UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-QSB  SQuarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2006  Or  £Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.   000-51230(Commission File No.)  CASTLE ARCH REAL ESTATE INVESTMENT COMPANY, L.L.C. ______________________________________________________________________________ (name of small business issuer in its charter)    California20-1077312(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)9595 Wilshire, PH 1000, Beverly Hills, CA90212(Address of principal executive offices)(Zip Code)  Issuers telephone number: (310) 385-5970  Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes £   No S  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 (the "Exchange Act") 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 £  As of August 1, 2006, the Registrant had 33,280,455 units, consisting of 23,259,574 common units, 10,020,881 preferred units. _________________________________________________________________________________       INDEX  Castle Arch Real Estate Investment Company, LLC For The Quarter Ending June 30, 2006   Part I.  Financial InformationItem 1.Financial Statements3Consolidated Statement of Financial Condition  June 30, 2006 (Unaudited).3Consolidated Statements of Operations (Unaudited)  For the six months ended
June 30, 2006; and for the six months ended June 30, 2005; and for the three months
ended June 30, 2006; and for the three months ended June 30, 2005; and cumulative
from April 15, 2004 (inception) to June 30, 2006.4Consolidated Statements of Cash Flows (Unaudited)  For the six months ended
June 30, 2006, and for the six months ended June 30, 2005, and cumulative from
April 15, 2004 (inception) to June 30, 2006.5Notes to Consolidated Financial Statements (Unaudited)  June 30, 2006.7Item 2.Managements Discussion and Analysis of Financial Condition or Plan of Operation.13Item 3.Controls and Procedures14Part II.  Other Information15Item 2.Unregistered Sales of Equity Securities and Use of Proceeds15Item 5.Other Matters16Item 6.Exhibits and Reports on Form 8-K16Signatures17  2    Part I  Financial Information  Item 1. Financial Statements  Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Consolidated Statement of Financial Condition (Unaudited)  June 30,ASSETS2006Current assets:Cash and cash equivalents$251,713Interest receivable20,978Notes receivable1,338,041Prepaid expenses55,128Total current assets1,665,860Property and equipment:Office equipment34,905Less: accumulated depreciation(7,266)Net property and equipment27,639Other assets:Properties held for sale149,145Other properties held for investment23,819,088Options, earnest money deposits, and entitlement costs633,211Total other assets24,601,444Total assets$26,294,943LIABILITIES AND MEMBERS CAPITALCurrent liabilities:Accounts payable and accrued expenses$234,610Preferred unit distributions payable1,538,009Notes payable7,622,846Total current liabilities9,395,465Minority interest in consolidated LLC (see Note 2)50,000Members Capital:Common units, 23,180,808, issued and outstanding,ranging from $.001 to $2.50 per unit810,386Non-managing members units, series A preferred,1,000,000 units issued and outstanding, $1.00 per unit693,269Non-managing members units, series B preferred,2,000,000 units issued and outstanding, $2.00 per unit1,451,814Non-managing members units, series C preferred,3,300,000 units issued and outstanding, $3.00 per unit2,583,948Non-managing members units, series D preferred,3,667,526 units issued and outstanding, $5.00 per unit16,168,782Deficit accumulated during the development stage(4,858,721)Total members capital16,849,478Total liabilities, minority interest, and members capital$26,294,943  See accompanying notes  3


Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Consolidated Statements of Operations (Unaudited)  Cumulative FromFor the SixFor the SixFor the ThreeFor the ThreeApril 15, 2004Months EndedMonths EndedMonths EndedMonths Ended(inception) toJune 30, 2006June 30, 2005June 30, 2006June 30, 2005June 30, 2006Revenues and Other IncomeProceeds from sale of property, netof cost of property sold$-$-$-$-$-Total revenues and other income-----ExpensesSalaries, wages and other compensation629,868403,671357,623221,2381,743,605Selling and marketing217,40495,98194,91649,690499,031Start-up and organizational costs----55,696Office supplies and expenses244,29290,301143,30653,923637,011Legal and outside services585,624119,229349,61432,5781,120,426Costs of terminated purchaseagreements1,155---246,518Travel, meals and lodging86,27648,86241,28113,972267,310Depreciation3,1703,7481,7001,8747,266Amortization of loan issuance costs96,231-19,269-96,231Taxes and licenses180---95,158Total operating expenses1,853,155761,7921,007,709373,2754,768,252Net operating loss(1,864,200)(761,792)(1,007,709)(373,275)(4,768,252)Other income (expense)Interest income33,64318,40415,79214,48484,505Interest expense(174,743)(231)(137,400)-(174,974)Total other income (expense)(141,100)18,173(121,608)14,484(90,469)Net loss and deficit accumulatedduring the development stage$(2,005,300)$(743,619)$(1,129,317)$(358,791)$(4,858,721)Accumulated preferred dividends$(854,567)$(177,506)$(460,506)$(243,616)Net loss available to commonunitholders$(2,859,867)$(921,125)$(1,589,823)$(602,407)Net loss per common unit (Note 1)$(.13)$(.05)$(.07)$(.03)Weighted average units outstanding22,779,75618,786,07323,101,47219,041,278  See accompanying notes


4


Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Consolidated Statements of Cash Flows (Unaudited)   CumulativeFor the SixFor the SixFrom April 15,Months EndedMonths Ended2004 (inception) toJune 30, 2006June 30, 2005June 30, 2006Cash Flows From Operating Activities:Net loss$(2,005,300)$(743,619)$(4,858,721)Adjustments to reconcile net loss tonet cash used in operating activities:Depreciation3,1703,7487,266Amortization of debt issuance costs96,231-96,231Amortization of discount on note payable2,635-2,635Professional outside services paid inthe form of common units50,000-128,750Changes in operating assets and liabilities:Interest receivable(16,583)-(20,978)Prepaid expenses(31,164)-(55,126)Accounts payable and accrued expenses(50,679)(103,780)162,196Due to related party-(20,000)-Properties held for sale--(149,145)Properties held for investment(7,626,927)-(17,125,320)Net cash used in operating activities(9,578,617)(863,651)(21,812,212)Cash Flows From Investing ActivitiesOption, earnest money,entitlement deposits(264,863)(905,874)(585,652)Notes receivable(400,000)-(500,000)Purchase of property and equipment(9,221)-(34,905)Net cash used in investing activities(674,084)(905,874)(1,120,557)Cash Flows From Financing ActivitiesProceeds from issuance of member unitsfor cash (net of offering costs)4,488,3672,727,83423,184,482Proceeds from subscriptions receivable1,985,135138,134-Proceeds (payments) from issuanceof notes payable-(11,843)-Net cash provided by financing activities6,473,5022,854,12523,184,482Net increase (decrease) in cash and cashequivalents(3,779,199)1,084,600251,713Cash at beginning of period4,030,9122,341,332-Cash at end of period$251,713$3,425,932$251,713


5


Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Consolidated Statements of Cash Flows (Unaudited)     CumulativeFor The SixFor the SixFrom April 15,Months EndedMonths Ended2004 (inception) toJune 30, 2006June 30, 2005June 30, 2006Non-Cash Investing and Financing ActivitiesIssuance of members units for subscriptionsreceivable$333,400$978,732$333,400Distributions payable$854,567$98,750$1,538,009Accrued finders fees (offering costs)$35,775$88,044$35,775Accrued finders fees paid with common units$267,002$30,250$613,639Issuance of notes payable (net of debt offeringcosts and accrued interest) in exchange forother properties held for investment$6,685,939$-$6,685,939Issuance of promissory notes payable (net ofloan issuance costs and discount) inexchange for a promissory note receivable$838,041$-$838,041Accrued interest receivable applied towardsthe purchase of other property held forinvestment$2,438$-$2,438Accrued costs related to other properties heldfor investment$180$-$180Accrued costs related to options, earnestmoney deposits, and entitlement costs$53,120$-$53,120Changes Attributable to ReclassificationsDuring the six month period ended June 30, 2006, the Company reclassified $939,686 in options, earnest money deposits
and entitlement costs to other property held for investment.Supplemental DisclosuresCash paid for interest$172,109$231$172,340   See accompanying notes


6


Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Notes to Consolidated Financial Statements June 30, 2006 (Unaudited)   1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  A. General Description of the Company and Presentation  Castle Arch Real Estate Investment Company, LLC, a California limited liability company, was organized on April 15, 2004 as a residential and commercial land development company with target properties located primarily in the Western United States.  The principal activities of the Company 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.  Property targeted by the Company may have end uses that range from residential, multifamily, retail and office, to industrial.  The Company may also consider other strategic and joint venture opportunities.  The Company has completed or commenced four private placements of membership units in the Company as follows:  Effective May 1, 2004, the placement of 1,000,000 Series A membership units consisting of one common and one preferred unit each at $1.00 per membership unit.  Effective July 20, 2004, the placement of 1,000,000 Series B membership units, consisting of one common and two preferred units each at $2.00 per membership unit.  Effective November 5, 2004, the placement of 1,100,000 Series C membership units, consisting of one common and three preferred units each at $3.00 per membership unit.  Effective June 30, 2005, the placement of 3,000,000 Series D membership units, consisting of one common and one preferred unit each at $5.00 per membership unit.  Effective April 14, 2006, the Company elected to oversubscribe the Series D private placement; resulting in an additional 940,000 Series D membership units, consisting of one common and one preferred unit each at $5.00 per membership unit.  As of June 30, 2006, the Company had completed the Series A, B, and C private placement offerings, and had raised $18,387,631 of the Series D private placement.  Of this amount, $333,400 represents Series D subscribed units outstanding for which funds had not been received at June 30, 2006.  The Members share in the profits and losses of the Company in proportion to their respective interests in the Company based on the weighted average dollar amount invested during the period.  A non-Managing Members loss is limited to the amount of his or her investment.  Consistent with the Companys policy and its private placement memorandums, profits and losses have been allocated to the various members interests as follows:


7


Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Notes to Consolidated Financial Statements June 30, 2006 (Unaudited)   1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  A. General Description of the Company (continued)  a) Allocation of profits shall be made:  (i) First, to the members, up to the aggregate of, and in proportion to, any losses previously allocated to each member, to the extent not previously offset by allocations of profits; (ii) Second, to preferred members, subject to the Managers election to redeem the membership units and to the extent of the cumulative preferred unit return; (iii) Third, to the common members, in proportion to their percentage interests.  b) Allocation of losses shall be made as follows:  (i) First, to the members, up to the aggregate of, and in proportion to, any profits previously allocated to each member and not previously offset by losses until their capital account balances have been reduced to zero; (ii) Second, to the preferred members until their capital account balances have been reduced to zero; (iii) Third, to the common members, in proportion to their percentage interest.  c) At no time shall the sum of all historical net profit distributions to common unit holders exceed the total amounts paid toward redeeming any outstanding preferred units, until all preferred units have been redeemed.  The Company has not received revenues from the sale or development of property as of June 30, 2006 in accordance with its business plan.  Accordingly, the Companys activities have been accounted for as those of a development stage enterprise as defined in Statement of Financial Accounting Standards (SFAS) No. 7, Accounting and Reporting by Development Stage Enterprises.  All losses since inception have been considered as part of the Companys development stage activities.  d) Presentation  The Company prepared the financial statements as of June 30, 2006 and for the periods ended June 30, 2005 and 2006, without audit pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations.  In the opinion of management, all necessary adjustments, which consist primarily of normal recurring adjustments, to the financial statements have been made to present fairly the financial position and results of operations and cash flows.  The results of operations for the respective periods presented are not necessarily indicative of the results for the respective complete years.  The Company has previously filed with the SEC an annual report on Form 10-KSB, which included audited financial statements for the period ending December 31, 2005.  It is suggested that the financial statements contained in this filing be read in conjunction with the statements and notes thereto contained in the Companys 10-KSB filing.


8


Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Notes to Consolidated Financial Statements June 30, 2006 (Unaudited)   1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  B. Principles of Consolidation  The accompanying consolidated financial statements include the accounts of Castle Arch Real Estate Investment Company, LLC and, effective April 2006, include the accounts of Castle Arch Kingman, LLC, a variable interest entity in which the Company is the primary beneficiary (see Note 2).  All intercompany accounts and transactions have been eliminated in the consolidated financial statements.  C. Reclassifications  Certain amounts in the accompanying financial statements have been reclassified to conform to current quarter presentation.  D. Method of Reporting and Use of Estimates  The Companys financial statements are presented in accordance with U.S. generally accepted accounting principles (GAAP).  Such principles require the use of certain estimates and assumptions made by the Companys management in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  E.   Accounting Method  The Companys financial statements are prepared using the accrual method of accounting.  The Company has elected a December 31 year end.  F.   Income and Expense Recognition  Gains or losses associated with real estate are realized in full when the property is sold by the full accrual method in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 66 Accounting for Sales of Real Estate.  Costs associated with real estate are accounted for in accordance with the provisions of Statement of Financial Accounting Standard (SFAS) No. 67 Accounting for Cost and Initial Rental Operations of Real Estate Projects.Accordingly, acquisition, development and construction costs, including property taxes, insurance and selling costs, are capitalized.  Such costs are specifically allocated to the related components or, if relating to multiple components, allocated on a pro rata basis as appropriate.  Estimates are reviewed periodically and revised as needed.  The respective real estate projects are also periodically reviewed to determine that the carrying amount does not exceed the net realizable value.  To date, no allowance has had to be provided for estimated impairments of value based on evaluation of the projects.  G. Income Taxes  No provision for income taxes has been made in these financial statements because each member is individually responsible for reporting income or loss based on its respective share of the Companys income and expenses as reported for income tax purposes.  The Company prepares calendar year federal and state information tax returns and reports to the members their allocable shares of the Companys income, expenses, and gains or losses.  H.   Cash and Cash Equivalents  The Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents.





Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Notes to Consolidated Financial Statements June 30, 2006 (Unaudited)  1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  I. Offering Costs  Costs incurred in the successful raising of capital under the Companys private placement memorandums such as finders fees and attorneys costs have been offset against various components of members equity as a reduction of the proceeds received from the sale of membership units.   J. Property and Equipment  Property, plant and equipment are stated at cost.  Depreciation is computed primarily using the straight-line method based on estimated useful lives of 5 years.  K. Advertising Costs  The Company may incur costs of advertising which it will expense as incurred.  Advertising costs do not include commissions for the sale of property or finders fees incurred for the successful raising of capital.  L. Net Loss Per Common Unit  Net loss per common unit is computed based on the weighted-average number of common units and, as appropriate, dilutive common unit equivalents outstanding during the period.  Basic net loss per common unit is the amount of net loss for the period available to each common unit outstanding during the reporting period.  Diluted net loss per common unit is the amount of net loss for the period available to each common unit outstanding during the reporting period and to each unit that would have been outstanding assuming the issuance of common units for all dilutive potential common units outstanding during the period.  At June 30, 2006, the basic and diluted net loss per common unit is the same as there are no common unit equivalents outstanding.  Accumulated preferred unit dividends, totaling $854,567 for the six month period ended June 30, 2006, have been included in the computation of net loss per common unit, resulting in an incremental increase in loss per unit of $.04.  M. Options and Deposits on Land and Entitlement Costs  As of June 30, 2006, the Company has successfully placed earnest money deposits, or deposits to acquire options, as well as increased deposits, for the purchase of fourteen properties totaling $2,057,000.  The terms of the purchase agreements provide for property review periods during which the deposits may be refunded upon written notice of unsuitability.  Upon expiration of the review periods, the deposits become non-refundable as liquidated damages to the seller if the purchase does not close.  The Companys policy is to capitalize entitlement costs and applicable deposits incurred as options, earnest money deposits and entitlement costs until such time as the properties are purchased.  Upon purchase, the Company classifies the property as held for sale only when certain requirements are met, such as the completion of the respective entitlements and the preparation of the property for immediate sale in its existing condition, an active program to identify potential buyers has been initiated, and when the Company believes the sale is probable and expected to occur within the following twelve months.  Those properties that do not meet these criteria are classified as other properties held for investment.      10    Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Notes to Consolidated Financial Statements June 30, 2006 (Unaudited)  1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  M. Options and Deposits on Land and Entitlement Costs (continued)  Of the successful deposits placed by the Company at June 30, 2006, $1,607,000 has been applied towards the purchase of seven separate properties, with purchase prices totaling $19,628,503.  The Company has also incurred $1,444,179 in entitlement costs and project costs, and $1,139,406 in water rights associated with these purchased properties at June 30, 2006.  These costs are included in other properties held for investment at June 30, 2006, totaling $23,819,088.  Of the remaining $450,000 in earnest and increased deposits, $385,000, combined with entitlement costs of $248,211, is related to five properties the Company has entered into purchase agreements to acquire and, accordingly, these amounts are recorded as options, earnest money deposits, and entitlement costs at June 30, 2006.  The remaining $65,000 in earnest and increased deposits at June 30, 2006 is related to properties held for sale (see Note 1, Item N).  N. Properties Held for Sale  During 2005, the Company placed land deposits of $50,000 and incurred associated entitlement costs totaling $99,145 to purchase the rights to one property.  These rights were subsequently sold by the Company in 2005.  As the sale of the rights meet the appropriate criteria for classification of held for sale (see Note 1, Item M), the associated costs, totaling $149,145 have been recorded as properties held for sale at June 30, 2006.  To date, the proceeds to be paid to the Company have not been realized.  O. Notes Receivable  At June 30, 2006, the Company had entered into three promissory notes receivable with a nonrelated entity, totaling $500,000.  One of the three notes has a principal balance of $400,000, and, pursuant with the original terms, bears interest at 8 percent per annum.  Accrued interest along with principal is to be paid in full on or before January 17, 2007.  The two remaining notes have principal balances of $50,000 each.  These promissory notes bore interest at 8 percent per annum, and accrued interest along with principal was to be paid in full on or before March 14, and April 20, 2006, respectively.  In January, 2006, the Company extended the maturity date of the two notes to December 31, 2006, and all accrued interest to date became due in full.  At June 30, 2006, the Company had not received payment for the required interest payments, but did not record any impairment for the interest receivable as it expects to extend by mutual agreement, the due date for the interest.  At June 30, 2006, the Company entered into a fourth promissory note receivable totaling $838,041 pursuant to a financing arrangement effected in June, 2006 (see Note 3).   Of this amount, $255,000 bears interest at 12 percent per annum.  Accrued interest along with principal is to be paid in full on or before May 15, 2020.  The remaining $583,041 was received in July, 2006 (see Note 4).  P. Notes Payable  In March and June, 2006, the Company entered into two promissory notes payable with a third-party lender totaling $5,380,293 and $1,479,339, respectively.  The Company incurred combined loan issuance costs totaling $77,516 and, accordingly, these costs will be amortized over the 12-month terms of the notes.  The Company collateralized the notes with four properties and associated water rights purchased during 2005 and 2006, respectively.  The notes bear annual interest rates of 10.5 and 10 percent, respectively, with interest only payments due on a monthly basis over the terms of the notes.  At the date of maturity, all principal and accrued interest is due in full.  In addition to using the proceeds for the acquisition of property held for investment, the Company also used $1,576,055 to repay an existing note payable and associated accrued interest.     11    Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Notes to Consolidated Financial Statements June 30, 2006 (Unaudited)  2. CONSOLIDATION OF A VARIABLE INTEREST ENTITY  Effective April 2006, the Company adopted FIN 46(R), resulting in the consolidation of Castle Arch Kingman, LLC (CAK).  In accordance with the pronouncement, CAK is considered a variable interest entity, and the Company its primary beneficiary.  Accordingly, the Company has consolidated the entity and eliminated all intercompany transactions.  CAK was founded in April, 2006 by members and managers of the Company to develop over 2,000 acres of land in the Kingman, Arizona area into commercial and residential properties.  At the date of CAKs formation, the Company agreed to sell, at cost, all of the land it has or will acquire in the Kingman, Arizona area.  As of June 30, 2006, the Company had purchased approximately 453 acres, totaling $12,008,373.  To date, the Company effectively owns 100 percent of all outstanding common units of CAK, and members of the Companys management team effectively control CAK.  The Company intends on funding CAKs working capital requirements and future operating expenses through a private placement offering, consisting of the placement of 1,200,000 membership units, comprising one preferred and five common units each at $25.00 per membership unit.  At the close of the offering, the investors of CAK will collectively own all 1,200,000 outstanding preferred units and 50 percent of all outstanding common units, or 6,000,000 units.  The Company will own the other 50 percent of CAKs common units.  In addition, the Company will receive a management fee of 2 percent of all funds raised on CAKs behalf.  At June 30, 2006, CAK had raised $111,000.  Of this amount, $60,000 represents subscribed units outstanding for which funds had not been received at June 30, 2006.  The minority interest in the Companys earnings during the six month period ended June 30, 2006 was immaterial and, therefore, no item has been recorded on the consolidated statement of operations.  3. FINANCING ARRANGMENT  In June, 2006, the Company entered into a purchase agreement to exchange 33 acres, comprising a portion of other properties held for investment, in return for $840,000 to facilitate an IRS code section 1031 exchange.  Pursuant to the terms of the purchase agreement, the Company exchanged the 33 acres for a $255,000 promissory note receivable (see Item O, Note 1) and $585,000 in cash proceeds, net of closing costs, which proceeds were realized in July, 2006 (see Note 4).  Also included in the terms of the purchase agreement is an option to repurchase, whereby the Company is entitled to purchase back the exchanged property at appreciated values at specified dates in the future.  In addition, the buyer is limited in its rights to the property under the purchase agreement, and may not assign or otherwise transfer its rights without the Companys written consent.  Given these factors, the Company exhibits substantial continuing involvement in the acreage exchanged and, therefore, the Company has treated the transaction as a financing arrangement.  Accordingly, at June 30, 2006 the Company has recorded a note receivable totaling $840,000, net of offering costs totaling $1,959, and a corresponding note payable totaling $1,053,696, net of offering costs and imputed interest totaling $212,966.  The offering costs and imputed interest will be amortized over the two year life of the option.  4. SUBSEQUENT EVENTS  Subsequent to quarters end, the Company realized cash proceeds totaling $583,041 resulting from the exchange of 33 acres for cash proceeds and a promissory note receivable, and accounted for as a financing arrangement at June 30, 2006 (see Note 3).  Subsequent to quarters end, the Company placed a $10,000 earnest money deposit to acquire an option for the purchase of 40 acres.  This amount will be applied towards the purchase price of the property contingent upon the Companys determination of suitability during the property review periods, the terms of which are disclosed in the respective purchase agreements.  Subsequent to quarters end, the Company has raised additional capital totaling $245,775 and has received $104,400 of outstanding subscriptions receivable at June 30, 2006.  12     Item 2. Management's Discussion and Analysis or Plan of Operation.  We are in the business of developing residential and commercial land with target properties located primarily in the Western United States.  Our principal activities include securing acquisition rights to properties, obtaining zoning and other entitlements for the properties, securing financing for the purchase of the properties, improving the properties infrastructure and amenities, and selling the properties.  Properties targeted by us may have end uses that range from residential, multifamily, retail and office, to industrial.  We may also consider other strategic and joint venture opportunities.  We have received no revenues from the sale or development of property as of December 31, 2005 or June 30, 2006. However, we are continuing to work several properties through the entitlement process and expect to generate revenues from those activities in the coming 12 months.  Our operations are currently funded by equity sales and loans.  Results of Operations  The following discussion should be read in conjunction with selected financial data and the financial statements and notes to financial statements.  Selected Financial Information Three months endedJune 30,20062005Revenue, net$- 0 -$- 0 -Gross profit (loss)(1,007,709)(419,696)Operating loss(1,007,709)(419,696)Other income (expense)(121,608)14,484Net income (loss)(1,129,317)(405,212) _________________________________________________________________________________  13      June 30,
2006December 31,
2005Balance Sheet Data:Cash and Cash Equivalents$251,713$4,030,912Total Current Assets1,665,8604,159,091Total Assets26,294,94314,148,656Total Current Liabilities9,395,4651,050,680Total stockholders equity$16,849,478$13,097,976 _________________________________________________________________________________   Discussion  During the three month period ended June 30, 2006 our revenues from operations were limited to interest income due to the fact that we received no funds from the sale of any property. During the three month period we continued to focus on locating, acquiring rights to, and entitling target properties. During the three month period ended June 30, 2006, we continued to incur entitlement costs on both properties under contract and those properties which we own. None of these activities have produced revenues. We expect that our first revenues will be derived from amounts due from our reassignment of the Fresno California properties.  Our general and administrative expenses totaled $988,440 during the three month period ended June 30, 2006, compared to $417,822 during the comparable three month period ended June 30, 2005. The increase in general and administrative expenses is primarily attributable to increased salaries of our executive officers and additional employees, office costs and professional services. We anticipate that our general and administrative expenses will remain fairly constant during the next several quarters, while we anticipate that our total revenues during such period will increase.  Liquidity and Capital Resources  At June 30, 2006, we had cash and cash equivalents of $251,713, compared to $3,401,246 on the same date one year earlier, and $4,030,912 at December 31, 2005. Our decreased cash balance at June 30, 2006 is largely attributable to general and administrative expenses and land acquisition costs.  We believe that proceeds from sales of our securities will be sufficient to for us to survive as a going concern for the next 12 months. Our management is actively pursuing additional sources of funding. In addition, our management is expecting an increase in cash flows through anticipated increases in revenue.  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. We may also sell unimproved land or land purchase contracts that we own. However, we currently do not have plans in the coming several months to sell unimproved land.   14    Prospective shareholders should understand that several factors govern whether any forward-looking statement contained herein will be or can be achieved. Any one of those factors could cause actual results to differ materially from those projected herein. These forward-looking statements include plans and objectives of management for future operations, including plans and objectives relating to the products and the future economic performance of the Company. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, future business decisions, and the time and money required to successfully complete development projects, 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 that the assumptions underlying the forward-looking statements contained herein are reasonable, any of those assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in any of the forward-looking statements contained herein will be realized. Based on actual experience and business development, the company may alter its marketing, capital expenditure plans or other budgets, which may in turn affect the companys results of operations. In light of the significant uncertainties inherent in the forward-looking statements included therein, the inclusion of any such statement should not be regarded as a representation by the Company or any other person that the objectives or plans of the company will be achieved.  Item 3.  Controls and Procedures  We carried out an evaluation as of June 30, 2006, under the supervision and with participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms. Subsequent to June 30, 2006, there have been no significant changes in our internal controls over financial reporting that occurred during the period covered by this report 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  The Company currently is not party to any material legal proceedings.  Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds  During the three month period ended June 30, 2006, we received $2,516,230 from the sale of 503,246 member units to a total of 61 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 stock 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.  15    Item 3.  Defaults Upon Senior Securities.  None.  Item 4.  Submission of Matters to a Vote of Security Holders.  None.  Item 5.  Other Information.  We intend to facilitate several land development projects through separate entities. The separate entities will be owned in whole or part by us and will generally be managed by our managers or their designees. We founded our first project specific entity, Castle Arch Kingman, LLC, a Nevada limited liability company, in April, 2006 in connection with our intended development of over 2,000 acres of land in the Kingman, Arizona area into commercial and residential properties. We intend to transfer to the Kingman entity all or portions of land which we currently have under contract in the Kingman area in exchange for recovery of our costs. We will charge a management fee to the entity for management of the entity. We will also own approximately half of the entity and share in approximately half of the profits.  The Kingman entity relies on us for its financial support, and we expect to receive a majority of the Kingman entitys expected losses, and a majority of its residual returns. As a result, the Kingman will be consolidated into our financial statements and all inter-company transactions will be eliminated accordingly.  Item 6.  Exhibits and Reports on Form 8-K.  (a) Exhibits (filed with this report unless indicated below)  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   (b) Reports on Form 8-K.  No reports on Form 8-K were filed by the Company during the three months ended June 30, 2006.    16    SIGNATURES  In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.  CASTLE ARCH REAL ESTATE INVESTMENT COMPANY, L.L.C.  Dated:  August 8, 2006   By: /s/ Kirby D. Cochran Kirby D. Cochran, Chief Executive Officer (Principal Executive Officer)  By: /s/ Douglas W. Child Douglas W. Child, Chief Financial Officer (Principal Financial Officer)         17