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 June 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 [castlearch10q063008002.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 company    S(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 o No x.      [castlearch10q063008004.gif]    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: 27,730,646 common units and 11,687,390 preferred units, outstanding as of August 12, 2008.  [castlearch10q063008006.gif]     1    CASTLE ARCH REAL ESTATE INVESTMENT COMPANY, L.L.C.  - INDEX -  PagePART I  FINANCIAL INFORMATION:Item 1.Financial Statements:3Unaudited Balance Sheet as of June 30, 2008 and December 31, 20074Statements of Operations (Unaudited) for the six month period ended June 30, 2008; and for the six month period ended June 30, 2007; and for the three
month period ended June 30, 2008; and for the three month period ended
June 30, 2007;5Statements of Cash Flows (Unaudited) for the six month period ended June 30, 2008; and for the six month period ended June 30, 2007;6Notes to Unaudited Condensed Financial Statements8Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations11Item 3.Quantitative and Qualitative Disclosures About Market Risk15Item 4T.Controls and Procedures15PART II  OTHER INFORMATION:Item 1.Legal Proceedings15Item 1A.Risk Factors15Item 2.Unregistered Sales of Equity Securities and Use of Proceeds16Item 3.Defaults Upon Senior Securities16Item 4.Submission of Matters to a Vote of Security Holders16Item 5.Other Information16Item 6.Exhibits17Signatures18  [castlearch10q063008008.gif]   2       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 June 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.   3   Castle Arch Real Estate Investment Company, LLC Consolidated Balance Sheets (Unaudited) June 30,December 31,ASSETS20082007Current assets:Cash$2,806,774$1,556,730Interest receivable  current-66,435Notes receivable  current-383,000Prepaid expenses and other current assets10,000279,983Total current assets2,816,7742,286,148Property, plant and equipment:Office equipment52,86062,864Less: accumulated depreciation(19,689)(19,884)Net property, plant and equipment33,17142,980Other assets:Properties held for investment43,340,24434,520,393Land deposits579,500530,000Entitlement costs21,1616,047Notes receivable  noncurrent255,000255,000Interest receivable  noncurrent62,122-Other noncurrent assets3,4303,430Total other assets44,261,45735,314,870Total assets$47,111,402$37,643,998LIABILITIES AND MEMBERS CAPITALCurrent liabilities:Accounts payable$291,929$259,396Accounts payable  related party-41,750Other accrued expenses210,54258,351Accrued common units-727,500Interest payable71,644-Interest payable  related party84,958-Notes payable  current7,214,0549,010,921Notes payable, related party  current1,743,576-Preferred dividend payable6,972,7145,251,867Total current liabilities16,589,41715,349,785Long term liabilities:Notes payable  noncurrent11,461,773-Notes payable, related party  noncurrent-1,910,423Other noncurrent liabilities665,000665,000Minority interest in consolidated LLCs11,864,88111,163,976Total long term liabilities23,991,65413,739,399Total liabilities40,581,07129,089,184Members Capital:Common units, 27,588,066, issued and outstanding,ranging from $.001 to $2.50 per unit9,183,4886,951,618Non-managing members units, Series A preferred,1,000,000 units issued and outstanding, $1.00 per unit532,636567,940Non-managing members units, Series B preferred,2,000,000 units issued and outstanding, $1.00 per unit1,137,0841,216,156Non-managing members units, Series C preferred,3,300,000 units issued and outstanding, $1.00 per unit2,060,1252,188,316Non-managing members units, Series D preferred,4,949,532 units issued and outstanding, $5.00 per unit19,305,40518,795,391Non-managing members units, Series E preferred,70,486 units issued and outstanding, $10 per unit576,548-Retained deficit(26,264,955)(21,164,607)Total members capital6,530,3318,554,814Total liabilities and members capital$47,111,402$37,643,998  See accompanying notes to the consolidated financial statements (unaudited).  4   Castle Arch Real Estate Investment Company, LLC Consolidated Statements of Operations (Unaudited)  For theFor theFor theFor theSix
MonthsSix
MonthThree
MonthsThree
MonthsEndedEndedEndedEndedJune 30,June 30,June 30,June 30,2008200720082007Revenues:Sales$1,980,000$-$1,980,000$-Cost of sales1,980,000-1,980,000-Net revenues----Operating expenses:Selling, general and administrative4,592,3792,222,5172,215,8541,140,295Depreciation6,3973,7783,3271,889Costs of terminated purchase agreements-11,750--Total operating expenses4,598,7762,238,0452,219,1811,142,184Operating loss(4,598,776)(2,238,045)(2,219,181)(1,142,184)Other revenues / (expenses)Interest income55,34063,78449,56438,416Interest expense(771,240)(371,764)(517,716)(228,016)Amortization of debt issue costs(79,113)(40,072)(11,075)(5,554)Loss on disposal of fixed assets(8,765)-(8,765)-Income / (loss) from continuing operationsbefore minority interest and cumulativeeffect of change in accounting principle(5,402,554)(2,586,097)(2,707,173)(1,337,338)Minority interest in losses of consolidatedSubsidiaries308,206283,029188,882122,433Cumulative effect of change inaccounting principle334,748---Net loss$(4,759,600)$(2,303,068)$(2,518,291)$(1,214,905)Accumulated preferred dividends$(1,720,848)$(1,152,871)$(919,106)$(624,537)Net loss available to common unitholders$(6,480,448)$(3,455,939)$(3,437,397)$(1,839,442)Net loss per common unit before cumulativeeffect of change in accounting principle$(.24)$(.14)$(.13)$(.07)Cumulative effect of change in accountingprinciple$.01$-$-$-Net loss per common unit$(.23)$(.14)$(.13)$(.07)Weighted average units outstanding26,614,83024,133,87427,344,53224,202,782  See accompanying notes to the consolidated financial statements (unaudited).  5    Castle Arch Real Estate Investment Company, LLC Consolidated Statements of Cash Flows (Unaudited)  For the Six MonthsFor the Six MonthsEnded June 30, 2008Ended June 30, 2007Cash Flows From Operating Activities:Net loss$(4,759,600)$(2,303,068)Adjustments to reconcile net loss to netcash used in operating activities:Depreciation6,3973,778Amortization of debt issue costs79,11340,072Loss 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(308,206)(283,029)Cumulative effect of change in accountingprinciple(334,748)-Professional outside services paid in the formof common units1,431,64678,750Changes in operating assets and liabilities:Interest receivable4,313(43,414)Prepaid investment banking fees359,383-Prepaid expenses and other assets(6,400)244,526Accounts payable32,533(17,952)Accounts payable  related party(41,750)-Other accrued expenses152,191(6,363)Interest payable71,644-Interest payable  related party84,958-Properties held for investment(1,819,851)(1,978,924)Net cash used in operating activities(4,739,612)(4,265,624)Cash Flows From Investing Activities:Land deposits(49,500)(1,377,361)Entitlement costs(15,114)-Additions to notes receivable-(146,383)Purchase of property, plant andequipment(5,353)(1,778)Net cash used in investing activities(69,967)(1,525,522)Cash Flows From Financing Activities:Proceeds from issuance of member units554,6934,217,199Offering costs(173,916)(54,530)Proceeds from subscriptions receivable3,259,900867,482Proceeds from notes payable5,443,164-Repayment of notes payable(3,024,218)-Debt issue costs-(36,191)Net cash provided by financing activities6,059,6234,993,960Net increase (decrease) in cash1,250,044(797,186)Cash at beginning of period1,556,7301,500,652Cash at end of period$2,806,774$703,466  See accompanying notes to the consolidated financial statements (unaudited).   6   Castle Arch Real Estate Investment Company, LLC Consolidated Statements of Cash Flows (Unaudited) Continued  For the Six MonthsFor the Six MonthsEnded June 30, 2008Ended June 30, 2007Non-Cash Investing and Financing Activities:Issuance of members units for subscriptionsreceivable$2,064,340$3,788,756Preferred dividends payable1,720,8471,152,871Referral fees issued as common units72,7244,000Issuance of notes payable in exchange forother properties held for investment7,000,000-Supplemental DisclosuresCash paid for interest$713,929$288,335   See accompanying notes to the consolidated financial statements (unaudited).   7   Castle Arch Real Estate Investment Company, LLC Notes to Consolidated Financial Statements (Unaudited) June 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 June 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  During the three month period ended June 30, 2008, the Company entered into two separate Land Sale Agreements, wherein the Company sold 72 acres for $1,980,000.  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.  In May, 2008, one of the Companys lenders (Lender), was closed by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (FDIC) was named receiver.  At the time of the closure, the Company had two Promissory Notes outstanding with the Lender, totaling $5,380,193 and $1,466,361, respectively.  In June, 2008, both Promissory Notes became due and payable.  Prior to such closure, the Company was engaged in discussions with the Lender regarding extension of the Notes.  The Company is communicating directly with the FDIC regarding the offered extensions and/or repayment of the Promissory Notes principal amounts.      8   Castle Arch Real Estate Investment Company, LLC Notes to Consolidated Financial Statements (Unaudited) June 30, 2008  2.  MATERIAL TRANSACTIONS (CONTINUED)  During the three months ended June 30, 2008, the Company entered into a Purchase Agreement to acquire water rights.  Accordingly, the Company made a $150,000 deposit, which is to be applied towards the ultimate purchase price at the time of the scheduled closing.  This amount has been recorded in properties held for investment for the six month period ended June 30, 2008.  During the three months ended June 30, 2008, the Company executed a Promissory Note in the principal amount of $390,000.  The Note is secured by 40 acres of land acquired by the Company during 2007.  Pursuant to the terms of the Note, principal and unpaid interest is due and payable on or before May 1, 2013.  The note bears interest at 7.25 percent per annum, and amortizes over 240 months.  Furthermore, an officer of the Company personally guaranteed the note.  In June, 2008, the Company commenced a $5,000,000 private placement offering, consisting of 500,000 investment units.  Each investment unit comprises one common unit, and one 8 percent cumulative preferred series E unit.  The purchase price per investment unit is $10.00.  The offering will terminate upon the earlier of the date on which all 500,000 of the investment units being offered are subscribed for or on December 1, 2008, whichever occurs first.  The offering may be extended for up to two additional ninety  day periods, at the Companys discretion.  During the three months ended June 30, 2008, the Company raised $3,132,145 through its subsidiary, Castle Arch Secured Development Fund, LLC (CASDF).  In exchange for the amounts raised, CASDF issued 3,132,145 twelve (12) percent Series A preferred units, which have been reported as long  term notes payable at June 30, 2008 on the Companys consolidated balance sheet.  3.  DEVELOPMENT STAGE ENTERPRISE  Prior to March 31, 2008 the Company had yet to receive significant revenues from its planned principal operations and, therefore, it was considered a development stage enterprise as per the Statement of Financial Accounting Standard (SFAS) No. 7, Accounting and Reporting by Development Stage Enterprises.  Moreover, the Companys activities were primarily devoted to raising capital and acquiring operating assets, in addition to other efforts devoted to establishing its business.  During the three month period ended June 30, 2008, the Company sold 72 acres for $1,980,000 (see Note 2).   As a result of the sale, the Company is no longer considered a development stage enterprise and, therefore, the Companys financial statements are no longer identified as those of a development stage enterprise.  In addition, certain descriptive captioning and disclosure, specific to development stage enterprises, has been omitted from the Companys financial statements at June 30, 2008.  9   Castle Arch Real Estate Investment Company, LLC Notes to Consolidated Financial Statements (Unaudited) June 30, 2008  4.  SUBSEQUENT EVENT  In August, 2008, and subsequent to the three month period ended June 30, 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.  As the bankruptcy of SNB Development recently occurred, the Company continues to assess the impact of the event for purposes of Statement of Financial Accounting Standards 5.  Accordingly, for the three month period ended June 30, 2008, the Company has determined that disclosure of the event is appropriate.   10   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 areas to stay stable or even continue to grow.  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 remain sufficiently steady and will get an additional boost when the nations credit woes begin to lift.   11   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 $15 million to purchase the property parcels, working with our architectural, marketing and engineering teams currently under development. We will take down the remaining property as needed for the project over the course of the next seven years. As of June 30, 2008, the current highlights of the project schedule are as follows:            Master Plan Design Completed            Project Manager was hired in April 2008            Scheduled start date for development of Major On-Site Improvements including drainage August, 2008 followed in schedule by construction of Grace Neal Parkway, other access roads and collector streets.  •          Scheduled lot development can begin as early as first quarter 2009, subject to management’s evaluation of the real estate environment and builder needs for inventory.  •          Design completed for the NicklausTM Design 18-hole Golf Course and Facilities.  •          TroonTM Golf has been hired to manage the Golf Course and Facilities  •           Development of Golf Course and Facilities scheduled to commence as early as 2009 subject to management decisions based on market conditions.  WYOMING: Star Valley/Thayne  As of June 30, 2008, we have continued to make progress in our Sunset Meadows project in Star Valley, Wyoming. We continue to anticipate that lot sales will commence in 2008. Plans for the project comprise of approximately 200 residential units, including fourplexes, duplexes and single-family homes.  12    TENNESSEE: Smyrna/Rutherford County  During the three month period ended June 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 June 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 October 2008. 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 June 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. In the past three month period, we made a $150,000 deposit toward the purchase of additional water shares. We now own outright or have purchase rights to sufficient water necessary to service the project.  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  During the three month period ended June 30, 2008, our Kingman affiliate sold land for $1,980,000. The cost of the land was $1,980,000. The purpose of the sale of land was to create working capital for us. Other than the sale of land at cost, we had no revenues in the three-month period ended June 30, 2008. Currently, we are continuing to work several properties through the entitlement process and expect to generate revenues from those activities in 2008. However, we also expected revenues in the past that have yet to materialize, in part due to disruptions in the real estate and finance markets. Due to our limited revenues, our operations are currently funded by capital funding.   13   Selling, General and Administrative Expenses  Our operating selling, general and administrative expenses totaled $2,215,854 during the three-month period ended June 30, 2008, compared to $1,140,295 during the comparable three-month period ended June 30, 2007. Our operating selling, general and administrative expenses totaled $4,592,379 during the six-month period ended June 30, 2008, compared to $2,222,517 during the comparable six-month period ended June 30, 2007. The increase in operating expenses during these periods 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. Specifically, in the six month period ended June 30, 2008, we have issued common units as compensation valued at $1,431,646 as opposed to common units worth only $78,750 in all of 2007. We anticipate that our general and administrative expenses to level off 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 June 30, 2008, we had cash and cash equivalents of $2,806,774, compared to $703,466 at June 30, 2007. Our increased cash balance as of June 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.  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.  However, 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.   14   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 June 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 June 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.   15   Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.  During the three month period ended June 30, 2008, we received $252,790 from the sale of our common and preferred D member units to 12 persons. In addition, our consolidated subsidiary Castle Arch Smyrna, LLC received $549,000 from the sale of its common and preferred A member units to 6 persons, and $394,000 from the sale of its common and preferred B member units to 6 persons.   Our Castle Arch Kingman, LLC consolidated affiliate received $50,000 from the sale of its common and preferred A member units to 1 person.  Finally, our consolidated subsidiary Castle Arch Secured Development Fund, LLC received $3,862,995 from the sale of its preferred A member units to 57 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.  None.   16   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 June 30, 2008.  17     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:  August 12, 2008  By: /s/ Kirby D. Cochran Kirby D. Cochran, Chief Executive Officer (Principal Executive Officer)   By: /s/ Jad Howell Jad Howell, Principal Financial Officer  18