##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-KSB
  þ
    
    Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal
year ended September 30, 2005.
 o
    
    Transition report under section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition
period from  to .
 Commission file number 0-18808
 Great
Western Land and Recreation, Inc.
  Nevada
(State or other jurisdiction
of incorporation or organization)
    
    13-3530765
(IRS Employer Identification No.)7373 N. Scottsdale Road, Suite C-140, Scottsdale, AZ
(Address of principal executive offices)
    
    85253
(Zip Code)
 (480) 949-6007
 None
  Common Stock, Par Value $0.001
 o
 þ o
 o
 o þ
    DOCUMENTS INCORPORATED BY REFERENCE
 TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT: Yes o No þ




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TABLE OF CONTENTS
 PART IItem 1. BusinessItem 2. Description of PropertyItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for Common Equity and Related Stockholder MattersItem 6. Managements Discussion and AnalysisItem 7. Financial StatementsItem 8. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 8A. Controls and ProceduresPART IIIItem 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange ActItem 10. Compensation of Directors and Executive OfficersItem 11. Security Ownership of Certain Beneficial Owners and ManagementItem 12. Certain Relationships and Related TransactionsItem 13. Exhibits and Reports on Form 8-KItem 14. Principal Accountant Fees and ServicesSIGNATURESEX-3.9EX-3.10EX-3.11EX-3.12EX-3.13EX-3.14EX-11EX-21EX-31.1EX-31.2EX-32.1EX-32.2EX-99.1
 2




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PART I
 
 Item 1. Business
 Overview
    Industry Overview
  Properties
  Texas
 Bella Vista Townhomes.
 Woodland Court.
 3




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Mallard Crossing Subdivision.
 Westchester Lakes
 F and B Development.
 Coventry Subdivision.
 Arizona
 Glendale Springs Condominiums.
   Apache Highlands.
 Wagon Bow Ranch.
 4




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Wright Place.
 New Mexico
 Willow Springs Ranch.
 Construction
  Regulation
    Competition
  5




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Notes Receivable
  Notes Payable
  Subordinated Debt
  Payable to Related Entities
  Employees
  
 Item 2. Description of Property
     
 Item 3. Legal Proceedings
  6




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Item 4. Submission of Matters to a Vote of Security Holders
  7




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PART II
 
 Item 5. Market for Common Equity and Related Stockholder Matters
   High
    
    LowPeriod 2/23/04  3/31/04
    
    
    1.01
    
    
    
    0.25Quarter ended 6/30/04
    
    
    1.25
    
    
    
    0.30Quarter ended 9/30/04
    
    
    1.01
    
    
    
    0.30Quarter ended 12/31/04
    
    
    1.01
    
    
    
    0.25Quarter ended 3/31/05
    
    
    1.10
    
    
    
    0.46Quarter ended 6/30/05
    
    
    1.25
    
    
    
    0.20Quarter ended 9/30/05
    
    
    1.01
    
    
    
    0.31
    
 Item 6. Managements Discussion and Analysis
 Forward-Looking Statements
  Results of Operations
 Year ended September 30, 2005 compared to the year ended September 30, 2004
 Real Estate Sales.
  8




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Cost of land and lot sales.
 Gross profit on sales.
  Operating, selling, general and administrative expenses.
 Loss on impairment of long-lived asset.
  Interest expense.
 Interest income.
 Loss from discontinued operations.
   Minority interests.
 9




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Other income (expense).
 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 year ended September 30, 2005.
  
    
    A $933,447 increase in uncollected notes/accounts receivable arising from current year
sales, primarily due to significant sales at or near year-end which resulted in unreleased
funds held in escrow pending final closings.
    
    An increase of $2,951,370 in expenditures for land and related development costs in fiscal 2005 compared to 2004.
    
    A decease of $270,421 in year-end accounts payable and other accrued liabilities.
  10




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
    
    Net earnings of $1,358,447 in the year ended 2005 compared to a net loss of $1,153,048 in
the year ended 2004, which is caused primarily by a $2,223,540 increase in gross profit on
real estate and real estate investment sales.
    
    A $372,780 decrease in losses on impairment of long-lived assets, a $153,324 decrease in
interest expense and an $88,570 decrease in losses from equity in unconsolidated companies.
    Long-term debt
      11




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Quantitative and Qualitative Disclosures About Market Risk
   Total
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    ThereafterVariable interest rate debt
    
    $
    6,025,361
    
    
    $
    6,025,361
    
    
    $
    5,318,012
    
    
    $
    707,349
    
    
    $
    
    
    
    $
    
    
    
    $
    Average interest rate
    
    
    8.02
    %
    
    
    8.02
    %
    
    
    8.02
    %
    
    
    7.98
    %
    
    
    
    
    
    
    
    
    
    
    Fixed interest rate debt
    
    
    7,205,174
    
    
    
    7,205,174
    
    
    
    6,957,106
    
    
    
    6,730,999
    
    
    
    5,946,323
    
    
    
    5,279,711
    
    
    
    Average interest rate
    
    
    8.60
    %
    
    
    8.52
    %
    
    
    8.49
    %
    
    
    8.45
    %
    
    
    8.43
    %
    
    
    8.43
    %
    
    
    Subordinated debt
    
    
    3,507,948
    
    
    
    3,507,948
    
    
    
    3,,743,315
    
    
    
    4,030,780
    
    
    
    4,191,243
    
    
    
    4,526,542
    
    
    
    4,888,665Average interest rate
    
    
    8.79
    %
    
    
    8.79
    %
    
    
    8.90
    %
    
    
    8.90
    %
    
    
    8.98
    %
    
    
    8.98
    %
    
    
    8.98
    %Fixed interest rate receivables
    
    
    935,741
    
    
    
    953,741
    
    
    
    948,782
    
    
    
    939,133
    
    
    
    930,725
    
    
    
    921,482
    
    
    
    701,731Average interest rate
    
    
    9.31
    %
    
    
    9.31
    %
    
    
    9.31
    %
    
    
    9.31
    %
    
    
    9.31
    %
    
    
    9.31
    %
    
    
    9.31
    %
 Recent Accounting Pronouncements
    12




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Item 7. Financial Statements
  
 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
      
 Item 8A. Controls and Procedures
       13




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PART III
 
 Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a)
of the Exchange Act
  Officer orName
    
    Age
    
    Office
    
    Director SinceJay N. Torok
    
    66
    
    Chairman and Chief Executive Officer
    
    1994David J. Weber
    
    53
    
    President, Chief Operating Officer and Director
    
    2004Roger B. Clark (1) (2)
    
    72
    
    Director
    
    1989Daniel Tracy (1) (2)
    
    65
    
    Director
    
    2003Don Dillon
    
    58
    
    Director
    
    2005Daniel J. Regan
    
    60
    
    Vice President and Chief Financial Officer
    
    2005
 
 (1)
    
    Member of Audit Committee(2)
    
    Member of Compensation Committee(3)
    
    Audit Committee Financial Expert Jay N. Torok,
 David J. Weber,
 Roger B. Clark
 Daniel Tracy,
 14




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Don Dillon,
 Daniel J. Regan
 SECTION 16(a) REPORTING COMPLIANCE
  CODE OF ETHICS
  
 Item 10. Executive Compensation
  Other AnnualName and Principal Positions
    
    Year
    
    
    Salary(1)
    
    
    Bonus
    
    
    Compensation (2)(3)Jay N. Torok, Chairman and Chief Executive Officer
    
    
    2005
    
    
    $
    144,325
    
    
    $
    10,000
    
    
    $
    4,2332004
    
    
    
    140,584
    
    
    
    
    
    
    
    4,2192003
    
    
    
    106,948
    
    
    
    
    
    
    
    3,115David J. Weber, President and Chief Operating Officer
    
    
    2005
    
    
    $
    137,040
    
    
    $
    10,000
 
 (1)
    
    Includes payments made by Great Western Land & Recreation, Inc. a Delaware corporation,
before our merger.(2)
    
    Includes 401(k) Company match.(3)
    
    Columns (f) through (i) have been omitted as they are not applicable.    15




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OPTION GRANTS IN LAST FISCAL YEAR
  Number of
    
    
    Percent of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Potential RealizableShares of
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Value at AssumedCommon Stock
    
    
    Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Annual Rate of StockUnderlying
    
    
    Granted to
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Price Appreciation forOptions
    
    
    Employees in
    
    
    Exercise
    
    
    
    
    
    
    Expiration
    
    
    the Option TermName
    
    Granted
    
    
    Fiscal Year
    
    
    Price
    
    
    Grant Date
    
    
    Date
    
    
    5%
    
    
    10%Year ended
9/30/05Jay N. Torok
    
    
    75,000
    
    
    
    4.10
    %
    
    $
    0.40
    
    
    
    5/9/2005
    
    
    
    5/9/2015
    
    
    $
    25,000
    
    
    $
    64,000100,000
    
    
    
    5.46
    %
    
    $
    0.35
    
    
    
    8/22/2005
    
    
    
    8/22/2015
    
    
    $
    22,000
    
    
    $
    56,000Roger B. Clark
    
    
    100,000
    
    
    
    5.46
    %
    
    $
    0.40
    
    
    
    5/9/2005
    
    
    
    5/9/2015
    
    
    $
    25,000
    
    
    $
    64,000100,000
    
    
    
    5.46
    %
    
    $
    0.35
    
    
    
    8/22/2005
    
    
    
    8/22/2015
    
    
    $
    22,000
    
    
    $
    56,000Daniel Tracy
    
    
    100,000
    
    
    
    5.46
    %
    
    $
    0.40
    
    
    
    5/9/2005
    
    
    
    5/9/2015
    
    
    $
    18,750
    
    
    $
    48,00075,000
    
    
    
    4.10
    %
    
    $
    0.35
    
    
    
    8/22/2005
    
    
    
    8/22/2015
    
    
    $
    16,500
    
    
    $
    42,000David Weber
    
    
    150,000
    
    
    
    8.20
    %
    
    $
    0.40
    
    
    
    5/9/2005
    
    
    
    5/9/2015
    
    
    $
    18,750
    
    
    $
    48,00075,000
    
    
    
    4.10
    %
    
    $
    0.35
    
    
    
    8/22/2005
    
    
    
    8/22/2015
    
    
    $
    16,500
    
    
    $
    42,000Daniel J. Regan
    
    
    150,000
    
    
    
    8.20
    %
    
    $
    0.35
    
    
    
    8/22/2005
    
    
    
    8/22/2015
    
    
    $
    33,000
    
    
    $
    84,000
  AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
  Number of
    
    
    
    
    
    
    Number of SecuritiesShares
    
    
    
    
    
    
    Underlying Unexercised
    
    
    Value of UnexercisedAcquired on
    
    
    Value
    
    
    Options at
    
    
    In-The-Money OptionsName
    
    Exercise
    
    
    Realized (1)
    
    
    September 30, 2005
    
    
    at September 30, 2005 (2)Exercisable
    
    
    Unexercisable
    
    
    Exercisable
    
    
    UnexercisableJay N. Torok
    
    
    50,000
    
    
    
    22,500
    
    
    
    1,083,250
    
    
    
    
    
    
    
    
    
    
    $
    530,538
    
    
    $
    
    
    
    
    
  (1)
    
    The value realized equals the difference between the option exercise
price and the fair market value of our common stock on the date of
exercise, multiplied by the number of shares for which the option was
exercised.(2)
    
    In-the-money options include only options for which the underlying
security price at September 30, 2005 was greater than the exercise
price of the options. The value of exercisable and unexercisable
options equals the difference between the option exercise price and
the estimated fair market value of our common stock on September 30,
2005, multiplied by the number of shares underlying the options.
Since our common stock traded in a very thin public market at
September 30, 2005, the estimated fair market price of $0.35 per share
was determined by the Board.
 EMPLOYMENT CONTRACT
  16




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Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  Shares
    
    Percent ofBeneficially
    
    SharesName and Address of Beneficial Owner
    
    Owned (1)
    
    OutstandingFive Percent Stockholders:Amortibanc Investments, L.C. (2)
    
    
    27,029,095
    
    
    
    91.0
    %Willard W. Garvey, Revocable Trust (2)
    
    
    27,029,095
    
    
    
    91.0
    %Willard W. Garvey Trust Number Thirteen (2)
    
    
    27,029,095
    
    
    
    91.0
    %Jean Garvey, Trustee (2)
    
    
    27,029,095
    
    
    
    91.0
    %Directors and Executive Officers:Jay N. Torok (3) (6)
    
    
    1,540,030
    
    
    
    6.8
    %David Weber (3) (7)
    
    
    325,000
    
    
    
    1.5
    %Daniel J. Regan (3)
    
    
    50,000
    
    
    
    0.2
    %Roger B. Clark (4) (9)
    
    
    464,476
    
    
    
    2.1
    %Daniel Tracy (5) (10)
    
    
    375,000
    
    
    
    1.7
    %Don DillonAll directors and Executive Officers as a Group (4Persons)
    
    
    2,817,006
    
    
    
    11.8
    %
 
 (1)
    
    In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a person is deemed
to be the beneficial owner, for purposes of this table, of any shares of common stock if such
person has or shares voting power or investment power with respect to such security, or has
the right to acquire beneficial ownership at any time within 60 days after December 20, 2006.
In calculating the percentage of ownership, such shares are deemed to be outstanding for the
purpose of computing the percentage of shares of common stock owned by such stockholder, but
are not deemed outstanding for the purpose of computing the percentage of shares of common
stock owned by any other stockholder. For purposes of this table, voting power is the power
to vote or direct the voting of shares and investment power is the power to dispose or
direct the disposition of shares.(2)
    
    The address for Amortibanc Investments L.C., the Willard Garvey Revocable Trust, the Willard
W. Garvey Trust Number Thirteen and Jean Garvey is 7309 E. 21st Street North, Suite
120, Wichita, KS 67206. Amortibanc Investments, L.C. disclaims beneficial ownership of these
shares. The Willard W. Garvey Revocable Trust and the Willard W. Garvey Trust Number Thirteen
are the only members of Amortibanc Investments L.C. and thereby share beneficial ownership of
these shares. Jean Garvey is the trustee of the Willard W. Garvey Revocable Trust and the
Willard W. Garvey Trust Number Thirteen. Includes the assumed conversion of $719,000 of
preferred stock into 8,124,446 shares of common stock. Does not include 84,726 shares of
common stock owned by David Theroux, Mrs. Garveys son-in law, 84,726 shares in the name of
Paul Theroux for whom David Theroux is custodian, or 84,726 shares in the name of Drake
Theroux, for whom David Theroux is custodian.(3)
    
    The address for Messrs. Torok, Weber and Regan is 7373 North Scottsdale Road, Suite C140,
Scottsdale, AZ 85253.(4)
    
    The address for Mr. Clark is 6 Cardinal Road, Hilton Head, SC 29926.(5)
    
    The address for Mr. Tracy is 88 Wood Pond Road, West Hartford, CT 06107-3541.(6)
    
    Includes 464,445 shares of common stock owned by Mr. Torok, 10,165 shares owned by Lone Pine
Industries, Inc., a company 17




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##### Table of Contents



controlled by Mr. Torok, 13,420 shares owned by Western Reserve
Environmental Services, a company in which Mr. Torok has an interest, primarily in a joint
trust with Anne V. Hodgkins, Mr. Toroks wife, and 1,083,250 shares of common stock issuable
upon the exercise of vested stock options.(7)
    
    Includes 325,000 shares of common stock common stock issuable upon the exercise of vested
stock options. Does not include 100,000 shares of common stock issuable upon the exercise of
stock options that will not vest within 60 days of September 30, 2005.(8)
    
    Includes 50,000 shares of common stock common stock issuable upon the exercise of vested
stock options. Does not include 100,000 shares of common stock issuable upon the exercise of
stock options that will not vest within 60 days of September 30, 2005.(9)
    
    Includes 62,500 shares of common stock owned by Mr. Clark, 1,976 shares owned by Clark-Bemis
Lumber Company, a company controlled by Mr. Clark, and 431,250 shares of common stock issuable
upon the exercise of vested stock options.(10)
    
    Includes 50,000 shares of common stock owned by Mr. Tracy and 325,000 shares of common stock
issuable upon the exercise of vested stock options. 
 Item 12. Certain Relationships and Related Transactions
        18




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Item 13. Exhibits.
 ExhibitNo.3.1
    
    Articles of Incorporation of First National Realty Associates, Inc. (Incorporated by reference to Exhibit 8 of Registration
Statement on Form S-18 (No. 33-30679-NY))3.2
    
    Agreement of Merger of First National Realty Associates, Inc. into Emphatic Mergers (Incorporated by reference to Exhibit
14 of Registration Statement on Form S-18 (No. 33-30679- NY))3.3
    
    By-Laws of First National Realty Associates, Inc. (Incorporated by reference to Exhibit 9 of Registration Statement on form
S-18 (No. 33-30679-NY)3.4
    
    Agreement and Plan of Merger between 1 st Realty Investments, Inc. and Great Western Land and
Recreation, Inc. dated as of July 23, 2002 (Incorporated by reference to Exhibit 1 of Form 8-K filed with the Commission on
July 29, 2002)3.5
    
    Certificate of Merger of Great Western Land and Recreation, Inc., a Delaware Corporation with and into
1 st Realty Investments, Inc., a Nevada Corporation (Incorporated by reference to Exhibit 10.4 of Form
10-KSB filed with the Commission on December 29, 2003)3.6
    
    Great Western Land and Recreation, Inc. Amended and Restated By-Laws (Incorporated by reference to Exhibit 10.5 of Form
10-KSB filed with the Commission on December 29, 2003)3.7
    
    Certificate of Designations of Series A Cumulative Convertible Preferred Stock of 1 st Realty
Investments, Inc. (Incorporated by reference to Appendix B of Schedule 14C of 1st Realty Investments,
Inc. filed with the Commission on January 27, 2003)3.8
    
    Reserved3.9
    
    Certificate of Amendment to the Articles of Incorporation of 1st Realty Investments, Inc. amending Article Fourth3.10
    
    Certificate of Amendment filed amending Article Fourth of the Articles of Incorporation of Great Western Land and
Recreation, Inc.3.11
    
    Certificate of Designations of Series B Cumulative Convertible Preferred Stock of Great Western Land and Recreation, Inc.3.12
    
    Certificate of Designations of Series C Cumulative Convertible Preferred Stock of Great Western Land and Recreation, Inc.3.13
    
    Certificate of Designations of Series D and E Cumulative Convertible Preferred Stock of Great Western Land and Recreation,
Inc.3.14
    
    Certificate of Designations of Series F Cumulative Convertible Preferred Stock of Great Western Land and Recreation, Inc.10.1
    
    Renumbered as 3.1 above.10.2
    
    Renumbered as 3.2 above.10.3
    
    Renumbered as 3.4 above.10.4
    
    Renumbered as 3.5 above.10.5
    
    Renumbered as 3.6 above.10.6
    
    Renumbered as 3.7 above.10.7
    
    Investment Agreement dated June 29, 2002 by and between Amortibanc Investments, L.C. and Great Western Land and Recreation,
Inc. (Incorporated by reference to Exhibit 10.7 of Form 10-KSB filed with the Commission on December 29, 2003)10.8
    
    Great Western Land and Recreation, Inc. Stock Option Plan (Incorporated by reference to Appendix C of Schedule 14C of
1 st Realty Investments, Inc. filed with the Commission on January 27, 2003)
 19




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##### Table of Contents



ExhibitNo.10.9
    
    Form of Great Western Land and Recreation, Inc. Stock Option Agreement (Incorporated by reference to Exhibit 4.02 of Form
S-4 of Great Western Land and Recreation, Inc. filed with the Commission on October 16, 2001)10.10
    
    Agreement of Sale of Partnership Interest, dated July 8, 2003 between Great Western Land and Recreation, Inc. and Arete
Real Estate and Development Co. (Incorporated by reference to Exhibit 10.10 of Form 10-KSB filed with the Commission on
December 29, 2003)10.11
    
    Sale and Subscription Agreement of Membership Interests in Laguna Investments L.L.C. dated September 29, 2003 between Great
Western Land and Recreation, Inc. and Torok Partners, L.L.C. (Incorporated by reference to Exhibit 10.11 of Form 10-KSB
filed with the Commission on December 29, 2003)10.12
    
    Sale and Subscription Agreement of Membership Interests in Laguna Investments L.L.C. dated September 29, 2003 between Great
Western Land and Recreation, Inc. and Lafayette Financial Services, L.L.C. (Incorporated by reference to Exhibit 10.12 of
Form 10-KSB filed with the Commission on December 29, 2003)10.13
    
    Employment Agreement between Great Western land and Recreation, Inc. and Jay N. Torok dated September 1, 2001 (Incorporated
by reference to Exhibit 10.01 of Form S-4/A of Great Western Land and Recreation, Inc. filed with the Commission on
December 11, 2001)10.14
    
    Contribution Agreement by and between Great Western Land and Recreation, Inc., Amortibanc Management, L.C., Amortibanc
Investments, L.C., and GWLR, LLC dated as of August 6, 2001 (Incorporated by reference to Exhibit 10.02 of Form S-4/A of
Great Western Land and Recreation, Inc. filed with the Commission on December 11, 2001)10.15
    
    Promissory Note dated January 3, 2002, by and between GWLR Wagon Bow Ranch, LLC and Bank Midwest (Incorporated by reference
to Exhibit 10.15 of Form 10-KSB filed with the Commission on December 29, 2003)10.16
    
    Secured Promissory Note dated September 25, 2002, between National Bank of Arizona and Glendale Condominiums, LLC
(Incorporated by reference to Exhibit 10.16 of Form 10-KSB filed with the Commission on December 29, 2003)10.17
    
    Promissory Note dated September 25, 2002, between National Bank of Arizona and Glendale Condominiums, LLC (Incorporated by
reference to Exhibit 10.17 of Form 10-KSB filed with the Commission on December 29, 2003)10.18
    
    Loan Agreement dated June 23, 2000, by and between Willow Spring Ranch, LLC and Bank Midwest (Incorporated by reference to
Exhibit 10.21 of Form S-4/A of Great Western Land and Recreation, Inc. filed with the Commission on December 11, 2001)10.19
    
    Renumbered as 14.1 below11
    
    Statement RE: Computation of per Share Earnings (Loss)14.1
    
    Great Western Land and Recreation, Inc. Code of Business Ethics (Incorporated by reference to Exhibit 10.19 of Form 10-KSB
filed with the Commission on December 29, 2003)21
    
    List of Subsidiaries31.1
    
    Certification of Jay N. Torok pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 200231.2
    
    Certification of Daniel J. Regan pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification of 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 of Daniel J. Regan pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 200299.1
    
    Risk Factors
 20




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##### Table of Contents



Item 14. Principal Accountant Fees And Services
  Audit and Nonaudit Fees
  2005
    
    
    2004Services ProvidedAudit Fees
    
    $
    159,525
    
    
    $
    95,026Tax Related Fees
    
    
    2,811
    
    
    
    1,754Total
    
    $
    162,336
    
    
    $
    96,780
 Audit Fees
  Audit-related fees
  Tax fees
  All other fees
   21




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##### Table of Contents



SIGNATURES
  GREAT WESTERN LAND AND RECREATION, INC.
(Registrant)Date: December 28, 2005
    By /s/ Jay N. TorokJay N. TorokChairman of the Board and Chief Executive Officer GREAT WESTERN LAND AND RECREATION, INC.
(Registrant)Date: December 28, 2005
    By /s/ Daniel J. ReganDaniel J. ReganVice President and Chief Financial Officer  Signatures
    
    Title
    
    Date/s/ Jay N. Torok
    
    Chairman of the Board and Principal Executive Officer
    
    December 28, 2005Jay N. Torok/s/ David J. Weber
    
    Director and Chief Operating Officer
    
    December 28, 2005David J. Weber/s/ Daniel Tracy
    
    Director
    
    December 28, 2005Daniel Tracy/s/ Roger B. Clark
    
    Director
    
    December 28, 2005Roger B. Clark/s/ Don Dillon
    
    Director
    
    December 28, 2005Don Dillon
 22




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##### Table of Contents



GREAT WESTERN LAND AND RECREATION, INC.
 CONTENTS
 PAGEReport of Independent Registered Public Accounting Firm
    
    F- 2Report of Independent Registered Public Accounting Firm
    
    F- 3Consolidated Balance Sheet, September 30, 2005
    
    F- 4Consolidated Statements of Operations, for the years ended September 30, 2005 and 2004
    
    F- 5Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss), for
the years ended September 30, 2005 and 2004
    
    F- 6Consolidated Statements of Cash Flows, for the years ended September 30, 2005 and 2004
    
    F- 7Notes to Consolidated Financial Statements
    
    F- 8
 F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    
 F-2




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 F-3




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##### Table of Contents



GREAT WESTERN LAND AND RECREATION, INC.
 
 CONSOLIDATED BALANCE SHEET
 September 30, 2005
 ASSETSCash and cash equivalents
    
    $
    5,478,682Notes and accounts receivable (net of allowance of $115,000)
    
    
    1,363,220Land held for development and sale
    
    
    14,768,847Receivable from related entities
    
    
    33,005Property and equipment, net of accumulated depreciation of $105,268
    
    
    197,229Other
    
    
    1,153,995$
    22,994,978LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesNotes payable
    
    $
    13,230,535Subordinated debt
    
    
    3,507,948Payable to related entities
    
    
    908,510Accounts payable and other accrued liabilities
    
    
    809,140Total liabilities
    
    
    18,456,133Minority 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 at September 30, 2005
    
    
    2,200,304Common stock, $0.001 par value; 30,000,000 shares authorized; 21,315,973 shares issued and outstanding
    
    
    21,315Additional paid-in capital
    
    
    2,558,720Accumulated other comprehensive loss
    
    
    (733
    )Accumulated deficit
    
    
    (275,676
    )Total stockholders equity
    
    
    4,503,930$
    22,994,978
  F-4




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##### Table of Contents



GREAT WESTERN LAND AND RECREATION, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year ended
    
    
    Year endedSeptember 30,
    
    
    September 30,2005
    
    
    2004Real estate and real estate investment sales
    
    $
    7,676,371
    
    
    $
    6,418,352Cost of real estate sales
    
    
    4,049,401
    
    
    
    5,014,922Earnings from sales of real estate and real estate investments
    
    
    3,626,970
    
    
    
    1,403,430Operating, selling, general and administrative expense
    
    
    2,058,241
    
    
    
    1,684,539Loss on impairment of long-lived assets
    
    
    
    
    
    
    211,889Earning (loss) from operations
    
    
    1,568,729
    
    
    
    (492,998
    )Other income (expense)Interest expense
    
    
    (329,651
    )
    
    
    (482,975
    )Interest income
    
    
    37,270
    
    
    
    7,399Other income (loss)
    
    
    51,722
    
    
    
    68,262(240,659
    )
    
    
    (407,314
    )Earnings (loss) before minority interest and discontinued operations
    
    
    1,328,070
    
    
    
    (900,312
    )Minority interest
    
    
    (412
    )
    
    
    (3,275
    )Earnings (loss) from continuing operations
    
    
    1,327,658
    
    
    
    (903,587
    )Loss from discontinued operations (no income tax effect)
    
    
    (84,211
    )
    
    
    (249,461
    )Net earnings (loss)
    
    
    1,243,447
    
    
    
    (1,153,048
    )Less: Preferred stock dividends applicable to the period
    
    
    (111,002
    )
    
    
    (73,702
    )Net earnings (loss) available to common shareholders
    
    $
    1,132,445
    
    
    $
    (1,226,750
    )Net earnings (loss) per common and common equivalent shareBasic:Continuing operations
    
    $
    0.06
    
    
    $
    (0.05
    )Discontinued operations
    
    $
    0.00
    
    
    $
    (0.01
    )Total
    
    $
    0.06
    
    
    $
    (0.06
    )Diluted::Continuing operations
    
    $
    0.06
    
    
    $
    (0.05
    )Discontinued operations
    
    $
    0.00
    
    
    $
    (0.01
    )Total
    
    $
    0.06
    
    
    $
    (0.06
    )Weighted average common and common equivalent shares outstandingBasic
    
    
    21,165,584
    
    
    
    20,886,002Diluted
    
    
    24,929,768
    
    
    
    20,886,002
  F-5




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##### Table of Contents



GREAT WESTERN LAND AND RECREATION, INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 AND COMPREHENSIVE INCOME (LOSS)
 Years ended September 30, 2005 and 2004
 AccumulatedOtherAdditional
    
    
    compre-
    
    
    
    
    
    
    Compre-Preferred Stock
    
    
    Common Stock
    
    
    paid-in
    
    
    hensive
    
    
    Accumulated
    
    
    hensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    capital
    
    
    loss
    
    
    deficit
    
    
    Income Loss)Balance, September 30, 2003
    
    
    14,380
    
    
    $
    660,409
    
    
    
    20,781,965
    
    
    $
    20,782
    
    
    $
    2,595,301
    
    
    $
    (733
    )
    
    $
    (287,557
    )Rounding on reverse stock split
    
    
    
    
    
    
    
    
    
    
    3,434
    
    
    
    3
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    Issuance of preferred stock in
exchange for land
    
    
    8,200
    
    
    
    678,581
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of preferred stock to
subsidiary and reported as treasury
stock
    
    
    20,000
    
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Preferred stock held by subsidiary and
reported as treasury stock
    
    
    (20,000
    )
    
    
    (1,000,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of discount on preferred
stock
    
    
    
    
    
    
    51,627
    
    
    
    
    
    
    
    
    
    
    
    (51,627
    )
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock in exchange
for minority interest and an option to
purchase land
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    100
    
    
    
    14,900
    
    
    
    
    
    
    
    
    
    
    
    Payment of dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,050
    )Stock option exercises
    
    
    
    
    
    
    
    
    
    
    123,000
    
    
    
    123
    
    
    
    18,327
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,153,048
    )
    
    
    (1,153,048
    )Comprehensive loss for the year ended
September 30, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (1,153,048
    )Balance, September 30, 2004
    
    
    22,580
    
    
    
    1,390,617
    
    
    
    21,008,399
    
    
    
    21,008
    
    
    
    2,576,898
    
    
    
    (733
    )
    
    
    (1,442,655
    )
    
    
    Issuance of preferred stock in
exchange for land
    
    
    8,739
    
    
    
    745,522
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of discount on preferred
stock
    
    
    
    
    
    
    64,165
    
    
    
    
    
    
    
    
    
    
    
    (64,165
    )
    
    
    
    
    
    
    
    
    
    
    Payment of dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (76,465
    )
    
    
    Stock option exercises
    
    
    
    
    
    
    
    
    
    
    307,574
    
    
    
    307
    
    
    
    45,987
    
    
    
    
    
    
    
    
    
    
    
    Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,243,447
    
    
    
    1,243,447Comprehensive income for the year
ended September 30, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,243,447Balance, September 30, 2005
    
    
    31,319
    
    
    $
    2.200,304
    
    
    
    21,315,973
    
    
    $
    21,315
    
    
    $
    2,558,720
    
    
    $
    (733
    )
    
    $
    (275,676
    )
  F-6




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##### Table of Contents



GREAT WESTERN LAND AND RECREATION, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Twelve months ended September 30,2005
    
    
    2004Cash flows provided by (used in) operating activitiesNet earnings (loss)
    
    $
    1,243,447
    
    
    $
    (1,153,048
    )Adjustments to reconcile net earnings (loss) to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    46,401
    
    
    
    47,021Loss from discontinued operations
    
    
    84,211
    
    
    
    Other non-cash expenses
    
    
    23,793
    
    
    
    Allowance
for doubtful accounts
    
    
    115,000Accrued interest expense included in debt
    
    
    217,672
    
    
    
    375,089Collection of notes receivable relating to prior years sales
    
    
    84,137
    
    
    
    2,425Uncollected notes receivable from current year sales
    
    
    (1,251,014
    )
    
    
    (243,650
    )Loss on disposal of property, plant and equipment
    
    
    
    
    
    
    92,886Loss on impairment of long-lived asset
    
    
    
    
    
    
    372,780Equity in losses of unconsolidated companies
    
    
    
    
    
    
    88,570Minority interests in earnings of consolidated subsidiaries
    
    
    412
    
    
    
    3,275Changes in operating assets and liabilities:Land held for development and sale
    
    
    (3,564,975
    )
    
    
    (534,097
    )Other assets
    
    
    (457,930
    )
    
    
    25,504Accounts payable and other accrued liabilities
    
    
    (134,730
    )
    
    
    356,283Net cash used in operating activities
    
    
    (3,324,119
    )
    
    
    (566,962
    )Cash flows provided by (used in) investing activitiesCollection of receivable from related entities
    
    
    862
    
    
    
    34,213Purchases of property and equipment
    
    
    (139,719
    )
    
    
    (53,577
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    40,000Net cash provided by (used) in investing activities
    
    
    (138,857
    )
    
    
    20,636Cash flows from financing activitiesIssuance of notes payable
    
    
    11,841,704
    
    
    
    5,192,501Payments on notes payable
    
    
    (4,377,005
    )
    
    
    (3,985,135
    )Issuance of note payable to related entity
    
    
    
    
    
    
    150,000Increase (decrease) in payable to related entities
    
    
    (112,701
    )
    
    
    125,783Increase (decrease) in subordinated debt
    
    
    (108,531
    )
    
    
    (378,377
    )Payment of dividends on preferred stock
    
    
    
    
    
    
    (2,050
    )Proceeds from stock options exercised
    
    
    22,501
    
    
    
    18,450Net cash provided by financing activities
    
    
    7,265,968
    
    
    
    1,121,172Net increase in cash and cash equivalents
    
    
    3,802,992
    
    
    
    574,846Cash and cash equivalents at beginning of period
    
    
    1,675,690
    
    
    
    1,100,844Cash and cash equivalents at end of period
    
    $
    5,478,682
    
    
    $
    1,675,690Supplemental disclosure of cash flow information:Cash paid during the period for interest, net of amount capitalized
    
    $
    269,562
    
    
    $
    53,682Noncash investing and financing activitiesAccrued interest capitalized included in debt
    
    
    211,380
    
    
    
    165,778Cashless exercise of stock options
    
    
    23,793Transfer of Wagon Bow ranch land in exchange for minority interest in
Houston Warren Ranch LLC
    
    
    
    
    
    
    15,614Preferred stock issued in exchange for land
    
    
    745,522
    
    
    
    678,581Common stock
issued in exchange for 47.5% minority interest in Firebird Financial
LLC and an option to purchase land
    
    
    
    
    
    
    15,000Subordinated
debt issued in exchange for land in College Station, Texas
    
    
    
    
    
    
    70,000
 F-7




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##### Table of Contents



GREAT WESTERN LAND AND RECREATION, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE A  SUMMARY OF ACCOUNTING POLICIES
  1. Basis of presentation and business
     2. Revenue recognition
  3. Land held for development and sale
  4. Notes receivable
   F-8




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##### Table of Contents



5. Advertising costs
  6. Income taxes
  7. Use of estimates
  8. Cash equivalents
  9. Financial instruments
  10. Net earnings (loss) per share
  2005
    
    
    2004Earnings
    
    
    Shares
    
    
    Per share
    
    
    (Loss)
    
    
    Shares
    
    
    Per shareNet Earnings (Loss)
    
    $
    1,243,447
    
    
    
    
    
    
    
    
    
    
    $
    (1,153,048
    )Preferred stock dividends
    
    
    (111,002
    )
    
    
    
    
    
    
    
    
    
    
    (73,702
    )Discontinued operations
    
    
    84,211
    
    
    
    
    
    
    
    
    
    
    
    249,461Earnings Loss from
continuing operations
    
    $
    1,216,656
    
    
    
    
    
    
    
    
    
    
    $
    (977,289
    )Basic Earnings Per ShareEarnings Loss available to
common stockholders
    
    $
    1,216,656
    
    
    
    21,165,584
    
    
    $
    0.06
    
    
    $
    (977,289
    )
    
    
    20,886,002
    
    
    $
    (0.05
    )Effect of dilutive securities
    
    $
    111,002
    
    
    
    3,764,184
    
    
    
    
    
    
    
    N/ADiluted Earnings Per Share
    
    $
    1,327,658
    
    
    
    24,929,768
    
    
    $
    0.05
    
    
    $
    (977,289
    )
    
    
    20,886,002
    
    
    $
    (0.05
    )
 F-9




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##### Table of Contents



11. Stock-based compensation
  Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
 Year ended
    
    
    Year endedSeptember 30,
    
    
    September 30,2005
    
    
    2004Net earnings (loss) as reported
    
    $
    1,243,447
    
    
    $
    (1,153,048
    )Deduct: Total stock-based employee
compensation expense determined
under fair value based method (1)
    
    
    (580,711
    )
    
    
    (68,995
    )Pro forma net earnings (loss)
    
    $
    662,736
    
    
    $
    (1,222,043
    )Earnings (loss) per share:Basic  as reported
    
    $
    0.06
    
    
    $
    (0.06
    )Basic  pro forma
    
    $
    0.03
    
    
    $
    (0.06
    )Diluted  as reported
    
    $
    0.06
    
    
    $
    (0.06
    )Diluted  pro forma
    
    $
    0.03
    
    
    $
    (0.06
    )
 
 (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 5 % and 4.88%, in 2005 and 2004, respectively,
volatility factor of 223%., and an expected option life of 10 years with no dividends The
ten year life is based on all options being exercised just prior to expiration. 12. Property
and equipment
  NOTE B  NOTES AND ACCOUNTS RECEIVABLE
   2006
    
    $
    13,3152007
    
    
    14,8262008
    
    
    16,5052009
    
    
    18,4062010
    
    
    20,534Thereafter
    
    
    870,156$
    953,741
 F-10




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##### Table of Contents



NOTE C  LAND HELD FOR DEVELOPMENT AND SALE
 :
 Houston,
    
    
    NewTexas
    
    
    Mexico
    
    
    Arizonaproperties
    
    
    properties
    
    
    properties
    
    
    TotalLand acquisition costs
    
    $
    6,365,729
    
    
    $
    4,661,638
    
    
    $
    5,572,415
    
    
    $
    16,599,782Development costs
    
    
    7,223,580
    
    
    
    566,480
    
    
    
    4,817,395
    
    
    
    12,607,455Capitalized interest
    
    
    1,048,063
    
    
    
    68,817
    
    
    
    434,584
    
    
    
    1,551,464Impairment
reserve
    
    
    
    
    
    
    
    
    
    
    (211,799
    )
    
    
    (211,799
    )Capitalized taxes
    
    
    224,947
    
    
    
    
    
    
    
    71,285
    
    
    
    296,232Capitalized loan costs
    
    
    577,722
    
    
    
    58,584
    
    
    
    16,895
    
    
    
    653,201Total
    
    
    15,440,041
    
    
    
    5,355,519
    
    
    
    10,700,775
    
    
    
    31,496,335Less cumulative allocation to cost of sales
    
    
    7,548,509
    
    
    
    5,335,441
    
    
    
    3,843,538
    
    
    
    16,727,488$
    7,891,532
    
    
    $
    20,078
    
    
    $
    6.857,237
    
    
    $
    14,768,847
  NOTE D  RELATED ENTITIES
  Receivable from related entities:Minority investor in Houston Warren Ranch Partners, LLC (2)
    
    $
    19,625Other
    
    
    13,380$
    33,005Payable to related entities:Minority investors in Glendale Condominiums, LLC (1)
    
    $
    731,635Minority investors in Villa Maria, LLC (3)
    
    
    176,875$
    908,510
  
 (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 cost and
preliminary development costs for this project total $3,189,471 and $3,477,688 at September
30, 2005 and 2004, respectively and are included in land held for development and sale in
Arizona properties.(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. F-11




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##### Table of Contents



NOTE E  INVESTMENT IN UNCONSOLIDATED COMPANY
    NOTE F  OTHER ASSETS
  Financing reserve receivable, net of allowance of $21,118
    
    $
    310,194Earnest money deposit on land purchase
    
    
    288,147Debt origination fees
    
    
    227,500Prepaid expenses, advances and other
    
    
    242,457Project costs and other
    
    
    85,727$
    865,848
 NOTE G  NOTES PAYABLE
  Texas PropertiesNotes payable to various financial institutions bearing
interest at 1% to 2% over prime (6.75% at September 30,
2005). The interest payments are due monthly and the loans
have maturity dates through December, 2005. Principal
reductions are primarily made as developed lots are sold -
collateralized by Texas real estate
    
    $
    4,503,775Arizona Ranch PropertiesNote payable to financial institution, bearing interest at
2% over prime (6.5% at date of closing). The rate is
fixed at 8.5% until March, 2007, adjustable semi-annually
in March, 2007, and quarterly thereafter. Interest
payments are due monthly with principal reductions made as
acreage is sold. Principal payments of $650,000 are due on
the third and fourth anniversary date, and any remaining
balance is due September, 2010,  collateralized by Arizona
real estate
    
    
    6,500,000Notes payable to various sellers, bearing interest at a
fixed rates of 8 to 10%. Interest payments are due monthly
or quarterly with principal payments due annually. Any
unpaid principal is due at maturity from April to August,
2010.
    
    
    727,200Other Arizona PropertiesNotes payable to financial institutions for construction of
a condominium complexes, bearing interest at variable rates
of 1.25% to 7.0%over prime (6.75% as September 30, 2005).
Interest payments are due monthly, with principal
reductions made as condominiums are sold, remaining balance
due April and October, 2007- collateralized by Arizona real
estate
    
    
    1,456,259Other
    
    
    43,301$
    13,230,535
 :
 Year ended
September 30,2006
    
    $
    5,379,7272007
    
    
    1,100,2902008
    
    
    775,3642009
    
    
    652,4042010
    
    
    5,322,750Thereafter
    
    
    $
    13,230,535
 F-12




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##### Table of Contents



NOTE H  SUBORDINATED DEBT
  NOTE I  OPERATING LEASES
  Year ending September 30,2006
    
    $
    61,0072007
    
    
    62,3242008
    
    
    63,2912009
    
    
    50,4852010
    

    Thereafter
    
    $
    237,106
  NOTE J  PROFIT-SHARING RETIREMENT PLAN
  NOTE K  COMMITMENTS AND CONTINGENCIES
    
 F-13




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##### Table of Contents



NOTE L  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
  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
  F-14




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##### Table of Contents



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
    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
  F-15




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##### Table of Contents



Series E Preferred Stock
    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
    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 M  STOCK OPTION PLAN
  F-16




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##### Table of Contents



Outstanding OptionsWeightedNumber
    
    
    Averageof
    
    
    ExerciseShares
    
    
    PriceSeptember 30, 2003
    
    
    2,043,750
    
    
    $
    0.18Grants
    
    
    950,000
    
    
    $
    0.33Exercises
    
    
    (123,000
    )
    
    $
    0.15Cancellations
    
    
    (581,250
    )
    
    $
    0.20September 30, 2004
    
    
    2,289,500
    
    
    $
    0.24Grants
    
    
    2,035,000
    
    
    $
    0.38Exercises
    
    
    (307,574
    )
    
    $
    0.15Cancellations
    
    
    (542,426
    )
    
    $
    0.30September 30, 2005
    
    
    3,474,500
    
    
    $
    0.32
  Outstanding Options
    
    
    Exercisable OptionsWeighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Average
    
    
    Number
    
    
    AverageExercise
    
    of
    
    
    Contractual
    
    
    of
    
    
    ContractualPrices
    
    Shares
    
    
    Life (in years)
    
    
    Shares
    
    
    Life (in years)$0.15
    
    
    877,000
    
    
    
    6.1
    
    
    
    827,000
    
    
    
    6.5$0.31
    
    
    750,000
    
    
    
    8.9
    
    
    
    550,000
    
    
    
    8.9$0.35
    
    
    730,000
    
    
    
    7.9
    
    
    
    730,000
    
    
    
    9.9$0.36
    
    
    50,000
    
    
    
    9.1
    
    
    
    
    
    
    
    $0.40
    
    
    915,000
    
    
    
    10.1
    
    
    
    815,000
    
    
    
    9.6$0.46
    
    
    20,000
    
    
    
    9.3
    
    
    
    10,000
    
    
    
    9.3$0.60
    
    
    20,000
    
    
    
    9.5
    
    
    
    20,000
    
    
    
    9.5$0.65
    
    
    50,000
    
    
    
    8.6
    
    
    
    16,666
    
    
    
    8.6$0.80
    
    
    62,500
    
    
    
    4.1
    
    
    
    62,500
    
    
    
    4.13,474,500
    
    
    
    
    
    
    
    3,031,166
 NOTE N  DISCONTINUED OPERATIONS
     F-17




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##### Table of Contents



Year Ended
    
    
    Year EndedSeptember
30, 2005
    
    

September
30, 2004Sales
    
    $
    218,000
    
    
    $
    Operating expenses
    
    
    (346,329
    )
    
    
    Minority interest
    
    
    72,461
    
    
    
    (55,608
    )
    
    
    Equity in operating losses of Stafford Springs prior to consolidation
    
    
    (28,603
    )
    
    
    (88,570
    )Impairment charge to reduce value of Stafford Springs
    
    
    
    
    
    
    (160,891
    )Loss from discontinued operations
    
    $
    (84,211
    )
    
    $
    (249,461
    )
 NOTE O  INCOME TAXES
  September 30,
    
    
    September 30,2005
    
    
    2004


2003Deferred tax assetsNet operating loss carry forwards
    
    $
    27,576
    
    
    $
    297,105Impairment writedown
    
    
    149,076
    
    
    
    149,076Allowance for doubtful accounts
    
    
    40,250
    
    
    
    12,514Deferred compensation
    
    
    9,520
    
    
    
    226,422
    
    
    
    458,695Less valuation allowance
    
    
    (223,182
    )
    
    
    (451,997
    )3,240
    
    
    
    6,698Deferred tax liabilityDepreciation of property and equipment
    
    
    3,240
    
    
    
    6,698$
    
    
    
    $
    
   Year
    
    
    Yearended
    
    
    endedSeptember 30,
    
    
    September 30,2005
    
    
    2004Current expense (benefit)
    
    $
    (454,000
    )
    
    $
    (12,079
    )Deferred tax expense (benefit)
    
    
    454,000
    
    
    
    12,079Income tax expense
    
    $
    
    
    
    $
    
  Year
    
    
    
    
    
    
    Yearended
    
    
    
    
    
    
    endedSeptember 30,
    
    
    
    
    
    
    September 30,2005
    
    
    
    
    
    
    2004Income tax expense (benefit) at statutory rate
    
    $
    423,000
    
    
    
    34
    %
    
    $
    (392,036
    )
    
    
    (34
    )%Increase (decrease) in deferred tax valuation allowance
    
    
    (449,000
    )
    
    
    (36
    )%
    
    
    436,047
    
    
    
    38
    %Other, primarily state income taxes
    
    
    26,000
    
    
    
    2
    %
    
    
    (44,011
    )
    
    
    (4
    )%$
    
    
    
    
    
    
    
    $
    
  NOTE P  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
 F-18




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##### Table of Contents



Year ended September 30, 2005Quarter ended
    
    Dec 31
    
    Mar 31
    
    Jun 30
    
    Sep 30Revenue
    
    $
    907,375
    
    
    $
    1,524,641
    
    
    $
    2,506,178
    
    
    $
    2,738,177Operating income (loss)
    
    
    21,507
    
    
    
    (269,692
    )
    
    
    97,074
    
    
    
    1,719,840Net earnings (loss)
    
    
    (80,200
    )
    
    
    528,305
    
    
    
    100,220
    
    
    
    695,122Net earnings (loss) per common and common equivalent share
    
    $
    0.00
    
    
    $
    0.02
    
    
    $
    0.00
    
    
    $
    0.04
 NOTE Q  RELATED PARTY TRANSACTIONS
     NOTE R  RECENT ACCOUNTING PRONOUNCEMENTS
   Inventory Costs, an amendment of ARB No.43, Chapter
4
 Exchanges of Nonmonetary Assets
 Accounting Changes and Error Corrections
 F-19




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##### Table of Contents



NOTE S
 LOSS ON IMPAIRMENT OF LONG-LIVED ASSETS
   
 F-20




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##### Table of Contents



Exhibit Index
 ExhibitNo.3.1
    
    Articles of Incorporation of First National Realty Associates, Inc. (Incorporated by reference to Exhibit 8 of Registration
Statement on Form S-18 (No. 33-30679-NY))3.2
    
    Agreement of Merger of First National Realty Associates, Inc. into Emphatic Mergers (Incorporated by reference to Exhibit
14 of Registration Statement on Form S-18 (No. 33-30679- NY))3.3
    
    By-Laws of First National Realty Associates, Inc. (Incorporated by reference to Exhibit 9 of Registration Statement on form
S-18 (No. 33-30679-NY)3.4
    
    Agreement and Plan of Merger between 1 st Realty Investments, Inc. and Great Western Land and
Recreation, Inc. dated as of July 23, 2002 (Incorporated by reference to Exhibit 1 of Form 8-K filed with the Commission on
July 29, 2002)3.5
    
    Certificate of Merger of Great Western Land and Recreation, Inc., a Delaware Corporation with and into
1 st Realty Investments, Inc., a Nevada Corporation (Incorporated by reference to Exhibit 10.4 of Form
10-KSB filed with the Commission on December 29, 2003)3.6
    
    Great Western Land and Recreation, Inc. Amended and Restated By-Laws (Incorporated by reference to Exhibit 10.5 of Form
10-KSB filed with the Commission on December 29, 2003)3.7
    
    Certificate of Designations of Series A Cumulative Convertible Preferred Stock of 1 st Realty
Investments, Inc. (Incorporated by reference to Appendix B of Schedule 14C of 1 st Realty Investments,
Inc. filed with the Commission on January 27, 2003)3.8
    
    Reserved3.9
    
    Certificate of Amendment to the Articles of Incorporation of 1st Realty Investments, Inc. amending Article Fourth3.10
    
    Certificate of Amendment filed amending Article Fourth of the Articles of Incorporation of Great Western Land and
Recreation, Inc.3.11
    
    Certificate of Designations of Series B Cumulative Convertible Preferred Stock of Great Western Land and Recreation, Inc.3.12
    
    Certificate of Designations of Series C Cumulative Convertible Preferred Stock of Great Western Land and Recreation, Inc.3.13
    
    Certificate of Designations of Series D and E Cumulative Convertible Preferred Stock of Great Western Land and Recreation,
Inc.3.14
    
    Certificate of Designations of Series F Cumulative Convertible Preferred Stock of Great Western Land and Recreation, Inc.10.1
    
    Renumbered as 3.1 above.10.2
    
    Renumbered as 3.2 above.10.3
    
    Renumbered as 3.4 above.10.4
    
    Renumbered as 3.5 above.10.5
    
    Renumbered as 3.6 above.10.6
    
    Renumbered as 3.7 above.10.7
    
    Investment Agreement dated June 29, 2002 by and between Amortibanc Investments, L.C. and Great Western Land and Recreation,
Inc. (Incorporated by reference to Exhibit 10.7 of Form 10-KSB filed with the Commission on December 29, 2003)10.8
    
    Great Western Land and Recreation, Inc. Stock Option Plan (Incorporated by reference to Appendix C of Schedule 14C of
1 st Realty Investments, Inc. filed with the Commission on January 27, 2003)




---



##### Table of Contents



ExhibitNo.10.9
    
    Form of Great Western Land and Recreation, Inc. Stock Option Agreement (Incorporated by reference to Exhibit 4.02 of Form
S-4 of Great Western Land and Recreation, Inc. filed with the Commission on October 16, 2001)10.10
    
    Agreement of Sale of Partnership Interest, dated July 8, 2003 between Great Western Land and Recreation, Inc. and Arete
Real Estate and Development Co. (Incorporated by reference to Exhibit 10.10 of Form 10-KSB filed with the Commission on
December 29, 2003)10.11
    
    Sale and Subscription Agreement of Membership Interests in Laguna Investments L.L.C. dated September 29, 2003 between Great
Western Land and Recreation, Inc. and Torok Partners, L.L.C. (Incorporated by reference to Exhibit 10.11 of Form 10-KSB
filed with the Commission on December 29, 2003)10.12
    
    Sale and Subscription Agreement of Membership Interests in Laguna Investments L.L.C. dated September 29, 2003 between Great
Western Land and Recreation, Inc. and Lafayette Financial Services, L.L.C. (Incorporated by reference to Exhibit 10.12 of
Form 10-KSB filed with the Commission on December 29, 2003)10.13
    
    Employment Agreement between Great Western land and Recreation, Inc. and Jay N. Torok dated September 1, 2001 (Incorporated
by reference to Exhibit 10.01 of Form S-4/A of Great Western Land and Recreation, Inc. filed with the Commission on
December 11, 2001)10.14
    
    Contribution Agreement by and between Great Western Land and Recreation, Inc., Amortibanc Management, L.C., Amortibanc
Investments, L.C., and GWLR, LLC dated as of August 6, 2001 (Incorporated by reference to Exhibit 10.02 of Form S-4/A of
Great Western Land and Recreation, Inc. filed with the Commission on December 11, 2001)10.15
    
    Promissory Note dated January 3, 2002, by and between GWLR Wagon Bow Ranch, LLC and Bank Midwest (Incorporated by reference
to Exhibit 10.15 of Form 10-KSB filed with the Commission on December 29, 2003)10.16
    
    Secured Promissory Note dated September 25, 2002, between National Bank of Arizona and Glendale Condominiums, LLC
(Incorporated by reference to Exhibit 10.16 of Form 10-KSB filed with the Commission on December 29, 2003)10.17
    
    Promissory Note dated September 25, 2002, between National Bank of Arizona and Glendale Condominiums, LLC (Incorporated by
reference to Exhibit 10.17 of Form 10-KSB filed with the Commission on December 29, 2003)10.18
    
    Loan Agreement dated June 23, 2000, by and between Willow Spring Ranch, LLC and Bank Midwest (Incorporated by reference to
Exhibit 10.21 of Form S-4/A of Great Western Land and Recreation, Inc. filed with the Commission on December 11, 2001)10.19
    
    Renumbered as 14.1 below11
    
    Statement RE: Computation of per Share Earnings (Loss)14.1
    
    Great Western Land and Recreation, Inc. Code of Business Ethics (Incorporated by reference to Exhibit 10.19 of Form 10-KSB
filed with the Commission on December 29, 2003)21
    
    List of Subsidiaries31.1
    
    Certification of Jay N. Torok pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 200231.2
    
    Certification of Daniel J. Regan pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification of 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 of Daniel J. Regan pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 200299.1
    
    Risk Factors