UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  Form 10-KSB/A No. 1  SANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 For the Fiscal Year Ended December 31, 2006 OR £TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to  .   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  Securities registered under Section 12 (b) of the Exchange Act: None  Securities registered under Section 12 (g) of the Exchange Act: Title of Class: Common Units, no par value.  Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act:  _____  Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past twelve 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 £  Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-KSB or any amendment to this Form 10-KSB. S      Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes £  No S  State issuers revenues for its most recent fiscal year: $48,041  The aggregate market value of the voting and non-common voting equity held by non-affiliates computed by reference to the average bid and asked price of such common equity, as of March 28, 2007 was: not applicable. There is no market for our securities and we have not requested that a ticker symbol be issued.  The number of outstanding shares of the registrants Common Units, no par value, as of March 27, 2007 was 24,087,379 common member units.  DOCUMENTS INCORPORATED BY REFERENCE Not applicable  Transitional Small Business Disclosure Format: Yes £  No S    2   EXPLANATORY NOTE  We are filing this Amendment No. 1 on Form 10-KSB/A to our Annual Report on Form 10-K for the year ended December 31, 2006, as filed with the Securities and Exchange Commission on April 2, 2007, for the purpose of amending and restating Item 7 thereof to separately reflect the minority interest in the net assets of our subsidiaries in our consolidated financials. We no longer show these minority interests as a part of member capital.  In addition, we are including as exhibits to this Amendment No. 1 on Form 10-KSB/A the certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.  Except as set forth herein, no other changes are made to our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. No attempt has been made in this Amendment No. 1 on Form 10-K/A to modify or update the other disclosures presented in the originally filed Form 10-K, which continues to speak as of the date of its original filing.  Except as presented herein, this Amendment No. 1 on Form 10-K/A does not reflect any events occurring after the filing of the originally filed Form 10-K or modify or update the disclosures included therein.  Accordingly, this Amendment No. 1 on Form 10-K/A should be read in conjunction with the originally filed Form 10-K and our other filings with the SEC.  ITEM 7. FINANCIAL STATEMENTS   3        REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM    To the Board of Directors of Castle Arch Real Estate Investment Company, LLC (a development stage company) Midvale, Utah   We have audited the accompanying consolidated statement of financial condition of Castle Arch Real Estate Investment Company, LLC (a development stage company) and Subsidiary as of December 31, 2006 and the related consolidated statements of operations, changes in members capital, and cash flows for the years ended December 31, 2006 and 2005 and for the period from inception on April 15, 2004 to December 31, 2006.  These consolidated financial statements are the responsibility of the Companys management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Castle Arch Real Estate Investment Company, LLC (a development stage company) and Subsidiary as of December 31, 2006 and the results of its operations and its cash flows for the years ended December 31, 2006 and 2005 and for period from inception on April 15, 2004 to December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.     /s/ Bouwhuis, Morrill & Company Bouwhuis, Morrill & Company Layton, Utah March 23, 2007  4   Financial Information Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Consolidated Statement of Financial Condition  December 31,2006ASSETSCurrent assets:Cash and cash equivalents$1,500,652Interest receivable, net of allowance,totaling $9,97348,654Other receivable250,000Notes receivable  current, net of allowance,totaling $100,000505,000Prepaid expenses and other current assets7,225Total current assets2,311,531Property, plant and equipment:Office equipment38,910Less: accumulated depreciation(11,044)Net property, plant and equipment27,866Other assets:Note receivable  noncurrent255,000Other properties held for investment23,561,741Earnest money and other deposits160,000Entitlement costs576,244Other noncurrent assets3,430Total other assets24,556,415Total assets$26,895,812LIABILITIES AND MEMBERS CAPITALCurrent liabilities:Accounts payable$1,396,106Other accrued expenses108,109Preferred dividends payable2,578,094Notes payable6,820,287Total current liabilities10,902,596Minority interest in consolidated subsidiary (see Note 6)2,237,329Total liabilities13,139,925Members capital:Common units, 23,550,841, issued and outstanding,ranging from $.001 to $2.50 per unit1,046,038Non-managing members units, series A preferred,1,000,000 units issued and outstanding, $1.00 per unit647,940Non-managing members units, series B preferred,2,000,000 units issued and outstanding, $1.00 per unit1,376,156Non-managing members units, series C preferred,3,300,000 units issued and outstanding, $1.00 per unit2,452,316Non-managing members units, series D preferred,3,940,000 units issued and outstanding, $5.00 per unit16,880,672Deficit accumulated during the development stage(8,647,235)Total members capital13,755,887Total liabilities, minority interest, and members capital$26,895,812  See notes to consolidated financial statements.  5    Financial Information Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Consolidated Statements of Operations  CumulativeFrom April 15,Year EndedYear Ended2004 (inception) toDecember 31,December 31,December 31,200620052006Revenues:Proceeds from sale of property,net of cost of property sold$48,041$-$48,041Total revenues48,041-48,041Operating expenses:Selling, general and administrative5,186,5202,302,1457,785,415Depreciation and amortization130,2523,604134,348Cost of terminatedpurchase agreements802245,363246,166Bad debt expense andimpairment losses109,973-109,973Start-up and organizational costs--55,696Total operating expenses5,427,5472,551,1128,331,598Operating loss(5,379,506)(2,551,112)(8,283,557)Other revenue/(expenses)Interest income98,49648,992149,359Interest expense(567,811)(231)(568,042)Income/(loss) from continuingoperations beforeminority interest(5,848,821)(2,502,351)(8,702,240)Minority interest in lossesof consolidated subsidiary55,005-55,005Net loss and deficit accumulated duringthe development stage$(5,793,816)$(2,502,351)$(8,647,235)Accumulated preferred dividends$1,894,652$617,332$2,578,094Net loss available to commonunitholders$(7,688,468)$(3,119,683)$(11,225,329)Net loss per common unit (Note 1)$(33.49)$(16.16)Weighted average units outstanding22,952,87819,304,121  See notes to consolidated financial statements.   6   Financial Information Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Consolidated Statements of Cash Flows  CumulativeFrom April 15,Year EndedYear Ended2004 (inception) toDecember 31,December 31,December 31,200620052006Cash flows from operating activitiesNet loss$(5,793,816)$(2,502,351)$(8,647,235)Adjustments to reconcile net loss tonet cash used in operating activitiesDepreciation6,9483,60411,044Amortization of debt issue costs123,303-123,303Allowance for bad debts109,973-109,973Minority interest in losses of subsidiary(55,005)-(55,005)Professional outside services paid inthe form of common units1,333,75078,7501,412,500hanges in operating assets and liabilities:Increase in notes receivable(255,000)-(255,000)Interest receivable(54,232)(4,395)(58,627)Other receivable(250,000)-(250,000)Prepaid expenses and othercurrent assets16,559(23,784)(7,225)Accounts payable39,5239,466247,657Other accrued expenses68,2734,21172,484Due to related party-(20,000)Properties held for investment(7,171,464)(8,713,063)(16,975,170)Other(3,430)-(3,430)Net cash used in operating activities(11,884,618)(11,167,562)(24,274,731)Cash flows from investing activitiesOption, earnest money, andentitlement deposits(415,348)(1,105,018)(579,618)Additions to notes receivable(505,000)(100,000)(605,000)Purchase of property, plant andequipment(13,226)(9,152)(38,910)Net cash used in investing activities(933,574)(1,214,170)(1,223,528)Cash flows from financing activitiesProceeds from issuance of memberunits8,716,96214,697,74128,328,796Offering costs(391,400)(915,720)(1,307,120)Proceeds from subscription receivables1,985,135301,134-Proceeds from issuance of long-term debt---Repayment of long-term debt-(11,843)-Debt issuance costs(22,765)-(22,765)Net cash provided by financing activities10,287,93214,071,31226,998,911Net increase (decrease) in cash and cashequivalents(2,530,260)1,689,5801,500,652Cash at beginning of period4,030,9122,341,332-Cash at end of period$1,500,652$4,030,912$1,500,652  See notes to consolidated financial statements.  7   Financial Information Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Consolidated Statements of Cash Flows (continued)  CumulativeFrom April 15,Year EndedYear Ended2004 (inception) toDecember 31,December 31,December 31,200620052006Non-cash investing andfinancing activitiesNotes payable issued for other propertyheld for investment$6,859,632$-$6,859,632Debt issuance costs on notes payable139,883-139,883Issuance of member unitsfor subscription receivables1,117,6531,985,135-Preferred dividend payable1,894,652617,3322,578,094Referral fees paid with common units258,510345,184779,897Accrued referral fees paid withcommon units152,394345,184779,897Accrued referral fees-67,744-Supplemental disclosuresCash paid for interest$556,766$231$556,997  See notes to consolidated financial statements.      8


Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Consolidated Statements of Changes in Members Capital Period from April 15, 2004 (inception) to December 31, 2006  AccumulatedNon-managingNon-managingNon-managingNon-managingDeficitMembers Units,Members Units,Members Units,Members Units,During theTotalCommon UnitsSeries A  PreferredSeries B PreferredSeries C  PreferredSeries D PreferredDevelopmentMembersUnitsAmountUnitsAmountUnitsAmountUnitsAmountUnitsAmountStageCapitalBalance (inception)April 15, 2004-$   --$   --$   --$   --$   -$   -$   -Sale of common unitsat $0.001 per unit16,000,00016,000---------16,000Sale of Series Ainvestment unitsat $1.00 per unit1,000,000-1,000,0001,000,000-------1,000,000Sale of Series Binvestment unitsat $2.00 per unit900,350---1,800,7001,800,700-----1,800,700Sale of Series Cinvestment unitsat $3.00 per unit191,667-----575,000575,000---575,000SubscriptionsReceivables-----(31,134)-(270,000)---(301,134)Preferred dividendPayable---(38,209)-(25,379)-(2,522)---(66,110)Offering costs---(154,610)(280,223)(115,058)(549,891)Net loss----------(351,068)(351,068)Balance,December 31, 200418,092,017$16,0001,000,000$807,1811,800,700$1,463,964575,000$187,420-$   -$(351,068)$2,123,497   See notes to consolidated financial statements.


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Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Consolidated Statements of Changes in Members Capital (continued) Period from April 15, 2004 (inception) to December 31, 2005  AccumulatedNon-managingNon-managingNon-managingNon-managingDeficitMembers Units,Members Units,Members Units,Members Units,During theTotalCommon UnitsSeries A  PreferredSeries B PreferredSeries C  PreferredSeries D PreferredDevelopmentMembersUnitsAmountUnitsAmountUnitsAmountUnitsAmountUnitsAmountStageCapitalIssuance of units forreferral fees andservices268,981$425,388-$   --$   --$   --$   -$   -$25,388Sale of Series Binvestment unitsat $2.00 per unit99,650---199,300199,300-----199,300Sale of Series Cinvestment unitsat $3.00 per unit908,333-----2,725,0002,725,000---2,725,000Sale of Series DInvestment unitsat $5.00 per unit2,659,167-------2,659,16713,295,836-13,295,836Subscriptionsreceivables---------(1,985,135)-(1,985,135)Proceeds fromsubscribed units-----31,134-270,000---301,134Preferred dividendpayable---(79,241)-(157,098)-(205,159)-(175,834)-(617,332)Offering costs-----(1,144)-(260,461)-(605,756)-(867,361)Net loss----------(2,502,351)(2,502,351)Balance,December 31, 200522,028,148441,3881,000,000727,9402,000,0001,536,1563,300,0002,716,8002,659,16710,529,111(2,853,419)13,097,976Issuance of units forreferral fees andservices241,860604,650---------604,650Sale of Series DInvestment unitsat $5.00 per1,280,833-------1,280,8336,404,165-6,404,165Subscriptionreceivables---------(68,400)-(68,400)Proceeds fromsubscribed units---------1,985,135-1,985,135Preferred dividendpayable---(80,000)-(160,000)-(264,484)-(1,354,629)-(1,859,113)Offering costs---------(614,710)-(614,710)Net loss----------(5,793,816)(5,793,816)Balance,December 31, 200623,550,841$1,046,0381,000,000$647,9402,000,000$1,376,1563,300,000$2,452,3163,940,000$16,880,672$(8,647,235)$13,755,887  See notes to consolidated financial statements.


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Financial Information Castle Arch Real Estate Investment Company, LLC (A Development Stage Company)   Notes to the Consolidated Financial Statements  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 five private placements of membership units in the Company, and its subsidiaries 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 December 31, 2006, the Company has successfully placed 3,940,000 membership units.  Effective May 22, 2006, the placement of 1,200,000 membership units in Castle Arch Kingman, LLC (CAK), a variable interest entity, of which the Company is considered the primary beneficiary (see Note 7).  Each membership unit consists of five common and one preferred unit at $25.00 per membership unit.  At December 31, 2006, CAK had raised $3,195,276, resulting in the placement of 127,811 membership units.  Of this amount, $799,082 represents subscribed units outstanding for which funds had not been received at December 31, 2006.  At December 31, 2006, the Company had completed the Series A, B, and C private placement offerings, and had raised $19,700,000 of the Series D private placement, resulting in the placement of 7,040,000 membership units.  Of this amount, $68,400 represents Series D subscribed units outstanding for which funds had not been received at December 31, 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:





Financial Information Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Notes to the Consolidated Financial Statements   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.  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 significant revenues from the sale or development of property as of December 31, 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 part of the Companys development stage activities.  B. 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.  Significant estimates that may change in the near future include properties held for sale and other properties held for investment if it becomes necessary to incur unexpected additional costs to prepare these properties for sale within the next twelve months.  In addition, significant estimates include potential impairment of certain promissory notes receivable whose maturities have expired at December 31, 2006 (see Note 2).  D. Principles of Consolidation  The accompanying consolidated financial statements include the accounts of the Company and, effective April, 2006, the accounts of Castle Arch Kingman, LLC (CAK).  In December 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46(R) ("FIN 46(R)"), which further clarified and amended FIN 46, Consolidation of Variable Interest Entities, which requires the consolidation of entities in which an enterprise absorbs a majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or is the primary beneficiary, as a result of ownership, contractual or other financial interests in the entity.  CAK is considered a variable interest entity of which the Company is the primary beneficiary (see Note 2).  All intercompany accounts and transactions have been eliminated in the consolidated financial statements.


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Financial Information Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Notes to the Consolidated Financial Statements  1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)  E. Reclassifications  Certain prior year amounts have been reclassified to conform to the current years presentation.  F. Accounting Method  The Companys financial statements are prepared using the accrual method of accounting. The Company has elected a December 31 year end.  G. 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 and interest on associated debt 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.  H. Uninsured Cash Balances  The Company maintains its corporate cash balances in multiple accounts at one bank.  Corporate cash accounts at banks are insured by the FDIC up to $100,000.  Amounts in excess of insured limits were approximately $1,400,652 at December 31, 2006.  To date, the Company has not experienced any losses as a result of this excess and does not anticipate any such losses in the future.  I. 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.  J. Cash and Cash Equivalents  The Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents.  Cash and cash equivalents are carried at cost, which approximates fair value.  K. Offering Costs  Costs incurred in the successful raising of capital under the Companys private placement memorandums such as referral 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.  L. Property, Plant and Equipment  Property, plant and equipment is stated at cost.  Depreciation is computed primarily using the straight-line method based on estimated useful lives of 5 years.


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Financial Information Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Notes to the Consolidated Financial Statements  1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)  M. 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 referral fees incurred for the successful raising of capital.  N. Options, Deposits and Entitlement Costs  The terms of the Companys purchase agreements provide for due diligence periods during which 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 transpire.  The Companys policy is to capitalize entitlement costs and applicable deposits incurred as noncurrent assets, classified as earnest and increased money deposits, and entitlement costs, until such time as the properties are purchased.  Upon purchase, the Company classifies certain properties as held for sale that meet the requirements of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. These requirements include the completion of the respective entitlements and the preparation of the property for immediate sale in its existing condition, the initiation of an active program to identify potential buyers, and the expectation of occurrence of a probable sale within the following twelve months.  Those properties that do not meet these criteria are classified as other properties held for investment.  During the year ended December 31, 2006, the Company incurred costs related to nine separate properties, totaling $14,774,480.  Of this amount, $6,719,749 reflects debt proceeds used to fund the closing of three separate purchases during the year (see Note 3).  These amounts have been classified as other properties held for investment.  In addition, the Company incurred $415,348 in costs related to five separate properties and classified as earnest and increased deposits, and entitlement costs at December 31, 2006.  O. Recent Accounting Pronouncements  In February, 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments.  SFAS No. 155 eliminates the temporary exemption of bifurcation requirements to securitized financial assets, contained in SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.  As a result, similar financial instruments are accounted for similarly regardless of the form of the instruments.  In addition, in instances where a derivative would otherwise have to bifurcated, SFAS No. 155 allows a preparer on an instrument-by-instrument basis to elect fair value measurement at acquisition, at issuance, or when a previously recognized financial instrument is subject to remeasurement.  The adoption of SFAS No. 155 has not materially affected the Companys reported loss, financial condition or cash flows.  In March, 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.  The pronouncement establishes standards whereby servicing assets and servicing liabilities are initially measured at fair value, where applicable.  In addition, SFAS No. 156 allows subsequent measurement of servicing assets and liabilities at fair value, and where applicable, derivative instruments used to mitigate risks inherent with servicing assets and liabilities are likewise measured at fair value.  The adoption of SFAS No. 156 has not materially affected the Companys reported loss, financial condition, or cash flows.


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Financial Information Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Notes to the Consolidated Financial Statements  1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)  O. Recent Accounting Pronouncements (continued)  In March, 2006, the FASB issued Interpretation No. 48, (FIN 48) Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109, Accounting for Income Taxes.  FIN 48 prescribes criteria for the recognition and measurement of a tax position taken or expected to be taken in a tax return.  Accordingly, tax positions are analyzed to determine whether it is more likely than not they will be sustained when examined by the appropriate tax authority.  Positions that meet the more-likely-than-not criteria are measured to determine the amount of benefit to be recognized, whereas those positions that do not meet the more-likely-than-not criteria are derecognized in the financial statements.  The adoption of FIN 48 has not materially affected the Companys reported loss, financial condition, or cash flows.  In September, 2006, the FASB issued SFAS No. 157, Fair Value Measurements.  The statement defines fair value, determines appropriate measurement methods, and expands disclosure requirements about those measurements.  The adoption of SFAS No. 157 has not materially affected the Companys reported loss, financial condition, or cash flows.  In September, 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans.  This statement requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year of change through comprehensive income.  In addition, SFAS No. 158 requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position.   The adoption of SFAS No. 158 has not materially affected the Companys reported loss, financial condition, or cash flows.  P. 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 in accordance with SFAS No. 128, Earnings Per Share.  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 December 31, 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 $1,793,837 for the twelve months ended December 31, 2006, have been included in the computation of net loss per common unit, resulting in an incremental increase in loss per unit of $7.82.


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Financial Information Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Notes to the Consolidated Financial Statements  AmountInterest RateDue DateCurrent$50,0008%200650,0008%2006400,0008%200725,0008%200725,0008%200725,0008%200720,0008%200710,0008%2007605,000Allowance(100,000)$505,000Noncurrent$255,00012%2010  2. NOTES, OTHER RECEIVABLES  Notes receivable at December 31, 2006, consisted of the following:  Accrued interest along with principal is to be paid in full on or before the respective maturity date.  During 2006, the Company issued $505,000 in promissory notes receivable, bearing interest at 8 percent per annum.  Maturity dates associated with these issuances vary throughout 2007.  At December 31, 2006, two uncollateralized promissory notes, with principal balances of $50,000 each, along with accrued interest became due in full.  To date, the Company has not received payment for the required principal and interest amounts.  Accordingly, management has recorded an impairment of the notes and corresponding interest receivable, totaling $100,000 in principal and $9,973 in associated interest receivable (see also Note 4).  In addition, at December 31, 2006, the Company was owed $250,000, representing a refundable earnest money deposit the Company had originally placed on a separate property, and subsequently decided not to pursue once the due diligence period had transpired.  This amount has been classified as an other receivable at December 31, 2006, and funds were subsequently received in 2007.  The Company realized sales proceeds of $840,000 during 2006.  A component of these proceeds included a note receivable, totaling $255,000 at December 31, 2006.  This note bears interest at 12 percent per annum and interest together with principal is owed to the Company in May, 2010.  3. NOTES PAYABLE  Notes payable at December 31, 2006, consisted of the following:  AmountInterest rateDue DateNote 1$5,380,29310.75%2007Note 21,479,33910.25%2007Total$6,859,632


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Financial Information Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Notes to the Consolidated Financial Statements  3. NOTES PAYABLE (CONTINUED)  During 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 debt issue costs totaling $76,745, of which amount $22,765 was paid from the Companys bank accounts. These debt issue costs have been amortized over the 12-month terms of the notes and at December 31, 2006 unamortized debt issue costs totaled $39,345.  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 10.75 and 10.25 percent, respectively, with interest only payments due on a monthly basis over their respective terms.  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 $1,565,010 and $11,045 to repay an existing note payable and associated accrued interest, respectively.  Debt issuance costs related to this note payable totaled $65,097.  4. COMMITMENTS AND CONTINGENCIES  At December 31, 2006, the maturities on two promissory notes receivable, each totaling $50,000, came due.  In addition, during the first quarter, 2007, a third promissory note, totaling $400,000, with a maturity date of January 17, 2007 also came due.  The Company has obtained collateral for the $400,000 note in accordance with the terms of the promissory note agreement whose value, in the opinion of management, equals or exceeds the face value of the note.  The remaining two notes are uncollateralized.  Accordingly, at December 31, 2006, the Companys management elected to impair two of the three promissory notes, resulting in a valuation allowance totaling $100,000.  Although an element of uncertainty currently exists regarding collectibility, given the expired agreements, management has had open communication with the promissee and, based on these discussions, fully anticipates recouping the amounts due to the Company, along with the associated interest.  5. RELATED-PARTY TRANSACTIONS  Certain officers of the Company provide office facilities and administrative services to the Company.  During the year ended December 31, 2006, the Company paid $210,000 to other officers or affiliated entities for facilities and administrative services.  As of December 31, 2006, three officers of the Company receive $2,000 per month and one officer of the Company receives $10,000 per month toward reimbursement for these expenses.  During 2006, the Company entered into a sublease agreement with a separate entity, owned by an officer of the Company, for office space.  Pursuant to the terms of the agreement, the Company is required to make monthly payments, totaling $3,430, over a two-year term.  As of December 31, 2006, the Company had paid $9,792 to the officers separate entity.  6. CONSOLIDATION OF 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 CAK 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 (the Project).  At the date of CAKs formation, the Company entered into an Option Contract for Sale and Purchase (the Contract) and, accordingly, agreed to sell, at cost, all of the land it has or will acquire in the Kingman, Arizona area to CAK.  At December 31, 2006, the Company has purchased approximately 453 acres, totaling $12,008,373.  In addition, at December 31, 2006, the transfer to CAK has not yet been consummated.


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Financial Information Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Notes to the Consolidated Financial Statements  6. CONSOLIDATION OF VARIABLE INTEREST ENTITY (CONTINUED)  In exchange for $6,000 in capital contributed to CAK at the date of its formation, the Company was issued 6,000,000 common units, representing approximately 92 percent of all outstanding common units of CAK at December 31, 2006.  Members of the Companys management team effectively control CAK pursuant to its operating agreement, wherein the Company and its managing members have been appointed as the managing member of CAK and, therefore, shall direct, manage and control and have complete authority, power, and discretion in decisions to accomplish the intended business and objectives of CAK.  The Company intends to fund 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.  The preferred units bear a 6 percent cumulative, noncompounded preferred dividend.  At December 31, 2006, the Company had accrued $35,539 of 6 percent preferred unit distributions payable to preferred units holders of CAK.  The Company may, at its option, at any time, redeem any number of outstanding CAK preferred units at a rate of $25.00 per unit, plus any accrued preferred dividends.  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 December 31, 2006, CAK had raised $3,195,276 and, accordingly, had accrued a management fee payable to the Company totaling $63,906.  The minority interest in the Companys earnings during the year ended December 31, 2006 totals $55,005.  A reconciliation of the minority interest in CAK at December 31, 2006 is as follows:  2006Beginning balance:$-Add: Capital raised3,195,276Less: Subscriptions receivable(799,082)Minority interest in current year  loss(55,005)Minority interest in referral fees of
Companys subsidiary(68.321)Minority interest in accrued dividend
of Companys subsidiary(35,539)Ending balance$2,237,329   The total equity investment at risk in CAK will be insufficient to accomplish, in its entirety, the scope of the Project and, therefore, will require additional subordinated support.  In addition, the Company is anticipated to absorb a majority of CAKs expected losses.  Therefore, upon close of the private placement offering, resulting in the Company owning 6,000,000 common units issued and outstanding, or 50 percent in CAK, the Company will continue to be considered the primary beneficiary and, accordingly, will continue to consolidate the entity.  7. MEMBERS EQUITY  Each membership unit issued to date consists of one common unit and any number of preferred units depending upon the offering.  The Company is authorized to issue up to 50,000,000 common units and 100,000,000 preferred units.


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Financial Information Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Notes to the Consolidated Financial Statements  7. MEMBERS EQUITY (CONTINUED)  As of December 31, 2006 common units issued and outstanding totaled 23,537,161.  Of this amount, 16,510,841 represents founders capital and referral and other consulting fees paid in the form of common units.  Accordingly, the value attributable to the respective common units varies.  Founders capital consists of 16,000,000 common units issued and outstanding and was valued at $.001 per unit at inception of the Company.  Common units representing referral and other consulting fees are valued based on payment options available to the recipient which provide for payment solely in the form of cash, or a combination of cash and units. Accordingly, the valuation of common units to be paid for referral and consulting fees is based on the amount of cash the individual would have been paid had he or she selectedthe cash only option less the amount of cash he would have been paid for the cash and units option.  This value was used for all referral and consulting fees to be paid in the form of common units in each respective private placement regardless of whether the individual actually elected the cash only option.  Utilizing this valuation methodology, at December 31, 2006 the Company had issued the following common units to advisory council members, consultants, and as referral fees:  RoundNumber of
Units IssuedValue
per UnitTotalRound A38,750$.50$19,375Round B30,0761.0030,076Round C124,4511.50186,677Round D317,5642.50793,910Totals510,841$1,030,038  The Series A preferred units may be redeemed at a price of $1.00 per unit.  The Series A preferred units have preferred dividend rights equal to 8 percent per year on a cumulative noncompounded basis.  These preferred dividends will be paid in cash upon redemption of Series A preferred units and after the return of principal.  Holders of Series A preferred units have no voting rights.  The Company may, at its option, at any time, redeem any number of outstanding Series A preferred units at a rate of $1.00 per unit, plus any accrued preferred dividends.  The Series B preferred units can be redeemed at a price of $1.00 per unit.  The Series B preferred units have preferred dividend rights equal to 8 percent per year on a cumulative noncompounded basis.  These preferred dividends will be paid in cash upon redemption of Series B preferred units and after the return of principal.  Holders of Series B preferred units have no voting rights.  The Company may, at its option, at any time, redeem any number of outstanding Series B preferred units at a rate of $1.00 per unit, plus any accrued preferred dividends.  The Series C preferred units can be redeemed at a price of $1.00 per unit.  The Series C preferred units have preferred dividend rights equal to 8 percent per year on a cumulative noncompounded basis.  These preferred dividends will be paid in cash upon redemption of Series C preferred units and after the return of principal.  Holders of Series C preferred units have no voting rights.  The Company may, at its option, at any time, redeem any number of outstanding Series C preferred units at a rate of $1.00 per unit, plus any accrued preferred dividends.  The Series D preferred units can be redeemed at a price of $5.00 per unit.  The Series D preferred units have preferred dividend rights equal to 8 percent per year on a cumulative noncompounded basis.  These preferred dividends will be paid in cash upon redemption of Series D preferred units and after the return of principal.  Holders of Series D preferred units have no voting rights.  The Company may, at its option, at any time, redeem any number of outstanding Series D preferred units at a rate of $5.00 per unit, plus any accrued preferred dividends.


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Financial Information Castle Arch Real Estate Investment Company, LLC (A Development Stage Company) Notes to the Consolidated Financial Statements  7. MEMBERS EQUITY (CONTINUED)  As of December 31, 2006, the Company had accrued $2,542,555 of 8 percent preferred unit distributions payable to preferred unit holders based on the period of time from receipt of funds related to the preferred unit holders respective investment to date.  In addition, CAK had accrued $35,539 of 6 percent preferred unit distributions payable at December 31, 2006, resulting in a total preferred dividend payable of $2,578,094 at December 31, 2006..  The holders of the common units are entitled to one vote for each unit held of record by them and may not accumulate votes.  This means that the holders of more than 50 percent of the common units voting for the election of directors can elect all of the directors if they choose to do so.  In such event, the holders of the remaining common units will not be able to elect any person to the board of directors.  The holders of the common units are entitled to receive dividends when, and if declared by the board of directors out of funds legally available therefore, subject to payment of all accrued dividends on outstanding preferred units.  In the event of the Companys liquidation, dissolution or winding up, the holders of the common units have the right to share proportionately in the Companys remaining net assets after payment of the total liquidation preference of all outstanding preferred units.  Holders of common units, as such, have no conversion, preemptive or other subscription rights, and there are no redemption rights applicable to the common units.  In the future, the Company intends to raise working capital through sales of additional preferred units.  The board of directors has authority, in accordance with the provisions of the Companys operating agreement, and without action by the members, to designate and issue all or any portion of the remaining authorized but unissued preferred units, and to determine the voting rights, preferences, privileges, and restrictions, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and the number of units constituting any series in the designation of such series.  Such preferred units, if and when issued, may carry rights superior to those of the common units.  7. SUBSEQUENT EVENTS  In March, 2007, the Company acquired a separate property, totaling $1,102,008.  Of this amount, $450,000 represents a note payable to the seller, secured by the acquired property and bearing interest at 8 percent per annum.  Combined principal and interest is due in full on or before September, 2007.  In January and March, 2007, the Company issued three promissory notes receivable to an unrelated entity, totaling $65,000.  The notes receivable bear interest of 8 percent and principal is to be paid together with interest on or before March 31, 2007.


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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on October 12, 2007. CASTLE ARCH REAL ESTATE INVESTMENT COMPANY, L.L.C.  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)


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