900		135,900
Construction in- progress		-		1,139,531
Investments, net		58,000		58,000
Deposits		18,230		41,103
Total other assets		212,130		1,374,534

Total assets	$	5,462,364	$	5,186,774

The financial information presented herein has been prepared by management without audit by independent certified public accountants.

See accompanying notes to consolidated financial statements, which are an integral part of the financial statements

MOD HOSPITALITY, INC. F/K/A PSPP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


Liabilities and Stockholders' Equity
		September 30,		December 31,
		2009		2008
		Unaudited		Audited
Current liabilities
Accounts payable and accrued expenses	$	2,371,725	$	1,423,596
Escrow reserves		1,221,429		908,605
Accrued salaries and wages		12,611		107,692
Management fees payable		104,531		20,857
Taxes payable, rooms and other		27,253		387,689
Due to related party		620,024		368,565
Notes payable		1,720,070		1,116,699
Total current liabilities		6,077,643		4,333,703

Total liabilities		6,077,643		4,333,703

Commitments and contingencies		-		-

Stockholders' Equity
Preferred stock, $.001 par value, 10,000,000 shares authorized
1,000,000 shares outstanding		10,000		10,000
Common stock, $.001 par value, 175,000,000 shares authorized
63,304,829 shares outstanding as of September 30, 2009 and 6,941,168 shares
outstanding as of December 31, 2008		63,305		6,941
Additional paid-in capital		4,582,337		3,529,837
Accumulated deficit		(5,270,921)		(2,693,707)
Total stockholders' equity		(615,279)		853,071

Total liabilities and stockholders' equity	$	5,462,364	$	5,186,774

The financial information presented herein has been prepared by management without audit by independent certified public accountants

See accompanying notes to consolidated financial statements, which are an integral part of the financial statements

MOD HOSPITALITY, INC. F/K/A PSPP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


		For the three		For the three		For the nine		For the nine
		months ended		months ended		months ended		months ended
		30-Sep-09		30-Sep-08		30-Sep-09		30-Sep-08
		Unaudited		Unaudited		Unaudited		Unaudited

Revenue
Rooms	$	2,440,598	$	2,822,745	$	7,238,704	$	8,753,866
Food and beverage		37,055		22,775		70,730		88,936
Other income		191,121		253,156		639,986		740,714
Total operating revenue		2,668,774		3,098,676		7,949,420		9,583,516

Operating expenses
Rooms		630,645		777,562		1,970,616		2,239,409
Food and beverage		61,159		(43,585)		199,294		154,437
Rent		1,117,104		1,002,739		3,273,320		2,983,652
Management and franchise fees		294,090		235,477		837,905		898,510
General and administrative		701,220		1,118,770		2,248,848		2,185,541
Depreciation and amortization		286,549		186,046		859,647		558,138
Other expenses		336,692		393,248		613,097		1,032,104
Total operating expenses		3,427,459		3,670,257		10,002,727		10,051,791

Income (Loss) from operations		(758,685)		(571,581)		(2,053,307)		(468,275)

Other income (expenses)
Interest income		(293)		662		-		1,193
Interest expense		(133,672)		(198,352)		(523,908)		(590,744)
Total other income (expenses)		(133,965)		(197,690)		(523,908)		(589,551)

Income (loss) before provision for income taxes		(892,650)		(769,271)		(2,577,215)		(1,057,826)

Provision for income taxes		-		-		-

Net income (loss)	$	(892,650)	$	(769,271)	$	(2,577,215)	$	(1,057,826)

Net loss per common share
Basic	$	(0.02)	$	(1.19)	$	(0.06)	$	(1.64)
Diluted	$	(0.02)	$	(1.19)	$	(0.06)	$	(1.64)

Weighted average of common shares outstanding
Basic - split adjusted		45,389,272		644,499		45,389,272		644,499
Diluted - split adjusted		45,389,272		644,499		45,389,272		644,499

Dividends declared per common share	$	-	$	-	$	-	$	-

The financial information presented herein has been prepared by management without audit by independent certified public accountants

See accompanying notes to consolidated financial statements, which are an integral part of the financial statements

MOD HOSPITALITY, INC. F/K/A PSPP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


		For the nine		For the nine
		months ended		months ended
		September 30, 2009		September 30, 2008
Cash flows from operating activities:		Unaudited		Unaudited
Net loss	$	(2,577,215)	$	(1,057,826)
Adjustments to reconcile net loss from operations to
net cash used in operating activities:
Stock issued for services
Depreciation and amortization		859,647		558,138
Franchise Fee amortization				8,600
(Increase) decrease in:
Prepaid expenses		25,773		90,558
Accounts receivable		(163,061)		153,545
Inventory		(6,900)		(562)
Deposits		22,873		3,971
Increase (decrease) in:
Accounts payable and accrued expenses		948,130		429,494
Escrow reserves		312,824		550,226
Accrued Salaries		(95,081)		17,735
Management Fees		83,674		(5,408)
Taxes payable, rooms and other		(360,436)		182,381
Net cash provided by (used in) operating activities		(949,772)		930,852

Cash flows from investing activities
Investment				(58,000)
Purchase of furniture, fixtures and equipment		(989,642)		(657,961)
Net cash (used in) investing activities		(989,642)		(715,961)

Cash flows from financing activities
Proceeds from capital contribution		1,108,864		615
Proceeds from notes payable		603,371		160,000
Due to related party, net		251,459		-
Net cash provided by (used in) financing activities		1,963,694		160,615

Net increase (decrease) in cash and cash equivalents		24,280		375,506
Cash and cash equivalents , beginning of year		728,349		806,806
Cash and cash equivalents, end of year	$	752,629	$	1,182,312

Supplemental disclosure of cash flow information:
Interest Paid	$	-	$	-
Taxes Paid	$	-	$	-

The financial information presented herein has been prepared by management without audit by independent certified public accountants

See accompanying notes to consolidated financial statements, which are an integral part of the financial statements

MOD HOSPITALITY, INC.

f/k/a PSPP HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

September 30, 2009

__________________________________________________________________________________________________

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUTING POLICIES AND BASIS OF PRESENTATION

Nature of Business

Mod Hospitality, Inc. f/k/a PSPP Holdings, Inc. (“the Company”) was incorporated in the State of Delaware in 1993. In 1997, the Company changed its Corporate Charter to the State of Nevada. As of September 30, 2009, the Company maintained its Corporate Charter in the State of Nevada.

On September 22, 2008, the Company changed its name to Mod Hospitality, Inc.

On February 12, 2008, East Coast Realty Ventures, LLC (ECRV, LLC) purchased from Airport Road Associates One, LLC ("Airport LLC"), the then controlling shareholder of the issuer, 900,000 shares of Preferred Stock and 25,865,000 shares of Common Stock in a privately negotiated transaction. ECRV, LLC paid $153,750 for the Preferred and Common Stock.

As of February 12, 2008, ECRV, LLC may be deemed to have sole voting power over 132,873,855 shares of Common Stock (which includes the 107,008,855 votes from the Series A Shares) and dispositive power over 81,553,282 shares of Common Stock (which includes shares of Common Stock issuable upon the conversion of the Series A Shares). Airport LLC may be deemed to have shared voting and dispositive power over no shares of Common Stock.

As of February 12, 2008, Frederic Richardson may be deemed to have sole voting and dispositive power over no shares of Common Stock and may be deemed to have shared voting power over 132,873,855 shares of Common Stock (which includes the 107,008,855 votes from the Series A Shares held by Airport LLC) and shared dispositive power over 81,553,282 shares of Common Stock (which includes shares of Common Stock issuable upon the conversion of the Series A Shares held by Airport LLC).

On March 26, 2008, ECV Holdings, Inc. (“ECV”) is a corporation formed under the laws of Delaware. On April 4, 2008, ECV entered into a stock for membership interest agreement with East Coast Realty Ventures, LLC (“ ECRV ”) which owned all of the issued and outstanding capital (the “ Membership Interest ”) of ECRV Hanover LeaseCo, LLC (the “ Hanover ”), ECRV Clinton LeaseCo, LLC (the “ Clinton ”), and ECRV FM LeaseCo, LLC (the “ Absecon ”). Hanover, Clinton, and Absecon are limited liability companies organized under the law of the State of Delaware. As a result of the stock for membership interest transaction, ECV acquired 100% of the membership interest in Hanover, Clinton and Absecon by issuing Frederic Richardson 100,000 shares of its common stock.

Effective May 8, 2008, ECV entered into a share exchange agreement with Frederic Richardson, and FLNU, a non-reporting small public company listed on the Pink Sheets Grey Market, whereby, Frederic Richardson transferred to FLNU 100% of the issued and outstanding common stock of ECV, in exchange for 28,000,000 shares of common stock of FLNU, which represents 80% of FLNU’s outstanding common stock. As a result of the share exchange transaction, Hanover, Clinton and Absecon became the wholly owned subsidiaries of FLNU.

On October 21, 2008 (“the Closing Date”), the Company acquired all of the issued and outstanding common stock of ECV Holdings, Inc., (“ECV”) a Delaware corporation, in accordance with the Share Exchange Agreement. On the Closing Date, pursuant to the terms of the Securities Exchange Transaction, the Company acquired all of the outstanding common stock of ECV from Flora Nutrients, Inc. (“FLNU”). In exchange, the Company issued FLNU 50,000,000 common stock, or approximately 99.912% of the Company’s common stock outstanding.

The Company conducts its business operations through ECRV Hanover LeaseCo, LLC (“Hanover”), ECRV Clinton LeaseCo, LLC (“Clinton”), and ECRV FM LeaseCo, LCC (“Absecon”).

Hanover was organized as a limited liability company under the laws of the State of Delaware on June 16, 2006. Clinton was organized as a limited liability company under the laws of the State of Delaware on March 08, 2007. Absecon was organized as a limited liability company under the laws of the State of Delaware on May 10, 2007.

Basis of Presentation

The accompanying consolidated interim unaudited financial statements of the Company as of September 30, 2009, and the six months ended September 30, 2009 and 2008 have been prepared in accordance with accounting principles generally accepted for interim unaudited financial statement presentation and in accordance with the instructions to Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statement presentation. In the opinion of management, all adjustments for a fair statement of the results of operations and financial position for the interim period presented have been included.

All such adjustments are of a normal recurring nature. This interim financial information should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K as of December 31, 2008.

The summary of significant accounting policies is presented to assist in the understanding of the financial statements. The financial statements and notes are the representation of management. These policies conform to accounting principles generally accepted in the United States of America and have been consistently applied.

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 the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent in the financial reporting process, actual results may differ significantly from those estimates.

Cash and cash Equivalents

The Company maintains cash balances in non-interest bearing accounts that currently do exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. There were cash equivalents as of September 30, 2009 and December 31, 2008 of $752,629 and 728,349 respectively. Historically, the Company has not incurred any losses due the accounts that exceed federally insured limits.

Fair Value of Financial Instruments

The Company measures their financial assets and liabilities in accordance with accounting principles generally accepted in the United States. For certain of the Company’s financial instruments, including cash, accounts payable and accrued expenses, the carrying amounts approximate fair value due to their short maturities.

FASB Interpretation No. (FIN) 46, “Consolidation of Variable Interest Entities”

As of September 30, 2009 and December 31, 2008, the Company considered the provisions of FASB Interpretation No. (FIN) 46, “Consolidation of Variable Interest Entities” specifically as it relates to the entities controlled by the majority shareholder of the Company. As of September 30, 2009 and December 31, 2008, the accompanying financial statements only include the accounts of the Company.

Net Loss per Share Calculation

In February 1997, the FASB issued SFAS No. 128, “Earnings per Share.” Basic net loss per common share ("EPS") is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per shares is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued.

Revenue and Expense Recognition

The Company recognizes income from the management of the properties in accordance with the accrual basis of accounting, that is, when the services and products are provided for hotel guests and there is no uncertainty as to cash collections; i.e. upon receipt of cash/check payment or credit card from the hotel guests. The Company recognizes expenses related to the management of the properties in accordance with the accrual basis of accounting, that is, when the expense is incurred.

Advertising, Sales and Marketing Expenses

The Company incurs sales and marketing expenses in conjunction with the production of promotional materials, and related travel costs. In accordance with the AICPA’s Statement of Position No. 93-7 “Reporting on Advertising Costs”, the Companies expense advertising and marketing costs as incurred or as the advertising takes place.

Income Taxes

Income taxes are provided for using the liability method of accounting in accordance with SFAS No. 109 "Accounting for Income Taxes," and clarified by FIN 48, "Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109." A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.

Investments

The Company accounts for investments, where the Company holds from 20% up to 50%, in the common stock, or membership interest, of an entity, using the equity method. The investment is initially recorded at cost and the carrying amount is adjusted to recognize the Company’s proportionate share of the earnings or losses of the investee after the date of acquisition. The amount of the adjustment is included in the determination of net income or loss of the Company in the period of the adjustment. Any dividends received from the investee reduce the carrying value of the investment.

Accounting Pronouncements

On January 1, 2009, the Company adopted Financial Accounting Standards Board (“FASB”) Statement No. 141R, Business Combinations (“FAS 141R”), FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets (“FSP FAS 142-3”), Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 (“FSP 160”), Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities (“FAS 161”), Emerging Issues Task Force (“EITF”) Issue No. 07-1 (“EITF 07-1”), Accounting for Collaborative Arrangements, EITF Issue No. 08-6, Equity Method Investment Accounting Considerations (“EITF 08-6”), EITF Issue No. 08-7, Accounting for Defensive Intangible Assets (“EITF 08-7”), FASB Staff Position EITF 03-6-1 , Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”) and FASB Staff Position APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)(“APB 14-1”).

FAS 141R expands the scope of acquisition accounting to all transactions under which control of a business is obtained. This standard requires an acquirer to recognize the assets acquired and liabilities assumed at the acquisition date fair values with limited exceptions. Additionally, FAS 141R requires that contingent consideration as well as contingent assets and liabilities be recorded at fair value on the acquisition date, that acquired in-process research and development be capitalized and recorded as intangible assets at the acquisition date, and also requires transaction costs and costs to restructure the acquired company be expensed. Transactions are now being accounted for under this standard. On April 1, 2009, the FASB issued Staff Position FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, which is effective January 1, 2009, and amends the guidance in FAS 141R to require that assets acquired and liabilities assumed in a business combination that arise fromcontingencies be recognized at fair value if fair value can reasonably be estimated. If the acquisition date fair value of an asset acquired or liability assumed that arises from a contingency cannot be determined, the asset or liability would be recognized in accordance with FASB Statement No. 5, Accounting for Contingencies (“FAS 5”) , and FASB Interpretation No. 14, Reasonable Estimation of the Amount of a Loss. If the fair value is not determinable and the FAS 5 criteria are not met, no asset or liability would be recognized.

FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets” (SFAS 142). The objective of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the assetunder SFAS 141(R), and other principles of GAAP. This FSP applies to all intangible assets, whether acquired in a business combination or otherwise, and shall be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years and applied prospectively to intangible assets acquired after the effective date. Early adoption is prohibited. We have evaluated the new statement and have determined that it will not have a significant impact on the determination or reporting of our financial results.

FAS 160 provides guidance for the accounting, reporting and disclosure of noncontrolling interests and requires, among other things, that noncontrolling interests be recorded as equity in the consolidated financial statements. The adoption of FAS 160 did not affect the

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 requires entities that use derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features contained within derivatives. SFAS 161 also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of SFAS 133 have been applied, and the impact that hedges have on an entity’s financial position, financial performance, and cash flows. The Company does not currently hold derivative instruments and was not impacted by the adoption of SFAS 161.

In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP 157-4), and FSP FASB 107-1 and Accounting Principles Board (APB) 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP 107-1). These two staff positions relate to fair value measurements and related disclosures. The FASB also issued a third FSP relating to the accounting for impaired debt securities titled FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP 115-2). These standards are effective for interim and annual periods ending after September 15, 2009. The Company has determined that FSP 157-4 and FSP 115-2 do not currently apply to its activities and has adopted the disclosure requirements of FSP 107-1.

In May 2009, the FASB issued Statement No. 165, “Subsequent Events” (“SFAS 165”), which establishes general standards of accounting for, and requires disclosure of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The Company adopted the provisions of SFAS 165 for the quarter ended September 30, 2009. The adoption of these provisions did not have a material effect on the Company’s consolidated financial statements.

The Company evaluated subsequent events through the time of filing this Quarterly Report on Form 10-Q on August 13, 2009. We are not aware of any significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on our Condensed Consolidated Financial Statements.

EITF 08-6, which is effective January 1, 2009, clarifies the accounting for certain transactions and impairment considerations involving equity method investments and is applied on a prospective basis to future transactions.

EITF 08-7, which is effective January 1, 2009, clarifies that a defensive intangible asset (an intangible asset that the entity does not intend to actively use, but intends to hold to prevent others from obtaining access to the asset) should be accounted for as a separate

unit of accounting and should be assigned a useful life that reflects the entity’s consumption of the expected benefits related to the asset. EITF 08-7 is applied on a prospective basis to future transactions.

FSP EITF 03-6-1 clarifies that share-based payment awards that entitle holders to receive nonforfeitable dividends before they vest will be considered participating securities and included in the earnings per share calculation pursuant to the two class method. The effect of adoption of FSP EITF 03-6-1 was not material to the Company’s consolidated results of operations.

APB 14-1 requires the issuer to separately account for the liability and equity components of convertible debt instruments in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The guidance will result in companies recognizing higher interest expense in the statement of operations due to amortization of the discount that results from separating the liability and equity components. APB 14-1 was adopted on January 1, 2009, and did not affect the Company’s consolidated financial position or consolidated results of operations.

Recently Issued Accounting Standards

The FASB recently issued Staff Position FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP FAS 157-4”), Staff Position FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (“FSP FAS 115-2/124-2”) and Staff Position FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP FAS 107-1/APB 28-1”).

Under FSP FAS 157-4, if an entity determines that there has been a significant decrease in the volume and level of activity for an asset or liability in relation to the normal market activity for the asset or liability (or similar assets or liabilities), then transactions or quoted prices may not accurately reflect fair value. In addition, if there is evidence that the transaction for the asset or liability is not orderly, the entity shall place little, if any, weight on that transaction price as an indicator of fair value. Since FSP FAS 157-4 is effective for interim reporting periods ending after September 15, 2009, the Company will adopt the provisions of FSP FAS 157-4 during the second

quarter of 2009 and is currently assessing the impact of adoption on its consolidated financial position and consolidated results of operations.

FSP FAS 115-2/124-2 changes existing guidance for determining whether debt securities are other-than-temporarily impaired and replaces the existing requirement that the entity’s management assert it has both the intent and ability to hold an impaired security until recovery with a requirement that management assert: (a) it does not have the intent to sell the security; and (b) it is more likely than not it will not have to sell the security before recovery of its cost basis. FSP FAS 115-2/124-2 requires entities to separate an other-than-temporary impairment of a debt security into two components when there are credit related losses associated with the impaired debt security for which management asserts that it does not have the intent to sell the security, and it is more likely than not that it will not be required to sell the security before recovery of its cost basis. The amount of the other-than-temporary impairment related to a credit loss is recognized in earnings, and the amount of the other-than-temporary impairment related to other factors is recorded in other comprehensive loss. Since FSP FAS 115-2/124-2 is effective for interim reporting periods ending after September 15, 2009, the Company will adopt the provisions of FSP FAS 115-2/124-2 during the second quarter of 2009 and is currently assessing the impact of adoption on its consolidated financial position and consolidated results of operations.

FSP FAS 107-1/APB 28-1 requires disclosures about fair values of financial instruments in interim and annual financial statements. Prior to the issuance of FSP FAS 107-1/APB 28-1, disclosures about fair values of financial instruments were only required to be

disclosed annually. FSP FAS 107-1/APB 28-1 requires disclosures about fair value of financial instruments in interim and annual financial statements. Since FSP FAS 107-1/APB 28-1 is effective for interim reporting periods ending after September 15, 2009, the Company will adopt FSP FAS 107-1/APB 28-1 in the second quarter 2009. Since FSP FAS 107-1/APB 28-1 requires only additional disclosures of fair values of financial instruments in interim financial statements, the adoption will not affect the Company’s consolidated financial position or consolidated results of operations.

In September 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment to SFAS No. 140 (SFAS 166). SFAS 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. SFAS 166 is effective for fiscal years beginning after November 15, 2009. The Company will adopt SFAS 166 in fiscal 2010 and is evaluating the impact it will have on the consolidated results of the Company.

In September 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167). The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS 167 is effective for the first annual reporting period beginning after November 15, 2009 and for interim periods within that first annual reporting period. The Company will adopt SFAS 167 in fiscal 2010 and is evaluating the impact it will have on the consolidated results of the Company.

In September 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (SFAS 168). SFAS 168 replaces FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles, and establishes the FASB Accounting Standards Codification ^TM (the Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (GAAP). SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The Company will begin to use the new Codification when referring to GAAP in its quarterly report on Form 10-Q for the quarter ending September 30, 2009. This will not have an impact on the consolidated results of the Company.

EITF 07-1 defines collaborative arrangements and establishes reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties. The effect of adoption of EITF 07-1 did not affect the Company’s consolidated financial position or consolidated results of operations.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification ^TM and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162,” (“SFAS

168”). SFAS 168 establishes the FASB Accounting Standards Codification ^TM(“Codification”) as the source of authoritative generally accepted accounting principles (“GAAP”) for nongovernmental entities. The Codification does not change GAAP. Instead, it takes the thousands of individual pronouncements that currently comprise GAAP and reorganizes them into approximately 90 accounting Topics, and displays all Topics using a consistent structure. Contents in each Topic are further organized first by Subtopic, then Section and finally Paragraph. The Paragraph level is the only level that contains substantive content. Citing particular content in the Codification involves specifying the unique numeric path to the content through the Topic, Subtopic, Section and Paragraph structure. FASB suggests that all citations begin with “FASB ASC,” where ASC stands for Accounting Standards Codification. Changes to the ASC subsequent to June 30, 2009 are referred to as Accounting Standards Updates (“ASU”).

In conjunction with the issuance of SFAS 168, the FASB also issued its first Accounting Standards Update No. 2009-1, “Topic 105 –Generally Accepted Accounting Principles” (“ASU 2009-1”) which includes SFAS 168 in its entirety as a transition to the ASC. ASU 2009-1 is effective for interim and annual periods ending after September 15, 2009 and will not have an impact on the Company’s financial position or results of operations but will change the referencing system for accounting standards. Certain of the following pronouncements were issued prior to the issuance of the ASC and adoption of the ASUs. For such pronouncements, citations to the applicable Codification by Topic, Subtopic and Section are provided where applicable in addition to the original standard type and number.

The FASB issued ASU 2009–05, “Fair Value Measurements and Disclosures (Topic 820) – Measuring Liabilities at Fair Value” in August 2009 to provide guidance when estimating the fair value of a liability. When a quoted price in an active market for the identical liability is not available, fair value should be measured using (a) the quoted price of an identical liability when traded as an asset; (b) quoted prices for similar liabilities or similar liabilities when traded as assets; or (c) another valuation technique consistent with the principles of Topic 820 such as an income approach or a market approach. If a restriction exists that prevents the transfer of the liability, a separate adjustment related to the restriction is not required when estimating fair value. The ASU was effective October 1, 2009 for the Company and will have no impact on financial position or operations.

ASU 2009-12, “Fair Value Measurements and Disclosures (Topic 820) - Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent),” issued in September 2009, allows a company to measure the fair value of an investment that has no readily determinable fair market value on the basis of the investee’s net asset value per share as provided by the investee. This allowance assumes that the investee has calculated net asset value in accordance with the GAAP measurement principles of Topic 946 as of the reporting entity’s measurement date. Examples of such investments include investments in hedge funds, private equity funds, real estate funds and venture capital funds. The update also provides guidance on how the investment should be classified within the fair value hierarchy based on the value for which the investment can be redeemed. The amendment is effective for interim and annual periods ending after December 15, 2009 with early adoption permitted. The Company does not have investments in such entities and, therefore, there will be no impact to its financial statements.

ASU 2009-13, “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements – a consensus of the FASB Emerging Issues Task Force” was issued in October 2009 and provides guidance on accounting for products or services (deliverables) separately rather than as a combined unit utilizing a selling price hierarchy to determine the selling price of a deliverable. The selling price is based on vendor-specific evidence, third-party evidence or estimated selling price. The amendments in the Update are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 with early adoption permitted. The Company does not expect the update to have an impact on its financial statements.

Issued October, 2009, ASU 2009-15, “Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing” amends ASC Topic 470 and provides guidance for accounting and reporting for own-share lending arrangements issued in contemplation of a convertible debt issuance. At the date of issuance, a share-lending arrangement entered into on an entity’s own shares should be measured at fair value in accordance with Topic 820 and recognized as an issuance cost, with an offset to additional paid-in capital. Loaned shares are excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs. The amendments also require several disclosures including a description and the terms of the arrangement and the reason for entering into the arrangement. The effective dates of the amendments are dependent upon the date the share-lending arrangement was entered into and include retrospective application for arrangements outstanding as of the beginning of fiscal years beginning on or after December 15, 2009. The Company has no plans to issue convertible debt and, therefore, does not expect the update to have an impact on its financial statements.

NOTE 2

FURNITURE, FIXTURES AND EQUIPMENT

Furniture and fixtures are recorded at cost. Depreciation is computed using the straight-line method; i.e. original cost divided by the estimated useful lives of the related assets, which is 5 years. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounting records, and any resulting gain or loss is reflected in the Statement of Operations for the period. The cost of maintenance and repairs are charged to income as incurred. Renewals and betterments are capitalized and depreciated over their estimated useful lives.

For the three months ended September 30, 2009 and 2008, the depreciation expense was $859,647 and $558,138, respectively.

NOTE 3

MANAGEMENT AGREEMENTS

Hanover leases the Holiday Inn Express flag for a hotel located in Hanover, Maryland. Absecon leases the Marriott’s Fairfield Inn flag for a hotel located in Absecon, New Jersey. The Clinton is a private hotel located in South Beach, Miami, Florida with no franchise or licensing agreements.

In September 2008, Company terminated PPHG’s management agreement for the Clinton Hotel in South Beach, Miami, Florida. In February 2009, the Company terminated PPHG’s management agreement for the Holiday Inn Express in Hanover, Maryland. The Company retained the management services of Mid-Atlantic Realty Group for Hanover and Presidential Management for Clinton. Mid-Atlantic Realty Group is an entity controlled by the Company’s majority shareholder and CEO, Mr. Richardson.

NOTE 4

PROPERTY IMPROVEMENT PLAN

A Property Improvement Plan (PIP) for the property located in Absecon, New Jersey has been completed and all reserved funds have been spent on capital improvements.

NOTE 5

FRANCHISE FEES

As of September 30, 2009, Hanover paid $64,5000 in franchise fees for the use of the Holiday Inn Express Flag, and Absecon paid $80,000 in franchise fees for the use of Marriott’s Fairfield Inn flag. Clinton did not incur any franchise fees when it was acquired in 2007. As of September 30, 2009, management of the Company has determined that the franchise fees have an indefinite useful life. Therefore, pursuant to SFAS no. 142, the franchise fees are not being subject to amortization rather they are subject to an impairment test by management. Management has conducted an impairment test and has determined that as of September 30, 2009, the franchise fees are not subject to any impairment adjustment; therefore, the carrying value of the franchise fees at their original cost of $144,500.

NOTE 6

BASE RENT AND ADDITIONAL RENT

There exists a triple net master lease between each of the Company’s subsidiaries, the master lessee and the tenant in common investors who own the buildings, in accordance with the master lease agreements. The master leases have a term of 15 years, but shall terminate upon the sale of the properties by the investors.

The tenants in common investors acquired the property subject to the master lease and became parties to the master lease. Except for certain reserves and escrows that are required under the terms of the loan, the master lessee is responsible for all costs of operating, managing, leasing, and maintaining the property during the term, excluding the payment of all capital expenses, which have been defined in the master lease.

The accompanying consolidated financial statements reflect the base rent expense to comply with the provisions of SFAS no. 13 paragraph 15. The base rent payments are not being made on straight-line basis over the life of the leases; however, the base rent expense is being recognized on a straight-line basis over the life of the leases.

For the period ended September 30, 2009 and the year ended December 31, 2008, the rent payable included in the current liabilities is $1,432,137.52 and $460,404 , respectively.

Base Rent: Hanover

Hanover pays base rent in equal monthly installments derived from the following annual yields on net cash equity investment:


Year	Annual Yield	Year	Annual Yield
Year 1	8.00%	Year 6	10.50%
Year 2	8.50%	year 7	10.50%
Year 3	9.00%	Year 8	10.50%
Year 4	9.25%	Year 9	10.50%
Year 5	10.50%	Year 10 - 15	10.50%

Base rent is paid, monthly, in arrears as follows:


Year		Total Base	Year		Total Base
Year 1	$	756,000	Year 6	$	992,250
Year 2		803,250	Year 7		992,250
Year 3		850,500	Year 8		992,250
Year 4		874,125	Year 9		992,250
Year 5		992,250	Year 10 - 15		992,250

Additional rent due under the lease is a combination of the principal, interest, reserves, tax, and insurance escrows due under the loan. Any funds remaining in any of the reserves or escrows are the property of Hanover.

For the three months ended September 30, 2009 and 2008 the base rent expense was $214, 594 and $211,254, respectively.

Base Rent: Clinton

Clinton pays the base rent in equal monthly installments derived from the following annual yields on net cash equity investment:


Year	Annual Yield	Year	Annual Yield
Year 1	8.00%	Year 6	9.00%
Year 2	8.25%	Year 7	9.00%
Year 3	8.50%	Year 8	9.00%
Year 4	8.75%	Year 9	9.00%
Year 5	9.00%	Year 10 - 15	9.00%

Base rent is paid, monthly, in arrears as follows:


Year		Total Base	Year		Total Base
Year 1	$	405,157	Year 6	$	540,209
Year 2		438,020	Year 7		540,209
Year 3		450,625	Year 8		540,209
Year 4		463,229	Year 9		540,209
Year 5		534,807	Year 10 - 15		540,209

For the three months ended September 30, 2009 and 2008 the base rent expense was $155,409 and $150,840, respectively.

Base Rent: Absecon

Rental payments shall be equivalent to a cumulative and compounding annualized return of 10% on the $2,150,000 purchase price plus $150,000, at risk, interest rate reserve required by Prudential ($230,000).

The additional rent payments are equal to the mortgage, principle plus interest and the tax, insurance, and reserves, less the Furniture, Fixtures & Equipment (“FF&E”) reserve. The FF&E reserve is paid by Absecon as part of the additional rent payment, but the control of the reserve belongs to Absecon. The reserve will be used exclusively to pay for the direct FF&E needs of the hotel operation as determined by the Company and Park Place Hospitality Group. Excess funds, over and above the current needs of the Base Rent Escrow Account and the FF&E escrow reserve are deemed “excess” and distributed periodically to the investor and Absecon as follows: 75% to investor as a rent extension payment and 25% to Absecon for services. This distribution sharing is subject to investor receiving full repayment of all invested funds and any accrued base rent through either refinancing or the excess distributable cash flow.

NOTE 7

LOANS PAYABLE

As of September 30, 2009 and December 31, 2008, the Company had notes payable with principal balances of $1,980,070 and $1,116,699, respectively.

These notes payable are demand notes payable with an interest rate of 10%. As of September 30, 2009 $1,720,070 of the notes payable are advances from the property owner at Absecon to cover the additional funds necessary to fulfill the $504,768 in the PIP and for operating cash flows. All of these funds were used for the Absecon property. The other notes payable with a principal balance of $243,474 were still issues as outstanding and continue to accrue interest expenses.

For the three months ended September 30, 2009 and 2008, the interest expense was $133,672 and $198,352 respectively.

NOTE 8

DUE TO RELATED PARTY

As of September 30, 2009 and December 31, 2008 the Company owed East Coast Realty Ventures, LLC, the former managing member of Hanover, Clinton and Absecon, an entity controlled by Frederic Richardson, the Company’s Chairman and CEO, $620,024 and $368,565, respectively under a demand note with no formal repayment requirements.

NOTE 9

COMMON AND PREFERRED STOCK

As of December 31, 2008, the majority shareholder of the Company, Frederic Richardson, directly or indirectly through FLNU was the owner of 25,000,000 shares. We made a reverse split of 10 to 1. The transfer agents inadvertently not recorded the shares. In the first quarter of 2009 FLNU was to be issued 50,000,000 shares. As of September 30, 2009, the shares were not issued. 1,750,000 shares were issued on May 5, 2009 and 52,500,000 shares were corrected in July 2009. Following table shows shares issued and outstanding during six months ending June 2009.


		No of Shares
Number of Shares as at December 31, 2008		6,941,168
Share issued on March 31, 2009		2,113,661
Share issued on May 5, 2009		1,750,000
Correction		52,500,000
		63,304,829

During the year ended December 31, 2008, 6,876,469 shares of common stock were issued at par value of $.001 for a total of $6,876 to certain individuals and entities for past consideration. The amount of $6,876 is included in general and administrative expenses.

As of September 30, 2009, the Company has 10,000,000 shares of preferred stock authorized and 1,000,000 issued and outstanding.

NOTE 10

REVERSE SPLIT AND SYMBOL CHANGE

On April 29, 2008, the Company increased our authorized common stock from 80,000,000 shares to 175,000,000 shares by filing a Certificate of Change pursuant to NRS 78.209.

Effective June 21, 2008, in order to meet a requirement of the Stock Purchase Agreement, as amended, between Airport Road Associates One, LLC (“Airport, LLC”) and East Coast Realty Ventures, LLC (“ECRV, LLC”), as previously reported on Form 8-K filed March 20, 2008, the Board of Directors of the Company has declared a 100 to 1 round lot reverse split of the Company’s Common Stock. In accordance with the reverse split, each shareholder will receive one (1) share of Common Stock for each one hundred (100) shares currently held. No fractional shares shall be issued; all fractional shares shall be rounded up to the next whole share. Any shareholder that should own less than one hundred (100) shares after completion of the reverse split shall be issued a sufficient number of additional shares so that each such shareholder shall own a minimum of one hundred (100) shares. The reverse split was effective as of the opening of trading on June 2, 2008. Additionally, also effective June 2, 2008, the Company’s trading symbol was changed to “PSPN” in conjunction with the reverse split of the Company’s common stock.

On August 11, 2008, the Company changed its name to Cynosure Holdings, Inc. by filing a Certificate of Amendment to Articles of Incorporation.

On August 11, 2008, the members of our Board of Directors were increased to six (6), and Mark T. Johnson and Marc D. Manoff, Esq. were appointed to the Board of Directors pursuant to the increase.

On August 21, 2008, the Company changed its name to Hybid Hospitality, Inc. by filing a Certificate of Amendment to the Articles of Incorporation.

On August 27, 2008, the Company changed its name to Mod Hospitality, Inc. by filing a Certificate of Amendment to the Articles of Incorporation.

Effective September 22, 2008, the Company completed a 1 for 10 reserve split of its common stock and changed its name to Mod Hospitality, Inc. with a new symbol “MODY.”

NOTE 11

INCOME TAXES AND CHANGE IN CONTROL

The Company has approximately $2,055,659 in gross deferred tax assets as of September 30, 2009, resulting from net operating loss carry forwards. A valuation allowance has been recorded to fully offset these deferred tax assets because the future realization of the related income tax benefits is uncertain. Accordingly, the net provision for income taxes is zero as of September 30, 2009.

As of September 30, 2009, the Company has federal net operating loss carry forwards of approximately $5,270,921 available to offset future taxable income through 2029 subject to the annual limitations imposed by Section 382 under the Internal Revenue Code due to the change in control. In February 2008, there was a change in control of the Company wherein Section 382 will apply to the net operating loss carryforward starting with the year ended December 31, 2008.

As of September 30, 2009, the difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to loss before income taxes is as follows (in percentages):


Statutory federal income tax rate	-34%
State taxes - net of federal benefits	-5%
Valuation allowance	39%

Income tax rate – net	0%

For the six months ended September 30, 2009, the valuation allowance adjustment was $372,962.

NOTE 12

REVERSE MERGER

On October 21, 2008, we underwent a reverse merger with ECV Holdings, Inc. (“ECV”), a Delaware corporation, pursuant to a share exchange agreement (the “Share Exchange Agreement”) with ECV and Flora Nutrients, Inc., a Nevada corporation and the sole shareholder of ECV (“FLNU”). The closing of the transaction took place on October 21, 2008 (the “Share Exchange Transaction”) and resulted in the acquisition of ECV. Pursuant to the terms of the Share Exchange Agreement, we acquired all of the outstanding common stock of ECV by issuing FLNU an aggregate of 50,000,000 shares representing 99.912% of our common stock outstanding. Since FLNU, the sole shareholder of ECV, will own 99.912% of the shares of our outstanding common stock upon the completion of the Share Exchange Transaction, ECV is the legal acquiree but the accounting acquirer in the reverse merger. Upon the completion of the Share Exchange Transaction, ECV (accounting acquirer, legal acquiree) will succeed to the business that we previously carried on, and will become the registrant. As a result, the historical financial statements presented going forward will be those of ECV (accounting acquirer, legal acquiree).

The Share Exchange Agreement contains customary terms and conditions for a transaction of this type, including representations, warranties and covenants, as well as provisions describing the consideration for the Acquisition, the process of exchanging the consideration and the effect of the acquisition.

As described above, on October 21, 2008, we acquired all of the issued and outstanding common stock of ECV, a Delaware corporation, in accordance with the Share Exchange Agreement. The closing of the transaction took place on October 21, 2008 (the “Closing Date”). On the Closing Date, pursuant to the terms of the Securities Exchange Transaction, we acquired all of the outstanding common stock of ECV from FLNU. In exchange, we issued FLNU 50,000,000 shares, or approximately 99.912% of our common stock outstanding. Since FLNU will own 99.912% of the shares of our outstanding common stock upon the completion of the Share Exchange Transaction, ECV is the legal acquiree but the accounting acquirer in the reverse merger. Upon the completion of the Share Exchange Transaction, ECV (accounting acquirer, legal acquiree) will succeed to the business that we previously carried on, and will become the registrant. As a result, the historical financial statements presented going forward will be those of ECV (accounting acquirer, legal acquiree).

ECV is a corporation formed on March 26, 2008 under the laws of Delaware. On April 4, 2008, ECV entered into a stock for membership interest agreement with East Coast Realty Ventures, LLC (“ECRV”) which owned all of the issued and outstanding capital (the “Membership Interest”) of ECRV Hanover LeaseCo, LLC (the “Hanover”), ECRV Clinton LeaseCo, LLC (the “Clinton”), and ECRV FM LeaseCo, LCC (the “Absecon”). Hanover, Clinton, and Absecon are limited liability companies organized under the law of the State of Delaware. As a result of the stock for membership interest transaction, ECV acquired 100% of the membership interest in Hanover, Clinton and Absecon by issuing Frederic Richardson 100,000 shares of its common stock.

NOTE 13

COMMITEMENTS AND CONTINGENCIES

Legal Proceedings

The principles of Marrior have defaulted on the previous lease hold interest loan. Beachview Restaurants, LLC as Plaintiff vs. ECRV Clinton Leaseco, LLC as Defendant, in the Circuit Court in and for Miami-Dade County, Florida Case NO. 07 29326 CA 22 which involves a dispute concerning a former lessee which had been evicted for non-payment of rent in 2007, claiming breach of lease and fraudulent inducement. It is unlikely that there will be an unfavorable outcome in this matter inasmuch as the Plaintiff has yet to state a cause of action regarding any breach of lease or inducement to sign the lease. There are sound defenses. The amount in controversy has been stated as merely in excess of $15,000.

Miami-Dade County, as Plaintiff vs. Clinton as Defendant, in the Circuit Court in and for Miami-Dade County, Florida, Case No. 07-32742 CA 22 which involves a dispute over a previously undisclosed water and sewer fee imposed by Miami-Dade County, Florida claiming non-payment of the bill. It is unlikely that there will be an unfavorable outcome in this matter in that it appears that the suit was filed beyond the applicable statute of limitations. The amount in controversy is claimed to be slightly in excess of $42,000.

Rafael Barrera vs. Clinton Hotel Investors, LLC and East Coast Realty Ventures, LLC, Miami-Dade County Circuit Court Case No. 08-67650 CA 24. Plaintiff, Barrera filed an eight (8) count Complaint; counts II, IV and VI apply exclusively to Clinton Hotel and counts I,III,V,VII, and VIII apply exclusively to East Coast Realty Ventures, LLC. Count II is for an alleged breach of the employment contract between Plaintiff and Clinton Hotel resulting from an alleged failure to pay four (4) months of base salary beginning on the date of Plaintiff’s termination. Count IV requests an accounting of vacation and bonus payments for the period beginning August 10, 2001 and ending on August 16, 2007. Count IV is for unjust enrichment based on an alleged failure to properly compensate Plaintiff. Clinton Hotel filed a Motion to Dismiss the Complaint which remains pending and is set for hearing on April 3, 2009. Plaintiff claims damages against Clinton Hotel in the approximate amount of $115,000, all of which is being denied by Clinton Hotel and which Clinton Hotel intends to vigorously defend.

As of September 30, 2009, management of the Company has determined that the amount of $172,000, which represents the approximate amount of the above lawsuits do not warrant an expense to be recorded in accompanying consolidated financial statements as of June 30, 2009.

In 2005, the Company retained the legal services of Weed & Co, LLP. On December 3, 2007, Weed & Co, LLP filed a complaint in Superior Court of the State of California in dispute over payment of legal fees against the Company and other defendants. On March 11, 2008, the other defendants entered into a settlement agreement where Weed & Co, LLP was to be paid $87,500. Weed & Co., LP has the right to re-file the complaint should the other defendants not satisfy this agreement. There is no liability reflected in the accompanying consolidated financial statements for this uncertainty.

NOTE 14

GOING CONCERN

The accompanying financial statements have been prepared on a going-concern basis, which contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary course of business.

As of September 30, 2009, the Company has an accumulated deficit of $5,270,921.

Management believes that additional capital will be required to fund operations through the year ended December 31, 2009 and beyond, as it attempts to generate increasing revenue. Management intends to raise capital through additional equity offerings. There can be no assurance that the Company will be successful in obtaining financing at the level needed or on terms acceptable to the Company. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In addition, there is no assurance, assuming the Company is successful in raising additional capital, that the Company will be successful in achieving profitability or positive cash flow.

NOTE 15

ESCROW RESERVE

Escrow reserve has been increased because of timing of tax collection and payments.

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

The information contained in Item 2 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

Forward-Looking Statements

We make forward-looking statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report based on the beliefs and assumptions of our management and on information currently available to us. Forward-looking statements include information about our possible or assumed future results of operations which follow under the headings “Business and Overview,” “Liquidity and Capital Resources,” and other statements throughout this report preceded by, followed by or that include the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions.

Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed in these forward-looking statements, including the risks and uncertainties described below and other factors we describe from time to time in our periodic filings with the U.S. Securities and Exchange Commission (the “SEC”). We therefore caution you not to rely unduly on any forward-looking statements. The forward-looking statements in this report speak only as of the date of this report, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

Company Overview

We were originally organized in the State of Delaware in February 1993 under the name PLR, Inc. Our business operations are primarily conducted through our three (3) indirect subsidiaries, ECRV Hanover LeaseCo, LLC (“Hanover”), ECRV Clinton LeaseCo, LLC (“Clinton”), and ECRV FM LeaseCo, LLC (“Absecon”), limited liabilities companies incorporated under the laws of the State of Delaware.

In November 1997, PLR, Inc. changed its name to Integrated Carbonics Corp. and moved its domicile to the State of Nevada. On July 23, 1999, Integrated Carbonics Corp. changed its name to Urbana.ca, Inc. (“URBA”). On April 11, 2003, URBA changed its name to PSPP Holdings, Inc. On August 11, 2008, PSPP Holdings, Inc. changed its name to Cynosure Holdings, Inc. by filing a Certificate of Amendment to Articles of Incorporation with the State of Nevada. Effective September 22, 2008, PSPP Holdings, Inc. changed its company name to Mod Hospitality, Inc. (hereinafter referred to as “Mod Hospitality,” “we,” “us” or the “Company”).

On March 26, 2008, ECV Holdings, Inc. (“ECV’) was formed under the laws of Delaware. On April 4, 2008, ECV entered into a stock for membership interest agreement with East Coast Realty Ventures, LLC (“ECRV”) which owned all of the membership interest of Hanover, Clinton, and Absecon. As a result of the stock for membership interest transaction, ECV acquired 100% of the membership interest in Hanover, Clinton and Absecon by issuing Frederic Richardson, the sole member of ECRV, 100,000 shares of its common stock.

Effective May 8, 2008, ECV entered into a share exchange agreement with Frederic Richardson and FLNU, a non-reporting small public company listed on the Pink Sheets Grey Market, whereby, Frederic Richardson transferred to FLNU 100% of the issued and outstanding common stock of ECV, in exchange for 28,000,000 shares of common stock of FLNU, which represents 80% of FLNU’s outstanding common stock. As a result of the share exchange transaction, Hanover, Clinton and Absecon became the wholly-owned subsidiaries of FLNU.

On October 21, 2008 (the “Closing Date”), we entered into a share exchange agreement (the “Share Exchange Agreement”) with ECV and FLNU. On the Closing Date of the share exchange transaction, we issued FLNU 50,000,000 common stock, or approximately 99.12% of our common stock outstanding, in exchange for all of the outstanding common stock of ECV from FLNU.

The past Quarter has shown continued decreasing revenues and as a result a decrease in net income. The hope is that the first quarter of 2010 will show an increase in revenue and NOI but there can be no guarantees that revenue will increase or that the economy in general will improve. As a result there is considerable doubt in management’s mind as to the viability of this business and as a result the Board of Directors has instructed management to begin exploring new business ventures for the company.

We are committed to finding unique and profitable hotel operations throughout the world. We exploit the changing real estate market with new financing structures and finds quality assets to which we can bring superior cost management and revenue generation skills. We currently own the operation of a boutique hotel in the Art Deco District of Miami, South Beach, Florida and branded hotel operations in the North East.

Hanover, Clinton and Absecon do not have ownership of the hotel buildings’ financing nor responsibility for capital items, real estate taxes, or building insurance, but they perform management of these items, which give the real estate investors a low-maintenance real estate investment.

Under separate management agreements, Hanover, Clinton and Absecon engaged the services of Park Place Hospitality, Inc (“PPHG”) with its base of operations located in Charlotte, North Carolina, to run the operations of the hotels. In September 2008, we terminated PPHG’s management arrangement for the Clinton Hotel in South Beach, Miami, Florida, and in February 2009, we terminated PPHG’s management agreement for the Holiday Inn Express in Hanover, Maryland. We have retained the management services of Mid-Atlantic Realty Group, an entity controlled by Frederic Richardson, our Chairman and CEO, for both these hotels under the same terms as with PPHG, with formal agreements pending to be executed.

Plan of Operations

In October 2009, the principles of Marriot Fairfield notified the lender that they will not be able to fund any future of the property is now in question. Mortgage payments in this slower demand environment, we are working aggressively to enhance property-level house profit margins by reviewing room amenities and adjusting room rates. We continue to implement new technology, develop new sales promotions, and improve our properties to increase property-level revenue, rather than simply discounting room rates.

Our plan of operation includes for the next twelve months fee generation from management agreements on three hotels. The operations will include selling equity participation on future hotel acquisitions. We plan to raise additional capital through a formal registration of equity contributions from its principal shareholder. Currently there are no planned acquisitions. We do not plan to sell any of its assets or operations at this time.

We believe that despite recent economic downturns the market for hotel lodging is stable in the markets in which we maintain the operations of the hotels. The American Hotel & Lodging Association stated that 2007 was the best year ever for the U.S. lodging industry. Spurred on by the weak U.S. dollar that has induced foreign travelers to the United States and consumers within the United States to travel within its borders. Additionally, peak construction of new hotels in markets where we maintain properties such as Miami have slowed significantly since the fourth quarter of 2007 which has led to a potential supply and demand imbalance. However, areas such as Baltimore have shown decreases in demand as they are not "trendy" vacation areas and occupancy rates are projected to decline in 2009. However, average daily room rates have increased and are projected to do so through 2009. Gaming revenues have increased in areas such as Atlantic City and lodging in such places has not been affected by the current economic instability.

There can be no guarantee that there will be success, but management is hopeful. To that end we have secured the help of the former owners of the company, Clinton Hotel, LLC, and they have committed to help raise money for the company and develop the new insurance business model. The company has formed a new subsidiary to explore cost saving strategies for real estate owners and the current Board has directed management to focus its efforts on this business venture. Although in the first quarter we were hopeful that business travel would rebound, we no longer hold these optimistic views and expect 2009 to lose or run out of cash. As a result we cannot be certain that the business will continue to operate without a substantial cash infusion.

Results of Operations

The following table sets forth the key components of our result of operations for the periods indicated, in U.S. Dollars.


		For the three		For the three		For the nine		For the nine
		months ended		months ended		months ended		months ended
		30-Sep-09		30-Sep-08		30-Sep-09		30-Sep-08
		Unaudited		Unaudited		Unaudited		Unaudited

Revenue	$	2,668,774	$	3,098,676	$	7,949,420	$	9,583,516
Operating expenses		3,427,459		3,670,257		10,002,727		10,051,791
Loss from operations		(758,685)		(571,581)		(2,053,307)		(468,275)
Other income (expenses)		(133,965)		(197,690)		(523,908)		(589,551)
Income before provision for income taxes		(892,650)		(769,271)		(2,577,215)		(1,057,826)
Provision for income taxes		-		-		-		-
Net loss		(892,650)		(769,271)		(2,577,215)		(1,057,826)

Revenue: Net revenue decreased by $ 429,902 from $ 3,098,676 in the quarter ended September 30, 2008 to $ 2,668,774 in the quarter ended September 30, 2009. Revenues are comprised of the revenues from rooms, food and beverage, rental, telephone, movies, and suite shop, generated as a result of the operations of the three hotels. Our revenue decreased because of the global financial crisis that began in December 2008, which affected business and personal travel, and the travel patterns of both domestic and international travel. We reduced our room rates significantly to attract guests.

Operating Expenses: Operating expenses, arising from rooms, food and beverage, rent, management and franchise fees, general and administrative, and depreciation, were $3,670,257 in the quarter ended September 30, 2008, compared to $3,427,459 in the quarter ended September 30, 2009. This represents a decrease of $242,798. This decrease was primarily due to cost reduction initiative taken by management.

Other Income (Expenses). Our other income (expenses) consists of interest income, interest expense, gain on sale of assets. We had totaled other expenses of $133,965 for the quarter ended September 30, 2009 as compared to $197,690 for the quarter ended September 30, 2008. This decrease is because of interest expenses.

Net Loss: Our net loss was $892,650 in the quarter ended September 30, 2009 and loss of $769,271 in the quarter ended September 30, 2008. The increase in net loss of $123,379 was primarily the result of the significant decrease in revenues.

Capital Liquidity and Resources

As of September 30, 2009 and 2008, we had total assets equal to $5,462,364 and $5,186,774 respectively. As of September 30, 2009, we had cash and cash equivalents of $752,629. The following table provides the key information about our net cash flow for all financial statement periods presented in this Form 10-Q:


	For the quarter ended
	30-Sep-09		31-Sep-08
Net cash provided by/used in operating activities	$	(949,772)	$	930,852
Net cash used in investing activities		(989,642)		(715,961)
Net cash provided by financing activities		1,963,694		160,615
Net increase (decrease) in cash and cash equivalents		24,280		375,506
Cash and cash equivalents, end of year	$	752,629	$	1,182,312

Comparison of Quarters Ended September 30, 2009 and 2008

Net Cash Provided By/Used In Operating Activities. Our net cash used by operating activities totaled $(949,772) for the nine months ended September 30, 2009 as compared to the net cash provided by operating activities of $930,852 for the nine months ended September 30, 2008. The increase in cash used by operating activities was primarily due to the decrease in the escrow reserves from the extensive renovations of Absecon required by the franchisor.

Net Cash Used In Investing Activities. Net cash used in investing activities was $(989,642) for the nine months ended September 30, 2009 and $(715,961) for the nine months ended September 30, 2008. The reason for the decrease in net cash was paying for the construction in progress for the Property Improvement Plan mandated by the franchisor.

Net Cash Provided By Financing Activities. Net cash provided by financing activities totaled $1,963,694 for the nine months ended September 30, 2009 as compared to net cash used by financing activities of $160,615 for the nine months ended September 30, 2008. The reason for increase in cash provided by financing activities was due to an increase of capital contributions, notes payable, and, related party debt.

Cash. As of September 30, 2009, we had cash of $752,629, as compared to $1,182,312 as of September 30, 2008. This decrease was primarily due to the decrease in our revenues and cost arising from the renovations of Absecon.

Critical Accounting Policy

Basis of Presentation

The accompanying consolidated interim unaudited financial statements as of September 30, 2009, and the three months ended September 30, 2009 and 2008 have been prepared in accordance with accounting principles generally accepted for interim unaudited financial statement presentation and in accordance with the instructions to Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statement presentation. In the opinion of management, all adjustments for a fair statement of the results of operations and financial position for the interim period presented have been included.

Revenue and Expense Recognition: We recognize income from the management of the properties in accordance with the accrual basis of accounting, that is, when the services and products are provided for hotel guests and there is no uncertainty as to cash collections; i.e. upon receipt of cash/check payment or credit card from the hotel guests. We recognize expenses related to the management of the properties in accordance with the accrual basis of accounting, that is, when the expense is incurred.

Advertising, Sales and Marketing Expense: We incur sales and marketing expenses in conjunction with the production of promotional materials, and related travel costs. In accordance with the AICPA’s Statement of Position No. 93-7 “Reporting on Advertising Costs”, companies expense advertising and marketing costs as incurred or as the advertising takes place.

Income Taxes: Income taxes are provided for using the liability method of accounting in accordance with SFAS No. 109 "Accounting for Income Taxes," and clarified by FIN 48, "Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109." A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.

Investment: We account for investments, where we hold from 20% up to 50%, in the common stock, or membership interest, of an entity, using the equity method. The investment is initially recorded at cost and the carrying amount is adjusted to recognize our proportionate share of the earnings or losses of the investee after the date of acquisition. The amount of the adjustment is included in the determination of our net income or loss in the period of the adjustment. Any dividends received from the investee reduce the carrying value of the investment.

As of September 30, 2009, Dream Apartments TV continued to pursue its planned operations, therefore, current management made the decision to reflect the $58,000 as the fair value of this investment.

Recent Accounting Pronouncements

In March 2008, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161). SFAS 161 amends and expands the disclosure requirements of SFAS 133, Accounting for Derivative Instruments and Hedging Activities. It requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2008.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R). SFAS 141R significantly changes the accounting for business combinations in a number of areas including the treatment of contingent consideration, pre-acquisition contingencies, transaction costs, in-process research and development, and restructuring costs. In addition, under SFAS 141R, changes in an acquired entity's deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. SFAS 141R is effective for fiscal years beginning after December 15, 2008.

The Emerging Issues Task Force (EITF) reached consensuses on EITF Issue No. 06-04, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements (EITF 06-04) and EITF Issue No. 06-10, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements (EITF 06-10), which require that a company recognize a liability for the postretirement benefits associated with endorsement and collateral assignment split-dollar life insurance arrangements. The Company does not expect that the provisions of this pronouncement to have an impact on its consolidated financial statements.

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157 (“FAS 157”), Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. FAS 157 applies under other accounting pronouncements that require or permit fair value measurements. Prior to FAS 157, there were different definitions of fair value and limited guidance for applying those definitions in GAAP. Moreover, that guidance was dispersed among the many accounting pronouncements that require fair value measurements. Differences in that guidance created inconsistencies that added to the complexity in applying GAAP. The changes to current practice resulting from the application of FAS 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company does not expect the adoption of FAS 157 to have an effect on its financial statements.

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 prescribes a comprehensive model of how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. The Company expects to comply with the provisions of FIN 48. As of December 31, 2008, the Company did not have any uncertain tax positions that the Company has taken or expects to take on a tax return. ECV Holdings, Inc. and its subsidiaries (Clinton, Hanover and Absecon) expect to file their first federal and state tax returns for the year ended December 31, 2008. Clinton, Hanover and Absecon are single-member limited liability companies that are disregarded entities for federal tax purposes.

Off Balance Sheet Transactions

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable because we are a smaller reporting company.

Item 4T. Controls and Procedures

Management's report on internal control over financial reporting

Our Management is responsible for establishing and maintaining adequate internal control over financial reporting under the supervision of the President and Chief Executive Officer and the Chief Financial Officer. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Management evaluated the design and operation of our internal control over financial reporting as of March 31, 2009, based on the framework and criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and has concluded that such internal control over financial reporting is effective. There are no material weaknesses that have been identified by management.

An evaluation was performed, under the supervision of, and with the participation of, our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-(e) to the Securities and Exchange Act of 1934). Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were adequate and effective, as of September 30, 2009, to ensure that information required to be disclosed by us in the reports that it files or submits under the Securities Exchange Act of 1934, is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We do not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the system are met and cannot detect all deviations. Because of the inherent limitations in all control systems, no evaluation of control can provide absolute assurance that all control issues and instances of fraud or deviations, if any, within the Company have been detected.

This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this report.

Changes in internal control over financial reporting

There were no significant changes in our internal controls over financial reporting that occurred subsequent to our evaluation of our internal control over financial reporting for the three months ended September 30, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

There have been no material developments in this quarter in regard to any litigation pending or threatened by or against us or any of our subsidiaries as detailed in Form 10-K filed on April 15, 2009.

Item 1A. Risk Factors

Not applicable because we are a smaller reporting company.

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

On May 5, 2009, we issued 1,750,000 shares of our common stock to Richard Weed in settlement of prior litigation at $0.001 per share in reliance upon the exemption provided by Section 4(2) of the Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

None

Item 6. Exhibits.

31.1 Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer

32.1 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 13, 2009


	Mod Hospitality, Inc.
By:	/s/ Frederic Richardson
	Name: Frederic Richardson Title: Chief Executive Officer Principal Executive Officer

By:

/s/ Dilli Prasad Thapaliya

Name: Dilli Prasad Thapaliya

Title: Chief Financial Officer

Principal Financial Officer