FORM 10-Q U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  SQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the quarterly period ended September 30, 2008  OR  £TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the transition period from ________ to ________  Commission file number 000-51230 [castlearch10q093008002.gif]  CASTLE ARCH REAL ESTATE INVESTMENT COMPANY, L.L.C. (Exact name of registrant as specified in its charter)  California20-1077312(State or other jurisdiction
of incorporation or organization)(I.R.S. Employer Identification Number)  9595 Wilshire Blvd. Suite 1000, Beverly Hills, CA 90212 (Address of principal executive offices)  (310) 385-5970 (Registrants telephone number, including area code)  No change (Former name, former address and former fiscal year, if changed since last report)  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  S  No  £ .  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated file. 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 companyS(Do not check if a smaller reporting company)  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  £  No  S.   APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:  Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o.  APPLICABLE ONLY TO CORPORATE ISSUERS  Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 27,987,935 common units and 11,891,179 preferred units, outstanding as of November 13, 2008.  2    CASTLE ARCH REAL ESTATE INVESTMENT COMPANY, L.L.C.  - INDEX -  PagePART I  FINANCIAL INFORMATION:Item 1.Financial Statements:4Unaudited Balance Sheet as of September 30, 2008 and December 31, 20075Statements of Operations (Unaudited) for the three month period ended September 30, 2008; and for the three month period ended September 30, 2007; and for the nine month period ended September 30, 2008; and for the nine month period ended September 30, 2007;6Statements of Cash Flows (Unaudited) for the nine month period ended September 30, 2008; and for the nine month period ended September 30, 2007;7Notes to Unaudited Condensed Financial Statements9Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations12Item 3.Quantitative and Qualitative Disclosures About Market Risk14Item 4T.Controls and Procedures14PART II  OTHER INFORMATION:Item 1.Legal Proceedings14Item 1A.Risk Factors14Item 2.Unregistered Sales of Equity Securities and Use of Proceeds15Item 3.Defaults Upon Senior Securities15Item 4.Submission of Matters to a Vote of Security Holders15Item 5.Other Information15Item 6.Exhibits15Signatures16  3   PART I  FINANCIAL INFORMATION  Item 1. Financial Statements.  The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, the financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.  The results for the period ended September 30, 2008 are not necessarily indicative of the results of operations for the full year. These financial statements and related footnotes should be read in conjunction with the financial statements and footnotes thereto included in the Companys Form 10-KSB filed with the Securities and Exchange Commission for the period ended December 31, 2007.   Castle Arch Real Estate Investment Company, LLC Consolidated Financial Statements (Unaudited) Index to Consolidated Financial Statements (Unaudited) For the nine month period ended September 30, 2008   Balance Sheets as of September 30, 2008 (Unaudited) and December 31, 20075Statements of Operations (Unaudited) for the three month period ended September 30, 2008; and for the three month period ended September 30, 2007; and for the nine month period ended September 30, 2008; and for the nine month period ended September 30, 2007;6Statements of Cash Flows (Unaudited) for the nine month period ended September 30, 2008; and for the nine month period ended September 30, 2007;7Notes to the Consolidated Financial Statements (Unaudited)9  4   Castle Arch Real Estate Investment Company, LLC Consolidated Balance Sheets (Unaudited)  September 30,December 31,ASSETS20082007Current assets:Cash$3,147,789$1,556,730Interest receivable  current-66,435Notes receivable  current-383,000Prepaid expenses and other current assets49,888279,983Total current assets3,197,6772,286,148Property, plant and equipment:Office equipment60,31662,864Less: accumulated depreciation(20,983)(19,884)Net property, plant and equipment39,33342,980Other assets:Properties held for investment44,300,66734,520,393Land deposits99,000530,000Entitlement costs-6,047Notes receivable  noncurrent255,000255,000Interest receivable  noncurrent69,835-Other noncurrent assets-3,430Total other assets44,724,50235,314,870Total assets$47,961,512$37,643,998LIABILITIES AND MEMBERS CAPITALCurrent liabilities:Accounts payable$549,629$259,396Accounts payable  related party-41,750Other accrued expenses154,41458,351Accrued common units-727,500Interest payable551,041-Interest payable  related party128,952-Notes payable  current6,846,5549,010,921Notes payable, related party  current518,576-Total current liabilities8,749,16610,097,918Long term liabilities:Preferred dividend payable8,012,5395,251,867Notes payable  noncurrent7,365,941-Notes payable, related party  noncurrent-1,910,423CASDF Series A Preferred (See Note 2)5,692,804-Other noncurrent liabilities665,000665,000Minority interest in consolidated LLCs11,854,78111,163,976Total long term liabilities33,591,06518,991,266Total liabilities42,340,23129,089,184Members Capital:Common units, 27,830,449, issued and outstanding, ranging from $.001 to $2.50 per unit8,167,4636,951,618Non-managing members units, Series A preferred, 1,000,000 units issued and outstanding, $1.00 per unit512,885567,940Non-managing members units, Series B preferred,2,000,000 units issued and outstanding, $1.00 per unit1,091,0471,216,156Non-managing members units, Series C preferred,3,300,000 units issued and outstanding, $1.00 per unit1,988,6832,188,316Non-managing members units, Series D preferred,4,949,532 units issued and outstanding, $5.00 per unit18,794,43318,795,391Non-managing members units, Series E preferred,70,486 units issued and outstanding, $10 per unit3,466,289-Retained deficit(28,399,519)(21,164,607)Total members capital5,621,2818,554,814Total liabilities and members capital$47,961,512$37,643,998 See accompanying notes to the consolidated financial statements (unaudited).  5   Castle Arch Real Estate Investment Company, LLC Consolidated Statements of Operations (Unaudited)  For the
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2007Revenues:Sales$-$-$1,980,000$-Cost of sales--1,980,000-Net revenues----Operating expenses:Compensation paid in the formof common units290,0003,125,000438,0003,399,800Selling, general and administrative1,321,2111,460,1815,070,6403,403,568Depreciation1,2942,7927,6906,571Costs of terminated projects579,73159,064588,80670,814Total operating expenses2,192,2364,647,0376,105,1366,880,753Operating loss(2,192,236)(4,647,037)(6,105,136)(6,880,753)Other revenues / (expenses)Interest income18,3633,14232,82566,163Interest expense(649,990)(253,638)(1,380,877)(626,201)Amortization of debt issue costs(33,691)(60,092)(112,804)(100,163)Loss on disposal of fixed assets--(8,765)-Income / (loss) from continuing operationsbefore minority interest and cumulativeeffect of change in accounting principle(2,857,554)(4,957,625)(7,574,757)(7,540,954)Minority interest in losses of consolidatedSubsidiaries33,38882,962341,594326,425Cumulative effect of change inaccounting principle--334,748-Net loss$(2,824,166)$(4,874,663)$(6,898,415)$(7,214,529)Accumulated preferred dividends$(1,039,825)$(688,174)$(2,760,672)$(1,869,412)Net loss available to common unit holders$(3,863,991)$(5,562,837)$(9,659,087)$(9,083,941)Net loss per common unit before cumulativeeffect of change in accounting principle$(.14)$(.22)$(.36)$(.37)Cumulative effect of change in accountingprinciple$-$-$.01$-Net loss per common unit$(.14)$(.22)$(.35)$(.37)Weighted average units outstanding27,438,08525,094,99527,808,05124,377,658  See accompanying notes to the consolidated financial statements (unaudited).  6   Castle Arch Real Estate Investment Company, LLC Consolidated Statements of Cash Flows (Unaudited)  For the Nine MonthsFor the Nine MonthsEnded September 30,Ended September 30,20082007Cash Flows From Operating Activities:Net loss$(6,898,415)$(7,214,529)Adjustments to reconcile net loss to netcash used in operating activities:Depreciation7,6906,571Amortization of debt issue costs112,804100,163Loss on disposal of fixed assets8,765-Professional outside services paid in theform of assets transferred to broker dealer300,000-Minority interest in losses of subsidiaries(341,594)(326,425)Cumulative effect of change in accountingprinciple(334,748)-Professional outside services paid in the formof common units438,0003,399,800Changes in operating assets and liabilities:Interest receivable(3,400)(35,334)Prepaid investment banking fees359,383-Prepaid expenses and other assets(46,458)50,003Accounts payable290,354(304,859)Accounts payable  related party(41,750)-Other accrued expenses127,47225,546Interest payable520,848219,548Interest payable  related party128,952-Properties held for investment(2,118,290)(6,135,467)Net cash used in operating activities(7,490,387)(10,214,983)Cash Flows From Investing Activities:Land deposits(99,000)(500,000)Entitlement costs-(14,989)Additions to notes receivable-(171,383)Purchase of property, plant andequipment(12,808)(18,142)Net cash used in investing activities(111,808)(704,514)Cash Flows From Financing Activities:Checks drawn in excess of bank balance-19,699Proceeds from issuance of member units3,991,6988,730,231Offering costs(322,133)(164,260)Proceeds from subscriptions receivable3,259,900867,482Proceeds from notes payable5,661,526-Repayment of notes payable(1,850,000)-Repayment of notes payable  related party(1,390,000)-Debt issue costs(157,737)(34,307)Net cash provided by financing activities9,193,2549,418,845Net increase (decrease) in cash1,591,059(1,500,652)Cash at beginning of period1,556,7301,500,652Cash at end of period$3,147,789$-  See accompanying notes to the consolidated financial statements (unaudited).  7   Castle Arch Real Estate Investment Company, LLC Consolidated Statements of Cash Flows (Unaudited) Continued  For the Nine MonthsFor the Nine MonthsEnded September 30,Ended September 30,20082007Non-Cash Investing and Financing Activities:Issuance of members units for subscriptionsreceivable$1,205,000$2,094,300Preferred dividends payable2,760,6721,869,412Referral fees reinvested in the form of membersunits18,830-Accrued referral fees-52,500Referral fees issued as common units50,345126,828Issuance of notes payable in exchange forother properties held for investment7,000,0004,397,506Supplemental Disclosures:Cash paid for interest$-$555,093  See accompanying notes to the consolidated financial statements (unaudited).    8   Castle Arch Real Estate Investment Company, LLC Notes to Consolidated Financial Statements (Unaudited) September 30, 2008  1.  METHOD OF REPORTING AND USE OF ESTIMATES  The accompanying unaudited condensed consolidated financial statements have been prepared by Castle Arch Real Estate Investment Company, LLC (the Company) pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations.  The information furnished in the interim condensed financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements.  Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed financial statements be read in conjunction with the Company's audited financial statements and notes thereto included in its most recent Form 10KSB.  Operating results for the three months ended September 30, 2008 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2008.  The accompanying consolidated financial statements include the accounts of the Company, as well as the accounts of Castle Arch Kingman, LLC (CAK), Castle Arch Smyrna, LLC (CAS), and Castle Arch Secured Development Fund (CASDF) which are entities that were created in April, 2006, June, 2007, and January, 2008, respectively.  In December 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46(R) ("FIN 46(R)"), which further clarified and amended FIN 46, Consolidation of Variable Interest Entities, which requires the consolidation of entities in which an enterprise absorbs a majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or is the primary beneficiary, as a result of ownership, contractual or other financial interests in the entity.  CAK, CAS and CASDF are considered variable interest entities of which the Company is the primary beneficiary.  Accordingly, all intercompany accounts and transactions have been eliminated in the consolidated condensed financial statements.   2.  MATERIAL TRANSACTIONS  In February and May, 2008, the Company entered into two separate Land Sale Agreements, wherein the Company sold 60 and 12 acre parcels of land for $1,680,000 and $300,000, respectively.  Subsequently, the Company entered into Purchase Agreements, pursuant to which the Company, at its sole discretion, may elect to repurchase the land at specified values in the future.  Furthermore, the Company is obliged to incur quarterly deposits throughout the term of the Purchase Agreements, which deposits are nonrefundable and are to be applied towards the respective ultimate purchase price, should the Company elect to make the purchases.  Accordingly, during the three month period ended September 30, 2008, the Company incurred deposits totaling $42,000 and $7,500, respectively.  In May, 2008, one of the Companys third party lenders (the Lender), was closed by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (FDIC) was named as receiver.  At the time of the closure, the Company had two Promissory Notes outstanding with the Lender, totaling $1,466,361 and $5,380,193, respectively.  9   Castle Arch Real Estate Investment Company, LLC Notes to Consolidated Financial Statements (Unaudited) September 30, 2008  2.  MATERIAL TRANSACTIONS (CONTINUED)  During the three month period ended September 30, 2008, the Company continued its dialogue with the FDIC regarding modification of certain terms of the Promissory Notes.  It is anticipated that the Promissory Notes will be sold by the FDIC during the three months ended December 31, 2008, and that the Company will continue its dialogue with the future buyer.  As of September 30, 2008, the Company has incurred and accrued for related interest totaling $383,125.  This amount has been recorded in interest payable.  During the three months ended September 30, 2008, the Company raised $2,174,812 through its subsidiary, Castle Arch Secured Development Fund, LLC (CASDF).  The following table sets forth the activity of CASDF and its Series A Preferred Offering during the same period:  Amounts Raised / RedeemedUnits Issued / RedeemedBeginning Balance, June 30, 2008, net of redemptions$4,869,0364,869,036Series A preferred issuances2,174,8122,174,812Series A preferred redemptions(59,000)(59,000)Ending Balance, September 30, 2008$6,984,8486,984,848  The Series A Preferred Offering ending balance, totaling $6,984,848 at September 30, 2008, less subscriptions receivable (amounts subscribed but not yet funded) and unamortized debt issue costs totaling $1,203,724 and $88,320, respectively, has been recorded in CASDF Series A Preferred on the Companys consolidated balance sheet.  The Series A preferred units issued bear interest at twelve (12) percent per annum.  The interest earned may be paid out monthly as earned, or otherwise allowed to accrue and compound monthly.  Accordingly, during the three month period ended September 30, 2008, the Company had incurred $154,272 in interest expense related to the Series A preferred units issued and outstanding during the period.  Of this amount, $49,900 has been paid out to the applicable unitholders, while $104,372 has been accrued for and recorded in interest payable, totaling $551,041 at September 30, 2008.  In addition, in July, 2008, CASDF loaned $3,200,000 to Castle Arch Kingman, LLC (CAK), another subsidiary of the Company. The loan is secured by 120 acres of land in Kingman, AZ.  The loan bears simple, annual interest totaling 12 percent, payable to CASDF monthly, with principal, together with any accrued but unpaid interest, to be paid in January, 2010.  The loan also bears a five (5) percent origination fee, totaling $160,000, payable upon the date of maturity in January, 2010.  The following table sets forth the details of loans made by CASDF to date:  10   Castle Arch Real Estate Investment Company, LLC Notes to Consolidated Financial Statements (Unaudited) September 30, 2008  2.  MATERIAL TRANSACTIONS (CONTINUED)  Loan No.AmountInterest RateMaturity DateBorrowerCollateralLoan 1$    1,280,00012%September, 2009CAK40 acresLoan 2$    3,200,00012%January, 2010CAK120 acres  As CAK is the borrower, the transactions are considered intercompany transactions and, therefore, have been eliminated in consolidation of the Companys financial statements at September 30, 2008 (see Note 1).  Also during the three month period ended September 30, 2008, the Company raised $2,622,344 through its Series E Private Placement Offering, resulting in the issuance of 262,234 common and preferred units, respectively.  During the three month period ended September 30, 2008, the Company repaid principal debts and related interest totaling $1,200,000 and $64,514, respectively, to its President and Chairman.  In addition, during the three month period ended September 30, 2008, the Company repaid $340,000 in principal debt, in addition to $127,510 in related interest and origination fees, to a third party creditor.  In August, 2008, SNB Development, a third party borrower of the Company, filed for bankruptcy in Texas State court.  We have been actively pursuing efforts to collect our loans to SNB Development secured by property in Lyndale, Texas, and to further protect and pursue our interests through the bankruptcy process.  During the three month period ended September 30, 2008, the Company performed an internal assessment of collectability of the loans, partially secured through a second lien on the property in Lyndale, Texas.  Accordingly, the Company determined that, for purposes of Financial Accounting Standard 5, it was probable it would not be successful in recovering the loan amounts.  Therefore, at September 30, 2008, the Company has $575,904 in costs of terminated projects, representing $530,000 and $43,904 in principal and other associated capitalized costs, respectively.  3.  SUBSEQUENT EVENT  Subsequent to September 30, 2008, the Company repaid principal debt, interest and origination fees to its President, totaling $647,527.  11   Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.  Forward Looking Statement Notice  Certain statements made in this Quarterly Report on Form 10-Q are forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Castle Arch Real Estate Investment Company, L.L.C. (we, us, our or the Company) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.  Description of Business  We were organized under the laws of the State of California as a limited liability company on April 12, 2004. We are a residential and commercial land development company with projects located in Arizona, Utah, Tennessee and Wyoming. Our principal activities are securing acquisition rights to properties, obtaining zoning and other entitlements for the properties, securing financing for the purchase of the properties, improving the properties infrastructure and amenities, and selling the properties.  The sub-prime fall out and other financial market downturns and corrections have affected our business. Our management anticipates a continued correction in the housing market. While many parts of the country, including major areas of California, Arizona and Florida, are experiencing severe real estate setbacks, we expect other value decreases to bottom out in some areas. Improvement of our properties in the vicinities of Kingman Arizona, Smyrna Tennessee, Tooele Utah and Star Valley Wyoming are progressing. We believe that these markets will suffer some value loss, but are positioned to enjoy demand  when the nations credit woes begin to recover.  Overview  The following management discussion and analysis relates to our business of residential and commercial land development with target properties located primarily in the Western United States.  Our principal activities include securing acquisition rights to the property, obtaining zoning and other entitlements for the property, securing financing for the purchase of the property, improving the propertys infrastructure and amenities, and selling the property.  ARIZONA: Mohave County  Through Castle Arch Kingman, L.L.C., we own or otherwise have preferential purchase rights for approximately 2,200 acres of raw land just outside the City of Kingman, Arizona. To date we have invested over $22.4 million as of September 30, 2008 to purchase the property parcels, working with our architectural, marketing and engineering teams currently under development. We are moving forward with the project, however, we have restrained our velocity based on financing challenges connected with the financial markets and property value declines in the area.  WYOMING: Star Valley/Thayne  As of September 30, 2008, we have continued to make progress in our Sunset Meadows project in Star Valley, Wyoming. Due to market conditions, we do not currently anticipate lot sales to commence until 2009. We intend to sell lots to one or more a builders who will, in turn, build and sell housing units for their own accounts. The overall project consists of approximately 200 residential units, including fourplexes, duplexes and single-family homes.  12   TENNESSEE: Smyrna/Rutherford County  During the three month period ended September 30, 2008, we continued to make progress on development of the 640 acres of land near the town of Smyrna, Tennessee, located in rapidly growing Rutherford County. The area has seen significant annual growth of 5% to 7% over the last several years, and in fact has experienced stable and controllable population and economic increases over the past 25 years. Smyrna continues to be a relatively high job growth area. During the period ended September 30, 2008, we continued to work out details with local governments in connection with the allocation of cost, and the design and build-out of the sewer lines to the property. We presently expect to commence construction of sewer improvements in the coming months. The sewer build-out is estimated to take approximately nine to twelve months to complete.  UTAH: Tooele County  We have continued to move forward during the three month period ended September 30, 2008 with working the 347 acres of raw land in Tooele County, Utah through the entitlement process.  The development is currently anticipated to contain approximately 725 lots and leave over 40% of the total acreage as open space, thereby qualifying it as a Conservation Development. We have experienced a number of delays in connection with the Tooele project. We expect to complete the purchase of additional water shares in the fourth quarter of 2008. Upon closing of the water purchase of the additional water shares, we expect to own sufficient water necessary to service the project as currently planned. If we are unsuccessful in the purchase of the water, the current project plan will be imperiled.  Financial Statements  The financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplate our continuation as a going concern. We have sustained significant operating losses since our inception, including the years 2007 and 2006. In the coming twelve months, our liquidity and cash requirements will depend on several factors. If our resources are not sufficient to fund our needs through 2008, there are no assurances that we will be successful in raising sufficient capital.  Revenues  We had no revenues during the three month period ended September 30, 2008. We had revenues of $1,980,000 from the sale of raw land, at cost, from our Kingman Arizona raw land holdings during the nine month period ended September 20, 2008. We had a cumulative, consolidated net loss of $3,863,991 compared to a $5,562,837 net loss in the comparative three month period ended September 30, 2007.  Selling, General and Administrative Expenses  Our operating selling, general and administrative expenses totaled $1,321,211 during the three-month period ended September 30, 2008, compared to $1,460,181 during the comparable three-month period ended September 30, 2007. Our operating selling, general and administrative expenses totaled $5,070,640 during the nine-month period ended September 30, 2008, compared to $3,403,568 during the comparable nine-month period ended September 30, 2007. The increase in operating expenses during the nine month period is primarily attributable to additional employees, office costs, professional services in connection with expanded operations as well as significant non-cash expenses incurred as a result of common units issued for services rendered. However, in the three month period ended September 30, 2008, we have issued common units as compensation valued at $290,000 as opposed to common units worth $3,125,000 in the comparative three month 2007 period. We anticipate that our general and administrative expenses remain stable in the coming three-months due to continued internal austerity measures. However, we expect a continuation of entitlement activities on a number of property projects discussed above. We do not anticipate significant revenues during the next three months, however, we do expect limited revenues from the sale of undeveloped land parcels by our Kingman subsidiary. We also expect revenues in the next twelve months in connection with the sale of residential building lots in connection with the Star Valley Wyoming project.  Liquidity and Capital Resources  At September 30, 2008, we had cash and cash equivalents of $3,147,789, compared to $1,556,730 at December 31, 2007. Our increased cash balance as of September 30, 2008 is largely attributable to sale of equity by the company and by our affiliates and in connection with proceeds from third party investment into our Development Fund and due to sale of raw land.  Our management believes that proceeds from private offerings, loans and expected revenues will be sufficient for us to survive as a going concern for the next 12 months. However, additional funding will be necessary to finance growth and to achieve our strategic objectives. Management is actively pursuing additional sources of funding. In addition, management is expecting an increase in cash flows through anticipated increases in revenue.  13   However, the softening financial markets are expected to hinder fund raising. If we do not raise sufficient funds in the future, we may not be able to fund expansion, take advantage of future opportunities, meet our existing debt obligations or respond to competitive pressures or unanticipated requirements. Financing transactions in the future may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.  Off-Balance Sheet Arrangements  The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Companys financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.  Contractual Obligations  As a smaller reporting company as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.  Item 3. Quantitative and Qualitative Disclosures About Market Risk.  As a smaller reporting company as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.  Item 4T. Controls and Procedures.  Evaluation of Disclosure Controls and Procedures  We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules, regulations and related forms, and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.  As of September 30, 2008, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.  Changes in Internal Controls  There have been no changes in our internal controls over financial reporting during the quarter ended September 30, 2008 that have materially affected or are reasonably likely to materially affect our internal controls.  PART II  OTHER INFORMATION  Item 1. Legal Proceedings.  To the best knowledge of the officers and directors, the Company is not a party to any legal proceeding or litigation.  Item 1A. Risk Factors.  As a smaller reporting company as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.  14   Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.  During the three month period ended September 30, 2008, we received $3,146,684 from the sale of our common and preferred E member units to 51 persons.   In addition, our consolidated subsidiary Castle Arch Secured Development Fund, LLC received $1,613,189 from the sale of its preferred A member units to 39 persons.   We believe the transactions to be exempt under Section 4(2) of the Securities Act of 1933, as amended, because they do not involve a public offering. We believe that this sale of securities did not involve a public offering on the basis that each investor is an accredited investor as defined in Rule 501 of Regulation D and because we provided each of our investors with a private placement memorandum disclosing items set out in Rule 501 and 506 of Regulation D.  The shares sold were restricted securities as defined in Rule 144(a)(3). Further, each common and preferred unit certificate issued in connection with this private offering bears a legend providing, in substance, that the securities have been acquired for investment only and may not be sold, transferred or assigned in the absence of an effective registration statement or opinion of legal counsel that registration is not required under the Securities Act of 1933.  Item 3. Defaults Upon Senior Securities.  None.  Item 4. Submission of Matters to a Vote of Security Holders.  None.  Item 5. Other Information.  During the three month period ended September 30, 2008, Douglas Child, our CFO, resolved an inquiry by the SEC over his involvement with a third party company unrelated to Castle Arch to which he provided accounting services. The inquiry was unilaterally dismissed by the SEC and we take the position that it is appropriate for Mr. Child to continue to review and sign our SEC reports and to sign the Sarbanes Oxley certifications. As a result, Mr. Howell who was appointed and charged with the responsibility of acting as our principal financial officer for the purposes of SEC filing and attestation related activities during the latter portion of the SEC inquiry has been relieved of the responsibility.  Item 6.  Exhibits required by Item 601 of Regulation S-K.  (a) Exhibits (filed with this report unless indicated below)  Exhibit 3.1* Articles of Organization Dated April 12, 2004  Exhibit 3.2* Amended Operating Agreement Dated 7/21/04  Exhibit 31.1 Certification of principal executive officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  Exhibit 31.2 Certification of principal financial officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  Exhibit 32.1 Certification of principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Exhibit 32.2 Certification of principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  * Filed as an exhibit to the Company's Registration Statement on Form 10-SB, as filed with the SEC on March 30, 2005, and incorporated herein by this reference.  (b) Reports on Form 8-K.  No reports on Form 8-K were filed by the Company during the three months ended September 30, 2008.  15   SIGNATURES  Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.  CASTLE ARCH REAL ESTATE INVESTMENT COMPANY, L.L.C.  Dated:  November 13, 2008  By:/s/ Kirby D. Cochran Kirby D. Cochran, Chief Executive Officer (Principal Executive Officer)  By:/s/ Douglas W. Child Douglas W. Child, Principal Financial Officer   16