##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
  þ
    
    Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
  o
    
    Transition report under section 13 or 15(d) of the Securities Exchange Act of 1934
  Commission file number 0-18808
 Great Western Land and Recreation, Inc.
  Nevada(State or other jurisdiction
    
    13-3530765of incorporation or organization)
    
    (IRS Employer Identification No.)
 7373 N. Scottsdale Road, Suite C-140
Scottsdale, AZ 85253
(480) 949-6007
  Yes R No £
 o o




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##### Table of Contents



GREAT WESTERN LAND AND RECREATION, INC.
 CONTENTS
 PAGEPart IFinancial InformationItem 1. Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis
    
    
    15Item 3. Controls and Procedures
    
    
    19Part IIOther InformationItem 1. Legal Proceedings
    
    
    20Item 2. Unregistered Sales of Equity, Securities and Use of Proceeds
    
    
    20Item 3. Defaults Upon Senior Securities
    
    
    20Item 4. Submission of Matters to a Vote of Security Holders
    
    
    20Item 5. Other Information
    
    
    20Item 6. Exhibits
    
    
    20Signatures
    
    
    21EX  31.1
    
    
    22EX  31.2
    
    
    23EX  32.1
    
    
    24EX  32.2
    
    
    25EX-31.1EX-31.2EX-32.1EX-32.2
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BUSINESS RISKS AND FORWARD-LOOKING INFORMATION
  POSSIBLE APPLICATION OF EITF 00-19 TO THE RECORDING OF OUR SERIAL PREFERRED STOCK
  3




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PART I FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 GREAT WESTERN LAND AND RECREATION, INC.
CONSOLIDATED BALANCE SHEET
 December 31,2005(unaudited)ASSETSCash and cash equivalents
    
    $
    3,087,039Notes and accounts receivable (net of allowance of $115,000)
    
    
    1,525,822Land held for development and sale
    
    
    19,650,228Receivable from related entities
    
    
    33,976Property and equipment, net of accumulated depreciation of $119,266
    
    
    226,942Other
    
    
    875,841$
    25,399,848LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesNotes payable
    
    $
    15,579,344Subordinated debt
    
    
    3,564,259Payable to related entities
    
    
    1,058,586Accounts payable and other accrued liabilities
    
    
    861,524Deferred gain
    
    
    57,560Total liabilities
    
    
    21,121,273Minority interest
    
    
    34,915Stockholders equityPreferred stock, $0.001 par value; 10,000,000 shares authorized; 31,319 shares issued and
outstanding; 20,000 additional shares issued, held by a subsidiary and reported as treasury shares;
liquidation value  $2,419,200
    
    
    2,222,369Common stock, $0.001 par value; 45,000,000 shares authorized; 21,315,973 shares issued and outstanding
    
    
    21,315Additional paid-in capital
    
    
    2,536,655Accumulated other comprehensive loss
    
    
    (733
    )Accumulated deficit
    
    
    (535,946
    )Total stockholders equity
    
    
    4,243,660$
    25,399,848
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GREAT WESTERN LAND AND RECREATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 Three months endedDecember 31,2005
    
    
    2004Real estate sales
    
    $
    180,468
    
    
    $
    907,375Cost of real estate sales
    
    
    206,503
    
    
    
    419,213Gross profit (loss) from real estate sales
    
    
    (26,035
    )
    
    
    488,162Selling, general and administrative expenses
    
    
    556,769
    
    
    
    466,655Earnings (losses) from operations
    
    
    (582,804
    )
    
    
    21,507Other income (expense)Interest expense
    
    
    (126,008
    )
    
    
    (80,262
    )Interest income
    
    
    49,778
    
    
    
    8,324Other income (expense)
    
    
    444,428
    
    
    
    39,001Total other income (expense)
    
    
    368,198
    
    
    
    (32,937
    )Income (loss) before minority interests and discontinued operations
    
    
    (214,606
    )
    
    
    (11,430
    )Minority interests
    
    
    
    
    
    
    Income (loss) from continuing operations
    
    
    (214,606
    )
    
    
    (11,430
    )Loss from discontinued operations
    
    
    
    
    
    
    (68,770
    )Net income (loss)
    
    
    (214,606
    )
    
    
    (80,200
    )Less: preferred stock dividends applicable to the period
    
    
    (15,332
    )
    
    
    (16,430
    )Net income (loss) available for common stock
    
    $
    (229,938
    )
    
    $
    (96,630
    )Net income (loss) per common and common equivalent share:Basic and diluted:Continuing operations
    
    $
    (0.011
    )
    
    $
    (0.001
    )Discontinued operations
    
    
    
    
    
    
    (0.003
    )Total
    
    $
    (0.011
    )
    
    $
    (0.004
    )Weighted average common and common equivalent shares outstanding:Basic and diluted
    
    
    21,315,973
    
    
    
    21,050,888
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GREAT WESTERN LAND AND RECREATION, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
AND COMPREHENSIVE LOSS
(unaudited)
 AccumulatedOtherAdditional
    
    
    compre-
    
    
    
    
    
    
    Compre-Preferred Stock
    
    
    Common Stock
    
    
    paid-in
    
    
    hensive
    
    
    Accumulated
    
    
    hensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    capital
    
    
    loss
    
    
    deficit
    
    
    income (loss)Balance, September 30, 2005
    
    
    31,319
    
    
    $
    2,200,304
    
    
    
    21,315,973
    
    
    $
    21,315
    
    
    $
    2,558,720
    
    
    $
    (733
    )
    
    $
    (275,676
    )
    
    $
    Amortization of discount on preferred stock
    
    
    
    
    
    
    22,065
    
    
    
    
    
    
    
    
    
    
    
    (22,065
    )
    
    
    
    
    
    
    
    
    
    
    Accrued dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45,664
    )
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (214,606
    )
    
    
    (214,606
    )Comprehensive loss for the three months
ended December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (214,606
    )Balance, December 31, 2005
    
    
    31,319
    
    
    $
    2,222,369
    
    
    
    21,315,973
    
    
    $
    21,315
    
    
    $
    2,536,655
    
    
    $
    (733
    )
    
    $
    (535,946
    )
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GREAT WESTERN LAND AND RECREATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 Three months ended December 31,2005
    
    
    2004Cash flows provided by (used in) operating activitiesNet earnings (loss)
    
    $
    (214,606
    )
    
    $
    (80,200
    )Adjustments to reconcile net earnings (loss) to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    25,373
    
    
    
    17,159Note receivable received as legal settlements
    
    
    (500,000
    )
    
    
    Discount on note receivable
    
    
    20,000
    
    
    
    Loss from discontinued operations
    
    
    
    
    
    
    68,770Other non-cash expenses
    
    
    
    
    
    
    23,793Interest included in debt
    
    
    116,963
    
    
    
    57,942Collection of notes receivable relating to prior years sales
    
    
    526,380
    
    
    
    48,279Changes in operating assets and liabilities:(Increase) Land held for development and sale
    
    
    (4,881,381
    )
    
    
    (507,034
    )(Increase) Decrease Other assets
    
    
    237,712
    
    
    
    (260,593
    )Increase (decrease) Accounts payable and other accrued liabilities
    
    
    64,280
    
    
    
    (391,862
    )Net cash used in operating activities
    
    
    (4,605,279
    )
    
    
    (1,170,485
    )Cash flows provided by (used in) investing activitiesPurchase of note receivable in foreclosure
    
    
    (179,915
    )
    
    
    Collection of (increase in ) receivable from related entities
    
    
    (971
    )
    
    
    7,335Purchases of property and equipment
    
    
    (43,711
    )
    
    
    (45,784
    )Net cash provided by (used) in investing activities
    
    
    (224,597
    )
    
    
    (38,449
    )Cash flows from financing activitiesIssuance of notes payable
    
    
    2,439,622
    
    
    
    734,745Payments on notes payable
    
    
    (135,326
    )
    
    
    (428,594
    )Principal payment on notes of discontinued operations
    
    
    
    
    
    
    (9,262
    )Issuance of notes payable to related entities
    
    
    135,437
    
    
    
    (83,401
    )Payments on subordinated debt
    
    
    (1,500
    )
    
    
    Net cash provided by financing activities
    
    
    2,438,233
    
    
    
    213,488Net decrease in cash and cash equivalents
    
    
    (2,391,643
    )
    
    
    (995,446
    )Cash and cash equivalents at beginning of period
    
    
    5,478,682
    
    
    
    1,675,690Cash and cash equivalents at end of period
    
    $
    3,087,039
    
    
    $
    680,244Supplemental disclosure of cash flow information:Cash paid during the period for interest, net of amount capitalized
    
    $
    154,113
    
    
    $
    47,481Noncash investing and financing activitiesAccrued interest capitalized included in debt
    
    
    49,774
    
    
    
    38,222
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GREAT WESTERN LAND AND RECREATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 NOTE A  BACKGROUND AND BASIS OF PRESENTATION
      NOTE B  NOTES RECEIVABLE
  NOTE C  LAND HELD FOR DEVELOPMENT AND SALE
  NOTE D  RELATED ENTITIES
  Receivable from related entities:Minority investor in Houston Warren Ranch Partners, LLC (2)
    
    $
    20,000Other
    
    
    13,976$
    33,976Payable to related entities:Minority investors in Glendale Condominiums, LLC (1)
    
    $
    742,524Minority investors in Villa Maria, LLC (3)
    
    
    180,625Other
    
    
    135,437$
    1,058,586
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##### Table of Contents



(1)
    
    The Company has a 70% interest in Glendale Condominiums, LLC. The land for the project was
purchased from an individual and a trust who own the other 30% of the project. The payable
represents the balance due, including interest at 8% per annum, for this purchase. Principal
and interest are due quarterly from September 2008 through September 2018. The land costs and
preliminary development costs for this project total $4,020,608 at December 31, 2005 and are
included in land held for development and sale.(2)
    
    The Company has a total interest of 70% in Houston Warren Ranch Partners, LLC (Warren
Ranch) which is derived from its 55% direct ownership in Warren Ranch as well as a 15%
indirect interest from its one third ownership in Jessica Star Partners, LLC. Jessica Star
Partners, LLC owns 45% of Warren Ranch and consists of the following members owning a one
third interest in the company: Great Western Land & Recreation, Inc., the Chairman of Great
Westerns Board of Directors and Brad Dill of BD Realty. The note receivable from Jessica Star
Partners, LLC bears interest at 10%, with principal and interest due on September 23, 2006.(3)
    
    The Company has an 82.5% interest in Villa Maria, LLC, which is constructing a condominium
project in College Station, Texas called Woodland Court. The remaining 17.5% is owned by
minority investors, consisting of three members of the Companys Board of Directors. The
payable represents the balance due to these investors. Interest on this balance accrues at 10%
per annum, with principal and interest due at the end of the project. NOTE E  STOCK BASED COMPENSATION
 Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
 Three months
    
    
    Three monthsended
    
    
    endedDecember 31,
    
    
    December 31,2005
    
    
    2004Net loss as reported
    
    $
    (214,606
    )
    
    $
    (80,200
    )Total stock-based employee compensation adjustment determined under fair value based method (1)
    
    
    (12,748
    )
    
    
    (2,295
    )Pro forma net loss
    
    $
    (227,354
    )
    
    $
    (82,495
    )Loss per share:Basic and diluted  as reported
    
    $
    (0.010
    )
    
    $
    (0.004
    )Basic and diluted  pro forma
    
    $
    (0.011
    )
    
    $
    (0.004
    )
 
 (1)
    
    The fair value method amortizes the estimated fair value of the options at date of grant over
the vesting period. The fair value of these options was estimated at the date of grant
assuming a risk-free interest rate of 4.88%, an expected option life of 10 years with no
dividends. The expected option life is based on all options being exercised just prior to
expiration. NOTE F  NET INCOME (LOSS) PER SHARE
  NOTE G  SUBORDINATED DEBT
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NOTE H  COMMITMENTS AND CONTINGENCIES
    
 NOTE I  PREFERRED STOCK
  Series A Preferred Stock
  First year from the date of issuance
    
    0% per annumSecond year from the date of issuance
    
    2% per annumThird year from the date of issuance
    
    4% per annumFourth year from the date of issuance
    
    5% per annumFifth year from the date of issuance
    
    6% per annumThereafter
    
    7% per annum
  10




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Series B Preferred Stock
  First year from the date of issuance
    
    2.0% per annumSecond year from the date of issuance
    
    3.0% per annumThird year from the date of issuance
    
    3.5% per annumThereafter
    
    4.0% per annum
  Series C Preferred Stock
  First year from the date of issuance
    
    $1.00 per share of common stockSecond through fourth years from the date of issuance
    
    $2.00 per share of common stockThereafter
    
    $3.50 per share of common stock
  First year from the date of issuance
    
    1% per annumSecond year from the date of issuance
    
    2% per annumThird year from the date of issuance
    
    3% per annumFourth year from the date of issuance
    
    4% per annumFifth year from the date of issuance
    
    5% per annumThereafter
    
    7% per annum
  Series D Preferred Stock
  11




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Year from the date of issuance:First
    
    $2.00 per annumSecond
    
    $3.00 per annumThird
    
    $3.50 per annumFourth
    
    $4.00 per annumFifth
    
    $4.50 per annumThereafter
    
    $5.00 per annum
  Series E Preferred Stock
   Year from the date of issuance:First
    
    $1.00 per annumSecond
    
    $2.00 per annumThird
    
    $3.00 per annumFourth
    
    $4.00 per annumFifth
    
    $4.50 per annumThereafter
    
    $5.00 per annum
  Series F Preferred Stock
  12




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Year from the date of issuance:First
    
    $0.00 per annumSecond
    
    $1.00 per annumThird
    
    $2.00 per annumFourth
    
    $3.00 per annumFifth
    
    $4.00 per annumThereafter
    
    $4.50 per annum
  NOTE J  STOCK OPTION PLAN
  Outstanding OptionsWeightedNumber
    
    
    Averageof
    
    
    ExerciseShares
    
    
    PriceSeptember 30, 2005
    
    
    3,474,500
    
    
    $
    0.32Grants
    
    
    225,000
    
    
    $
    0.35Exercises
    
    
    
    
    
    
    Cancellations
    
    
    (207,500
    )
    
    $
    0.59December 31, 2005
    
    
    3,492,000
    
    
    $
    0.20
  Outstanding Options
    
    Exercisable OptionsWeighted
    
    
    
    
    
    WeightedNumber
    
    Average
    
    Number
    
    AverageExercise
    
    of
    
    Contractual
    
    of
    
    ContractualPrices
    
    Shares
    
    Life (in years)
    
    Shares
    
    Life (in years)$0.15
    
    
    877,000
    
    
    
    5.9
    
    
    
    827,000
    
    
    
    6.5$0.31
    
    
    750,000
    
    
    
    8.6
    
    
    
    550,000
    
    
    
    8.9$0.35
    
    
    905,000
    
    
    
    9.7
    
    
    
    830,000
    
    
    
    9.9$0.36
    
    
    50,000
    
    
    
    8.8
    
    
    
    50,000
    
    
    
    8.8$0.40
    
    
    890,000
    
    
    
    9.8
    
    
    
    990,000
    
    
    
    9.3$0.46
    
    
    20,000
    
    
    
    9.1
    
    
    
    10,000
    
    
    
    9.13,492,000
    
    
    
    
    
    
    
    3,057,000
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NOTE K  DISCONTINUED OPERATIONS
      Sales
    
    $
    174,684Operating expenses
    
    
    (294,234
    )Minority interest
    
    
    79,383(40,167
    )Equity in operating losses of Stafford Springs prior to consolidation
    
    
    (28,603
    )Loss from discontinued operations
    
    $
    (68,770
    )
 NOTE L INCOME TAXES
  NOTE M  RELATED PARTY TRANSACTIONS
   14




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NOTE N  RECENT ACCOUNTING PRONOUNCEMENTS
   Inventory Costs, an amendment of ARB No.43, Chapter
4
 Exchanges of Nonmonetary Assets
 Accounting Changes and Error Corrections
 
 Item 2. Managements Discussion and Analysis
 The following discussion includes forward-looking statements that involve risks and uncertainties.
Our actual results could differ materially from the results contemplated by these forward-looking
statements due to certain factors, including those discussed below, elsewhere in this Form 10-QSB
and in the Companys other filings with the SEC.
 Overview
  15




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Results of Operations
 Comparison of the three months ended December 31, 2005 and 2004 (first quarter of fiscal 2006 and
2005, respectively)
 Real estate sales.
  Cost of real estate sales.
 Gross profit from real estate sales.
 Selling, general and administrative expenses.
 Interest expense
 Interest income.
 Other
income (expense).
 Minority interests.
 Loss from discontinued operations.
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Net earnings (loss).
 Liquidity and Capital Resources
  
    
    sources and uses of cash, and significant factors that influence both;
    
    our analysis of our cash flows for the fiscal year ended 2005; and
    
    our commitments and contractual obligations.
  Sources and uses of cash
  
    
    factors that affect our results of operations and cash flows, including reduced demand
for land resulting from economic slowdown and competitive pricing pressures; and
    
    factors that affect our ability to bring new projects to market, including ability to
find profitable development opportunities, ability to locate necessary financing sources to
develop the projects; and
    
    factors that affect our access to bank financing that could impair our ability to obtain
needed financing on acceptable terms to finance the acquisition and development of new
projects.
 Analysis of cash flows.
 Cash flow activity for the three months ended December 31, 2005.
  
    
    A $500,000 increase in notes receivable received as legal settlement
    
    An increase of $4,374,347 in expenditures for land and related development costs in the
fiscal first quarter 2006 compared to the fiscal first quarter 2005.
    
    A decease of $456,182 in fiscal first quarter 2006 accounts payable and other accrued
liabilities.
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##### Table of Contents




    
    An increase of $478,101 in the collection of notes receivable relating to prior years.
This increase is primarily the result of the collection of significant amounts of unreleased
funds held in escrow at fiscal year end 2005.
    
    An increase of $498,305 in other assets.
    Long-term debt
      18




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Item 3. Controls and Procedures
 Disclosure Controls and Procedures
   Internal Control over Financial Reporting
   19




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PART II: OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Changes in Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 ExhibitNo.31.1
    
    
    Certification by Jay N. Torok pursuant to Rule 13a-14(a) or
15d-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification by Daniel J. Regan pursuant to Rule 13a-14(a) or
15d-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification by Jay N. Torok pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley
Act of 200232.2
    
    
    Certification by Daniel J. Regan pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley
Act of 2002
 20




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##### Table of Contents



SIGNATURES
  GREAT WESTERN LAND AND RECREATION, INC.
(Registrant)Date: February 14, 2006
    By /s/ Jay N. TorokJay N. TorokChairman of the Board and Chief Executive OfficerGREAT WESTERN LAND AND RECREATION, INC.
(Registrant)Date: February 14, 2006
    By /s/ Daniel J. ReganDaniel J. ReganVice President and Chief Financial Officer 21