**Table
          of Contents**
 **Index
          to Financial
          Statements**







**U.S.** **SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB**


(Mark
      One)





ý
            ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934





For
      the
      fiscal year ended: **December
      31, 2005**





 ̈
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934





For
      the
      transition period from ___________ to ___________





Commission
      file number: **0-17018**




**STRATFORD
        AMERICAN CORPORATION**


(Name
      of
      Small Business Issuer in Its charter)




**Arizona**
              
              **86-0608035**(State
                  or other jurisdiction of
                incorporation
                  or organization)
              
              (I.R.S.
                  Employer Identification No.)




**2400
      E. Arizona Biltmore Circle, Building 2,
      Suite 1270, Phoenix, Arizona 85016**


(Address
      of principal executive offices)





Issuer's
      telephone number:  **(602) 956-7809**




Securities
      registered under Section 12(b) of the Exchange Act:  
None




Securities
        registered under Section 12(g) of the Exchange Act:
  Common
        Stock, $.01 Par Value
 Series“A”Preferred Stock, $.01 Par Value





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 12 months (or for such shorter period that the registrant was
      required to file such reports), and (2) has been subject to such filing
      requirements for the past 90 days. Yes ý
      No
 ̈


Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B is not 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 this Form 10-KSB or any amendment to this form 10-KSB.
        ý
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act) Yes  ̈
        No
ý
 
 Issuer ’ s
        revenues for its most recent fiscal year were $1,799,000.
 
 The
        aggregate market value of the voting stock held by non-affiliates of the
        registrant, based on the February 28, 2006 closing price of $0.75 per share,
        as
        reported on the OTC Bulletin Board, was $2,831,000 .
 
 At
        February 28, 2006, 11,078,105 shares of the issuer ’ s
        common
        stock and no shares of its preferred stock were issued and
        outstanding.
 
 Documents
        Incorporated by Reference: None
  Transitional
        Small Business Disclosure Format (check one)  Yes  ̈
        No
ý


**Table
            of Contents**
 **Index
            to Financial
            Statements**




**STRATFORD
      AMERICAN CORPORATION**




**Form
      10-KSB**


**For
      the Fiscal Year Ended December 31, 2005**




**Table
      of
      Contents**


PagePart
                      IItem
                      1.
                  Description
                      of Business
                  2Item
                      2.
                  Properties
                  4Item
                      3.
                  Legal
                      Proceedings
                  5Item
                      4.
                  Submission
                      of Matters to a Vote of Security
                      Holders
                  5Part
                      IIItem
                      5.
                  Market
                      for Common Equity and Related Stockholder
                      Matters
                  6Item
                      6.
                  Management’s
                      Discussion
                      and Analysis of Financial Condition and Results of
                      Operations
                  8Item
                      7.
                  Financial
                      Statements and Supplementary
                      Data
                  16Item
                      8.
                  Changes
                      In and Disagreements with Accountants on
                      Accounting and Financial Disclosure
                  34Item
                      8A.
                  Controls
                      and Procedures
                  34Part
                      IIIItem
                      9.
                  Directors
                      and Executive Officers;
                      Compliance with Section 16(a) of the Exchange Act
                  34Item
                      10.
                  Executive
                      Compensation
                  36Item
                      11.
                  Security
                      Ownership of Certain Beneficial Owners
                      and Management
                  38Item
                      12.
                  Certain
                      Relationships and Related
                      Transactions
                  39Item
                      13.
                  Exhibits,
                      List and Reports on Form
                      8-K
                  40Item
                      14.
                  Principal
                      Accountant Fees and
                      Services
                  40SIGNATURES
                  42


-i-
 **Table
            of Contents**
 **Index
            to Financial
            Statements**


**PART
      I**








**Item
              1.**
            **Description
                of Business**





General
        Development of Business .
        Stratford American Corporation, an Arizona corporation incorporated on May
        13,
        1988 (the “ Company ” ),
        has
        several wholly-owned subsidiaries. The Company also owns 80% of Scottsdale
        Thompson Peak, LLC, an Arizona limited liability company ( “ STP ” ),
        which
        held the Company ’ s
        real
        estate segment. The real estate segment, consisting of an office building,
        was
        sold on November 9, 2004. Unless otherwise specified, the term “ Company ” as used
        herein includes the Company ’ s
        subsidiaries.
 
 The
        Company, through its subsidiaries, is engaged principally in the businesses
        of
        natural resource exploration and development. The Company employs four
        employees, one of whom works full time.
  Natural
        Resource Properties - Oil and Gas .
        The
        Company owns working and/or royalty interests in oil and gas properties that
        are
        primarily located in Oklahoma and Texas. The oil and gas is sold to numerous
        oil
        refiners and natural gas purchasers. In 2005, the operator of the largest
        property owned by the Company, purchased 31.99% of the production from the
        Stratford American Energy properties.
 
 The
        Company is not an operator with respect to any oil or gas properties. Rather,
        the Company participates in a property interest through a joint operating
        agreement. The Company is required to pay its allocable share of drilling
        and
        operating expenses based on its working interest, and participates in any
        discovery on the same basis. As a participant, the Company has only limited
        management rights with respect to any interest.
 
 The
        natural resource operations of the Company are somewhat seasonal, as the
        demand
        for oil and gas products increases in the winter months and decreases during
        the
        summer months.
 
 Intense
        competition from both major oil and gas producers and small, independent
        producers characterize the natural resource exploration and development
        industry. Many competitors have greater financial and other resources than
        the
        Company. The Company is unable to estimate the number of oil and gas producers
        against which it competes. Because oil and gas products are commodities,
        producers of such products compete mainly on the basis of price, which can
        fluctuate greatly from month-to-month. The operators of the wells in which
        the
        Company participates negotiate the price of the oil and gas based on end
        user
        demand, level of supply, and other relevant factors. The operators then
        determine whether to supply product at that price.
 
 The
        availability of a ready market for oil and gas discovered and produced by
        the
        ventures in which the Company participates depends on numerous factors beyond
        the Company ’ s
        control. These factors include, among others, the extent of domestic production
        of oil and gas by other producers, fluctuations in world and domestic prices
        for
        oil and gas, crude oil imports, the marketing of competitive fuels, conservation
        efforts, and the regulations of various governmental agencies concerning
        the
        production, transportation, and marketing of oil and gas.
 
 In
        an
        attempt to limit the risks inherent in the oil and gas business, the Company
        associates with experienced operators in its ventures rather than operating
        a
        property on its own behalf.
 2
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
  The
            Company ’ s
            oil and
            gas activities are subject to numerous federal, state, and local laws
            and
            regulations governing environmental quality and pollution control. The
            existence
            of such laws and regulations has, to date, had no material adverse effect
            on the
            Company ’ s
            operations, and the cost of compliance has not been material. The Company
            is
            unable to assess or predict the impact that compliance with
            environmental and pollution control laws and regulations may have on
            its future
            operations, capital expenditures,
            earnings, or competitive position.
 Stratford
          American Energy Properties .
          The
          Company, through its wholly-owned subsidiary Stratford
          American Energy Corporation ( “ SAEC ” ),
          currently has working interests in 40 producing oil and gas properties.
          The oil
          and gas properties are located in Oklahoma and Texas. During 2005, the
          Company
          invested $722,000 on drilling, equipment and lease costs for the SAEC
          properties. $16,000 was spent on equipment purchases for four producing
          properties. There was $425,000 spent on drilling costs for eleven development
          wells that the Company elected to participate in. Eight of the development
          wells
          are now producing properties. The remaining three development wells are
          expected
          to be completed in the second quarter of 2006. In exchange for $281,000
          lease
          costs paid, the Company received a 10% working interest in leases covering
          14,000 acres of land. Two of the three development wells will be drilled
          on
          these newly acquired leases.
 SA
        Oil
        Properties .
        The
        Company, through its wholly-owned subsidiary, SA Oil and Gas Corporation
        ( “ SA
        Oil ” ),
        owns
        working and/or royalty interests in 87 oil and gas properties located in
        Oklahoma and Texas. During 2005, the Company invested $50,000 on drilling
        and
        equipment for the SA Oil properties.
 
 Other
        Properties .
        The
        Company, through its wholly-owned subsidiary Stratford American Resource
        Corporation ( “ SARC ” ),
        owns a
        nominal interest in five oil and gas wells located in Arkansas and Oklahoma.
        During 2005, the Company invested $6,000 on equipment for the SARC
        properties.
 
 Discontinued
        Operations .
        On
        August 30, 2004, Scottsdale Thompson Peak, LLC ( “ STP ” ),
        entered into a Purchase and Sale Agreement ( “ the
        Agreement ” )
        with
        Holualoa Arizona, Inc, an Arizona corporation ( “ Holualoa ” )
        to sell
        the Company ’ s
        real
        estate segment, which consisted primarily of an office building located in
        Scottsdale, Arizona ( “ the
        Property ” ).
        The
        Agreement called for the closing of the sale of the Property by the end of
        November 2004 at a price of $31,400,000. The transaction closed on November
        9,
        2004. Debt service obligations of $23,401,000, which were inclusive of a
        $20,000,000, 5.9% loan, a $2,500,000, 6% loan and a $1,800,000, 10% loan,
        were
        paid out of the cash proceeds from the sale of the Property. Discontinued
        operations in the consolidated statements of operations reflect the results
        of
        operations of the Property sold in November 2004, including allocated interest
        expense for the periods presented. Interest expense was allocated to
        discontinued operations based on the outstanding debt specifically identified
        above. Net cash proceeds from the November 9, 2004 sale of the Property to
        STP,
        of which the Company owns 80% of the membership interests in, were $7,468,000.
        The Company ’ s
        80%
        share of the proceeds was approximately $5,974,000.
 
 The
        Company recognized a gain of $5,326,000, net of estimated tax of $430,000,
        from
        the sale of the Property. Completion of the Company ’ s
        2004
        tax returns in September of 2005 resulted in $49,000 lower income tax
        liabilities than originally estimated. Also, a reserve established for estimated
        expenses of $20,000, relating to the sale, was reversed when it was determined
        that all costs had been paid. Accordingly, for the year ended December 31,
        2005,
        the Company recognized a gain on sale of building, of $69,000. The real estate
        segment has been accounted for as a **** discontinued
        operation and, accordingly, its net liabilities, results of operations and
        cash
        flows are segregated for all periods presented in the accompanying condensed
        consolidated financial statements.
 3
 **Table
                of Contents**
 **Index
                to Financial
                Statements**
  Subsequent
              Events .
              On
              January 31, 2006, the Company entered into an Agreement and Plan of
              Merger (the “ Merger
              Agreement ” )
              with
              JDMD Investments, L.L.C., an Arizona limited liability company ( “ JDMD ” ),
              Stratford Holdings, L.L.C., an Arizona limited liability company ( “ Stratford
              Holdings ” ),
              and
              Stratford Acquisition, L.L.C., an Arizona limited liability company
              and a
              wholly-owned subsidiary of Stratford Holdings ( “ Stratford
              Acquisition ” and
              together with JDMD and Stratford Holdings, the “ Buyout
              Parties ” ),
              pursuant to which Stratford Acquisition will merge with and into the
              Company
              (the “ Merger ” ),
              with
              the Company continuing as the surviving corporation.
 Pursuant
              to the Merger Agreement, at the effective time of the Merger, each
              issued and
              outstanding share of common stock of the Company ( “ Common
              Stock ” ),
              other
              than Common Stock owned by the Company or any wholly-owned subsidiary
              of the
              Company, by the Buyout Parties and by shareholders who properly exercise
              dissenters ’ rights,
              will be converted into the right to receive $0.80 in cash per share,
              without
              interest. JDMD intends to finance the merger through use of the cash
              reserves of
              Stratford American Corporation, which will become available immediately
              upon the
              effectiveness of the merger, and other cash available to JDMD from
              its business
              activities unrelated to the Company.
 The
        Merger will extinguish all equity interests in the Company held by its public
        shareholders and will result in the Company being a wholly-owned subsidiary
        of
        Stratford Holdings. JDMD, as sole owner of Stratford Holdings, will be the
        beneficiary of the earnings and growth of the Company, if any, following
        the
        merger and will bear the risks of any decrease in the value of the Company
        following the merger.
 
 The
        Merger is conditioned upon, among other things, the affirmative vote of the
        holders of a majority of the outstanding unaffiliated shares of Common Stock
        (those not owned, directly or indirectly, by the Buyout Parties or their
        affiliates) and the affirmative vote of the holders of a majority of all
        outstanding shares of Common Stock (including those shares owned, directly
        or
        indirectly, by the Buyout Parties or their affiliates). Refer to the
        Company ’ s
        filing
        on Form 8-K dated January 31, 2006, and filed with the Securities and Exchange
        Commission on February 1, 2006, for additional information.
  Prior
          to the date that the Company’s shareholders approve and adopt the Merger
          Agreement and the Merger, the Board of Directors is permitted to engage
          in
          discussions and negotiations with a third party regarding a competing
          acquisition offer if: (a) the Board determines in good
          faith****that any such competing offer is a superior
          alternative to the Merger; (b) the Board reasonably determines in good
          faith
          that Board’s fiduciary duties under Arizona law require discussions to be
          conducted with the third party; and (c) the Company provides Stratford
          Holdings
          with written notice of the competing offer and the material terms of such
          offer.
          The Board of Directors is permitted by the Merger Agreement to withdraw
          its
          recommendation of the Merger Agreement and the Merger only if it: (a) reasonably
          determines in good faith, after consultation with and taking into account
          the
          advice of its outside legal counsel,****that such action is
          necessary in order for the Board to comply with its fiduciary duties under
          Arizona law; and (b) has given notice of its intention to withdraw its
          recommendation, and has not received an offer from Stratford Holdings within
          five business days which matches or exceeds the competing acquisition
          offer.


**Item
              2.**
            **Properties**




Principal
        Offices .
        The
        principal offices of the Company are located at 2400 East Arizona Biltmore
        Circle, Building 2, Suite 1270, Phoenix, Arizona 85016, telephone 602/956-7809.
        The premises are leased at a base rental rate of approximately $106,000 per
        year. The term of the current lease expires in October 2007. The Company
        believes its office space is sufficient to meet its operational needs in
        the
        near future.
 4
 **Table
                    of Contents**
 **Index
                    to Financial
                    Statements**
 Natural
        Resource Properties - Oil and Gas .
        The
        Company ’ s
        petroleum and natural gas activities are
        focused in the United States. The Company is not an operator with respect
        to any
        oil or gas properties.
        Rather, the Company participates in a property interest through a joint
        operating agreement. The Company is required to pay its allocable share of
        drilling and operating expenses based on its working
        interest, and participates in any discovery on the same basis. As a participant,
        the Company has only limited management rights with respect to any interest.
        (See Item 1 -Description of Business - Resource Properties - Oil and
        Gas.)
  Stratford
        American Energy Properties .
        The
        Company, through its wholly-owned subsidiary SAEC, currently has working
        interests in 40 producing oil and gas properties located in Oklahoma and Texas.
        (See Item 1 -Description of Business - Stratford American Energy
        Properties.)


SA
            Oil
            Properties .
            The
            Company, through its wholly-owned subsidiary SA Oil owns working and
            or royalty
            interests in 87 oil and gas properties located Oklahoma and Texas. (See
            Item 1
            -Description of Business - SA Oil Properties.)
 
 Other
            Properties .
            The
            Company also owns a nominal interest in five oil and gas wells located
            in
            Arkansas and Oklahoma. (See Item 1 -Description of Business - Other
            Properties.)


**Item
              3.**
            **Legal
                Proceedings**





The
        Company is not currently a party to any material legal
        proceedings.


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




There
        were no matters submitted to a vote of our security holders either through
        solicitation of proxies or otherwise in the fourth quarter of the fiscal
        year
        ended December 31, 2005.
 
 **Executive
        Officers**
 
 **Name**
              ****
              **Age**
              ****
              **Office**
              ****
              **Officer
                  Since**David
                  H. Eaton
              
              70
              
              Chief
                  Executive Officer
              
              6/88Mel
                  L. Shultz
              
              55
              
              President
              
              5/87Daniel
                  E. Matthews
              
              55
              
              Treasurer
                  and Secretary
              
              12/99
 
 David
        H. Eaton has been
        the Chairman of the Board of Directors of the Company since February 29,
        1988
        and its Chief Executive Officer since June 1, 1988.  Mr. Eaton’s principal
        occupation is serving as a managing member of JDMD.  The principal business
        of JDMD is (i) making investments in businesses, companies, and properties
        by
        means of acquisitions of stock, partnership interests, limited liability
        company
        memberships, and direct acquisitions of property and assets, and (ii) holding
        and managing such investments.
 5
 **Table
                  of Contents**
 **Index
                  to Financial
                  Statements**
 Mel
        L.
        Shultz has been
        a Director and the President of the Company since May 20, 1987. Mr. Shultz’s
        principal occupation is serving as a managing member of JDMD.  The
        principal business of JDMD is (i) making investments in businesses, companies,
        and properties by means of acquisitions of stock, partnership interests,
        limited
        liability company memberships, and direct acquisitions of property and assets,
        and (ii) holding and managing such investments.  In addition, Mr. Shultz
        has served as a member of Theater Development & Management, L.L.C., the
        manager of Phoenix Downtown Theatre, L.L.C., since January 1999.  The
        principal business of Phoenix Downtown Theatre is the ownership and management
        of the Dodge Theatre.
 
 Daniel
        E. Matthews was
        appointed Treasurer and Secretary of the Company on December 1, 1999. Mr.
        Matthews has been the Controller of the Company since May 1997.


**PART
      II**








**Item
              5.**
            **Market
                for Common Equity and Related Stockholder
                Matters**





**Market
        Information**
 
 The
        Company ’ s
        common
        stock $0.01 par value, is currently listed and traded on the OTC Bulletin
        Board (symbol: STFA.OB).
 
 The
        high
        and low bid price for each quarter during the last two years, are as
        follows:
 **Time
                      Period**
                  ****
                  **High**
                  ****
                  **Low**2005:
                  
                  First
                      quarter
                  
                  .61
                  
                  .41Second
                      quarter
                  
                  .64
                  
                  .40Third
                      quarter
                  
                  .70
                  
                  .54Fourth
                      quarter
                  
                  .75
                  
                  .582004:
                  
                  First
                      quarter
                  
                  .60
                  
                  .20Second
                      quarter
                  
                  .45
                  
                  .29Third
                      quarter
                  
                  .41
                  
                  .32Fourth
                      quarter
                  
                  .55
                  
                  .38
 The
          above
          information is based on the bid price as furnished by Pink Sheets, LLC.
          The quotations
          reflect inter-dealer prices, without retail mark-up, mark-down or commission,
          and may not represent actual transactions.
 
 **Holders**
 
 As
        of
        February 28, 2006, the common stock of the Company is estimated to be held
        beneficially by approximately 460 shareholders. No preferred stock is
        outstanding.
 6
 **Table
                  of Contents**
 **Index
                  to Financial
                  Statements**
 **Dividends**
 
 The
        Company has never paid cash dividends on its common equity. Arizona law may
        restrict the ability of a corporation to pay dividends. On January 31, 2006,
        the
        Company entered into the Merger Agreement with the Buyout Parties, pursuant
        to
        which Stratford Acquisition will merge with and into the Company, with the
        Company continuing as the surviving corporation. The Merger Agreement restricts
        the Company ’ s
        ability
        to pay dividends to its shareholders.
  Pursuant
        to the Merger Agreement, at the effective time of the Merger, each issued
        and
        outstanding share of Common Stock, other than Common Stock owned the Company
        or
        any wholly owned subsidiary of the Company, by the Buyout Parties and by
        shareholders who properly exercise dissenters ’ rights,
        will be converted into the right to receive $0.80 in cash per share, without
        interest. JDMD intends to finance the merger through use of the cash reserves
        of
        Stratford American Corporation, which will become available immediately upon
        the
        effectiveness of the merger, and other cash available to JDMD from its business
        activities unrelated to the Company. (See Item 1 - Description of Business
        -
        Subsequent Events.)
 
 **Securities
        Authorized for Issuance Under Equity Compensation Plans**
 
 **Equity
        Compensation Plan Information**
  **Number
                  of securities to be issued upon exercise of outstanding options,
                  warrants
                  and rights**
                **(a)**
              
              **Weighted-average
                  exercise price of outstanding options, warrants and
                  rights**
                **(b)**
              
              **Number
                  of securities remaining available for future issuance under equity
                  compensation plans (excluding securities reflected in column
                  (a))**
                **(c)(1)**Equity
                  compensation plans approved by security holders
              0
              
              $
                  0.00
              
              332,343Equity
                  compensation plans not approved by security holders
              0
              
              0.00
              
              0Total
              0
              
              $
                  0.00
              
              332,343
 
 (1)
              In
                  July 1998, the Company adopted a Stock Option Plan (the“Plan”).
                  The aggregate number of shares of common stock for which options
                  may be
                  granted or for which stock grants may be made
                  to any one individual participating in the Plan may not exceed
                  500,000
                  shares per year or 2,000,000 shares over the term of the Plan.
                  Options
                  become exercisable over a specificperiod
                  of continuous employment according to each grant awarded, but may
                  not be
                  exercised more than 10 years from the Date of Grant. The options
                  under the
                  Plan were granted at the fair market value of the Company’s
                  stock at the date of grant as determined by the Company’s
                  Board of Directors.
 
 The
        number of securities remaining available for future issuance under the Plan
        is
        based on a formula.
        The Plan provides that the total number of shares of common stock that may
        be
        available for grant under the Plan in each calendar year shall be equal to
        3% of
        the total number of shares of common stock outstanding as of the first day
        of
        each such calendar year for which the Plan is in effect, commencing
        with January 1, 1998. As of January 1, 2005, the total number of outstanding
        shares of common stock was 11,078,105 shares and 3% of such number is 332,343.
        Any shares of common stock available for grant in any particular calendar
        year,
        which are not, in fact, granted in such year, shall not be added to the shares
        of common stock available for grant in any subsequent calendar year.
 7
 **Table
                of Contents**
 **Index
                to Financial
                Statements**
 The
        Board
        of Directors, functioning as the committee administering the Plan may make
        or
        provide for such adjustments in the maximum number of shares of common stock
        available for grant under the Plan as such committee may in good faith determine
        to be equitably required in order to prevent dilution or expansion of the
        rights
        of participants that otherwise would result from (a) any stock dividend,
        stock
        split, combination of shares, recapitalization or other change in the capital
        structure of the Company or (b) any merger, reverse merger in which the Company
        is the surviving entity but in which securities possessing more than 50%
        of the
        total combined voting power of the Company ’ s
        outstanding securities are transferred to a person or persons different from
        the
        persons holding those securities immediately prior to such merger,
        consolidation, spin-off, split-off, split-up, reorganization, partial or
        complete liquidation or other distribution of assets, issuance of warrants
        or
        other rights to purchase securities or any other corporate transaction or
        event
        having an effect similar to any of the foregoing.
 
 **Recent
        Sales of Unregistered Securities**
 
 There
        were no recent sales of unregistered securities.


**Item
              6.**
            **Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations**




This
        annual report contains forward-looking statements within the meaning of Section
        27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
        Act
        of 1934 (forward-looking statements) that involve certain risks and
        uncertainties. The following discussion and analysis should
        be
        read in conjunction with our audited consolidated financial statements and
        notes
        thereto appearing elsewhere in this report. Except for the historical
        information contained herein, any statements that refer to expectations,
        projections or other characterization of future events or circumstances,
        and especially
        those which include variations of the words “ believes, ”  “ intends, ”  “ estimates, ”  “ anticipates, ” “ expects, ”  “ plans, ” or
        similar words or variations thereof, are likely to be forward-looking
        statements,  and as
        such,
        are likely to concern matters involving risk, uncertainty, unpredictability
        and
        other factors that could
        materially and adversely affect the outcome or results indicated by or inferred
        from the statements themselves. Such factors include, among others, the
        following: the risk that the working interests in the SAEC oil and gas
        properties and the operations of SA Oil may not be profitable; the risk that
        the
        Company will recognize losses from operations; the risk that all of the
        foregoing factors or other factors could cause fluctuations in the
        Company ’ s
        operating results and the price of the Company ’ s
        common
        stock; and other risks detailed in this annual report and from time to time
        in
        the Company ’ s
        other
        filings with the Securities and Exchange Commission. Therefore, the reader
        is
        advised that the following discussion should be considered in light of the
        discussion of risks and other factors contained in this annual report on
        Form
        10-KSB and in the Company ’ s
        other
        filings with the Securities and Exchange Commission, and that no  statements
        contained in the following discussion or in this Form 10-KSB should be
        construed as a guarantee or assurance of future performance or future results,
        and the reader is cautioned
        to not place undue reliance on such forward-looking statements. The
        forward-looking statements made herein are only made as of the date of this
        annual report on Form 10-KSB, and we undertake no obligation to publicly
        update
        such forward-looking statements to reflect subsequent events or
        circumstances.
 
 **General**
 
 On
        November 9, 2004, the Company, through its 80% owned subsidiary, Scottsdale
        Thompson Peak, LLC, sold the property located at 20225 North Scottsdale Road,
        Scottsdale, Arizona. The total sales price for the property was $31,400,000.
        Following the payment of debt service obligations and related interest due
        of
        $23,401,000, which were inclusive of the $20,000,000, 5.9% loan, the $2,500,000,
        6% loan and $1,800,000, 10% loan, and the payment of closing costs and
        pro-rations of $531,000, cash proceeds to Scottsdale Thompson Peak, LLC were
        $7,468,000. The Company ’ s
        80%
        share of the net proceeds was $5,974,000. This transaction represents the
        sale
        of the Company ’ s
        real
        estate segment. Accordingly, the results of operations of this segment are
        recorded within income from discontinued operations for all periods presented
        in
        the accompanying consolidated financial statements. See Note 3 to the
        accompanying consolidated financial statements of the Company for additional
        information related to the sale of the discontinued operations.
 8
 **Table
                of Contents**
 **Index
                to Financial
                Statements**
 The
        Company owns working interests in oil and gas properties primarily located
        in
        Oklahoma and Texas as discussed in Note 4 of the accompanying consolidated
        financial statements of the Company.
 
 Other
        than the transactions described above, the Company has no significant operations
        and there can be no assurance that the Company ’ s
        operations will be profitable. The Company ’ s
        future
        revenues and operating costs may fluctuate significantly due to any one factor
        or a combination of factors, many of which
        are
        outside management ’ s
        control. Management has identified the most important risk factors that may
        affect operating results in the future as follows:
 
 Oil
        and gas prices: Oil and
        gas prices are volatile. A decline in prices could adversely affect the
        Company ’ s
        financial position, financial results and cash flows. Our revenues and operating
        results depend primarily upon the prices we receive for oil and gas products.
        Historically, the markets for oil and gas have been volatile and they are
        likely
        to continue to be volatile. The volatility of the energy markets make
        it
        extremely difficult to predict future oil and gas price movements with any
        certainty.
 
 Competition: Competition in the oil and natural gas industry is intense. Many competitors
        have greater financial and other resources than the Company.
 
 Exploration
        and development drilling: Exploration and development drilling may not result in commercially productive
        reserves. The new wells that the Company may participate in may not be
        productive and the Company may not recover all or any portion of its investment
        in wells that it participates in. The cost of drilling, completing and operating
        a well is often uncertain, and cost factors can adversely affect the economics
        of a project.
 
 Government
        and environmental regulations: The oil
        and gas industry is subject to regulation at the federal, state, and local
        level, and some of the laws, rules and regulations that govern the
        Company ’ s
        oil and
        gas activities may carry penalties for noncompliance. The existence of such
        laws
        and regulations has, to date, had no material adverse effect on the
        Company ’ s
        operations, and the cost of compliance has not been material. The requirements
        imposed by such laws and regulations are frequently changed and subject to
        interpretation and the Company is unable to predict the ultimate cost of
        compliance with these requirements or their effect on its future operations,
        capital expenditures, earnings or competitive position.
 
 Sarbanes-Oxley: The
        enactment of the Sarbanes-Oxley Act of 2002 has led to increased compliance
        costs and additional burdens on management. Section 404 of the Sarbanes-Oxley
        Act of 2002, scheduled to be in effect for the Company ’ s
        fiscal
        year ending December 31, 2007, requires the Company ’ s
        management to assess the effectiveness of our internal controls over financial
        reporting and include an assertion in our annual report as to the effectiveness
        of our controls. Our independent registered
        public accounting firm will be required to attest to whether our assessment
        of
        the effectiveness of our internal control over financial reporting is fairly
        stated in all material respects and separately report on whether it believes
        we
        maintained, in all material respects, effective internal controls over financial
        reporting as of December 31, 2007. We expect that the adoption of Section
        404
        will require significant amounts of management time and resources, and will
        significantly increase the Company ’ s
        costs
        both internal and in the form of higher fees paid to its external auditors
        and
        other financial advisors, that may adversely impact its operating
        results.
 
 Stock
        price volatility: Our
        common shares are currently listed for public trading on the OTC Bulletin
        Board.
        The trading price of our common shares has been subject to wide fluctuations.
        Trading prices of our common shares may fluctuate in response to a number
        of
        factors, many of which will be beyond our control. The Company ’ s
        common
        stock ’ s
        small
        public float, an extremely limited trading volume, and bid-asked trading
        price
        spread have limited the Company ’ s
        ability
        to use its common stock as acquisition currency and has significantly limited
        the ability of shareholders to sell their shares without also reducing the
        trading price of the common stock.
 9
 **Table
                  of Contents**
 **Index
                  to Financial
                  Statements**
 On
        January 31, 2006, the Company entered into the Merger Agreement with the
        Buyout
        Parties ,
        pursuant to which Stratford Acquisition will merge with and into the Company,
        with the Company continuing as the surviving corporation.
  Pursuant
        to the Merger Agreement, at the effective time of the Merger, each issued
        and
        outstanding share of common stock of the Company ( “ Common
        Stock ” ),
        other
        than Common Stock owned
        the
        Company or any wholly-owned subsidiary of the Company, by the Buyout Parties
        and
        by shareholders who properly exercise dissenters ’ rights,
        will be converted into the right to receive $0.80 in cash per share, without
        interest. JDMD intends to finance the merger through use of the cash reserves
        of
        Stratford American Corporation, which will become available immediately upon
        the
        effectiveness of the merger, and other cash available to JDMD from its business
        activities unrelated to the Company.
 
 The
        Merger will extinguish all equity interests in the Company held by its public
        shareholders and will result in the Company being a wholly-owned subsidiary
        of
        Stratford Holdings. JDMD, as sole owner of Stratford Holdings, will be the
        beneficiary of the earnings and growth of the Company, if any, following
        the
        merger and will bear the risks of any decrease in the value of the Company
        following the merger.
 
 The
        Merger is conditioned upon, among other things, the affirmative vote of the
        holders of a majority of the outstanding unaffiliated shares of Common Stock
        (those not owned, directly or indirectly, by the Buyout Parties or their
        affiliates) and the affirmative vote of the holders of a majority of all
        outstanding shares of Common Stock (including those shares owned, directly
        or
        indirectly, by the Buyout Parties or their affiliates). Refer to the
        Company ’ s
        filing
        on Form 8-K dated January 31, 2006, and filed on February 1, 2006 with the
        Securities and Exchange Commission, for additional information.
  Prior
          to the date that the Company’s shareholders approve and adopt the Merger
          Agreement and the Merger, the Board of Directors is permitted to engage
          in
          discussions and negotiations with a third party regarding a competing
          acquisition offer if: (a) the Board determines in good
          faith****that any such competing offer is a superior
          alternative to the Merger; (b) the Board reasonably determines in good
          faith
          that Board’s fiduciary duties under Arizona law require discussions to be
          conducted with the third party; and (c) the Company provides Stratford
          Holdings
          with written notice of the competing offer and the material terms of such
          offer.
          The Board of Directors is permitted by the Merger Agreement to withdraw
          its
          recommendation of the Merger Agreement and the Merger only if it: (a) reasonably
          determines in good faith, after consultation with and taking into account
          the
          advice of its outside legal counsel,****that such action is
          necessary in order for the Board to comply with its fiduciary duties under
          Arizona law; and (b) has given notice of its intention to withdraw its
          recommendation, and has not received an offer from Stratford Holdings within
          five business days which matches or exceeds the competing acquisition
          offer.
 There
        can
        be no assurance that the Company will consummate the Merger and such failure
        to
        consummate the Merger could negatively impact the market price of the
        Company ’ s
        common
        stock.
 
 The
        risks
        described above are not the only risks and uncertainties that may negatively
        impact the Company ’ s
        business or its operating results. Additional risks and uncertainties not
        presently known to the Company may also impair the Company ’ s
        business operations, operating results or financial condition.
 10
 **Table
                  of Contents**
 **Index
                  to Financial
                  Statements**
 **Critical
        Accounting Policies and Estimates**
 
 The
        consolidated balance sheet and consolidated statements of operations have
        been
        prepared in accordance with U.S. generally accepted accounting principles.
        The
        preparation of these financial statements requires the Company to make certain
        estimates and judgments that affect the reported amounts of assets, liabilities,
        revenues and expenses, and related disclosure of contingent assets and
        liabilities. On an on-going basis, the Company evaluates its estimates,
        including those related to oil
        and
        gas interests, contingencies and litigation. The Company bases its estimates
        on historical
        experience and on various other assumptions that are believed to be reasonable
        under the circumstances, the results of which form the basis for making
        judgments about the carrying values of assets
        and liabilities that are not readily apparent from other sources. Actual
        results
        may differ from these estimates under different assumptions or
        conditions.
 The
              Company believes the following critical accounting policies affect
              its more
              significant judgments and estimates used in the preparation of its
              consolidated
              financial statements. The Company accrues production income and expense
              based
              upon historical performance, costs, and prices received for oil and
              gas.
              Revisions in profit estimates are charged to income in the period in
              which the
              facts that give rise to the revision become known. Future adverse changes
              in
              market conditions or poor operating results
 could
              result in losses or an inability to recover the carrying value of our
              oil and
              gas interests, thereby possibly requiring an impairment charge in the
              future.
 **Liquidity
        and Capital Resources**
 
 At
        December 31, 2005, the Company had $6,282,000 in available cash resources.
        A
        significant amount of the cash available at December 31, 2005 was generated
        from
        the one-time sale of the Property held
        by
        the Company ’ s
        80%
        subsidiary, STP. Proceeds to the Company from the sale of the Property by
        STP
        were $5,974,000.
 
 As
        previously discussed, the Property was sold to Holualoa, effective November
        9,
        2004. Part of the proceeds from the sale were used to payoff the above
        outstanding debt of $23,393,000, along with all accrued interest due of
        $8,000.
 
 During
        2005, the Company, through its wholly-owned subsidiary, SAEC, elected to
        participate proportionately in the drilling of nine new development wells
        with
        costs paid by the Company of $337,000. Funds for the development drilling
        came
        from Company cash. Six of the development wells are now producing properties.
        Future costs to complete the remaining three development wells, should they
        prove to be producing properties, will be approximately $146,000 and will
        be
        funded with Company cash.
        In
        addition, the Company paid $88,000 to complete two development wells that
        the
        Company had elected
        to participate in proportionately in 2004 and also paid $16,000 for equipment
        on
        four producing wells. Also in 2005, the Company agreed to participate as
        a 10%
        working interest owner in a 14,000 acre oil and gas lease in Muskogee, Oklahoma.
        Two of the development wells will be drilled on this lease, and the Company
        paid
        $281,000 out of Company funds to obtain their proportionate share of the
        lease.
 
 During
        2005, the Company, through its wholly-owned subsidiary, SA Oil, paid $50,000
        for
        drilling and equipment costs. As of December 31, 2005, $13,000 of these
        expenditures was prepaid to an operator for the drilling of a development
        well
        that the Company elected to participate in. Future costs to complete this
        well,
        should it prove to be a producing property, will be approximately $7,000,
        and
        will be funded with Company cash.
 
 During
        2005, the Company, through its wholly-owned subsidiary, SARC, paid $6,000
        for
        drilling and equipment costs.
 11
 **Table
                    of Contents**
 **Index
                    to Financial
                    Statements**
 The
        primary sources of the Company ’ s
        cash
        and cash equivalents were proceeds from the sale of the Property by STP on
        November 9, 2004 and revenues received from the working interests in the
        oil and
        gas properties. The Company maintains its excess cash funds in interest-bearing
        deposits. The Company believes that its current cash and cash equivalents
        will
        be sufficient to meet its forecasted operating cash needs for 2006.
 
 **Off-Balance
        Sheet Arrangements**
 
 The
        Company has no off balance sheet arrangements as defined by Item 303(c) of
        Regulation S-B.
  **Contractual
        Obligations and Commitments**
 
 The
        Company ’ s
        contractual commitment consists of payments due under a non-cancelable operating
        lease for its office space. The following table summarizes the
        Company ’ s
        contractual obligation at December 31, 2005.
 
 Year
                  ending December 31:2006
              
              $
              106,0002007
              
              
              87,000Total
              
              $
              193,000
 As
        of
        December 31, 2005, the Company did not have any other commercial commitments,
        such as letters of credit, guarantees, or repurchase obligations.
 
 **Results
        of Operations - Year Ended December 31, 2005, Compared with Year Ended December
        31, 2004**
 
 The
        Company reported net income of $536,000 for the year ended December 31, 2005,
        in
        comparison to net income of $4,324,000 for the year ended December 31, 2004.
        The
        2005 results include net income of $60,000 from discontinued operations and
        the
        2004 results include net income of $4,480,000 from discontinued operations,
        as
        discussed in Note 3 to the accompanying consolidated financial statements.
 
 Oil
        and Gas Revenues .
        For the
        year ended December 31, 2005, oil and gas revenues were $1,605,000, increasing
        $603,000, or 60% from $1,002,000 for the year ended December 31, 2004. Oil
        and
        gas revenues accounted for 89% of the total revenue from continuing operations
        for the year ended
        December 31, 2005. The increase in prices currently being received for oil
        and
        gas are the primary factor for the increase in revenues. Additional production
        volumes, primarily due to positive drilling results for development properties
        that the Company elected to participate in, also contributed to the
        increase.
 
 Separately,
        the SA Oil properties generated $773,000 and $635,000 in revenue for the
        years
        ended December 31, 2005 and December 31, 2004, respectively. The working
        interests in the SAEC oil and gas properties generated $816,000 and $352,000
        in
        revenue for the years ended December 31, 2005 and December 31, 2004,
        respectively. The SARC oil and gas properties generated $16,000 and $15,000
        in
        revenue for the years ended December 31, 2005 and December 31, 2004,
        respectively.
 12
 **Table
                of Contents**
 **Index
                to Financial
                Statements**
 The
        Company ’ s
        participation in oil and gas activities are a major part of the
        Company ’ s
        continuing operations. The Company ’ s
        gas
        products are sold in the spot market, which is highly seasonal and volatile.
        Oil
        prices will continue to be affected by world markets and
        conditions.
 
 Interest
        and Other Income .
        Interest and other income increased from $25,000 in 2004 to $194,000 in 2005.
        The increase is primarily due to interest earned in 2005 on the receipt of
        $5,974,000, in November 2004, which represented the Company ’ s
        80%
        share of the proceeds from the sale of the real estate segment.
 
 General
        and Administrative Expenses .
        General
        and administrative expenses consist primarily of salaries and related benefits,
        office rent, legal and accounting fees, and other administrative costs incurred
        in our office. General and administrative expenses decreased 1%, from $631,000
        to $625,000 for the years ended December 31, 2004 and 2005,
        respectively.
 
 Depreciation,
        Depletion and Amortization .
        Depreciation, depletion and amortization expense increased from $306,000
        for the
        year ended December 31, 2004 to $337,000 for the year ended December 31,
        2005.
        The depletion expense increase of $31,000 is due primarily to the additional
        depletion expense of $36,000 recognized on the SAEC development wells completed
        in 2005, an increase of $5,000 in amortization and depreciation on the equipment
        and intangible drilling costs capitalized for the SA Oil properties in 2005,
        offset by a decrease in depletion recognized on the SARC wells of $5,000,
        which
        as of September 30, 2004 were fully depleted, and by a decrease in depreciation
        of $5,000 due to office equipment becoming fully depreciated in late 2004.
 
 Oil
        and Gas Operations.  Oil
        and
        gas operations expense increased from $229,000 for the year ended December
        31,
        2004 to $339,000 for the year ended December 31, 2005. The increased expense
        for
        the year ended December 31, 2005 resulted primarily from higher field operating
        expenses from an expanded
        number of properties, higher maintenance costs, dry hole costs and state
        franchise taxes incurred as a result of increased revenues.
 
 Discontinued
        Operations .
        Property rental income, which is included in the income from operations of
        discontinued operations for the year ended December 31, 2004, consists of
        scheduled rental income of $1,794,000, deferred rent of $276,000, depreciation
        expense of $356,000, interest expense of $1,282,000, and property rental
        operations expense of $9,000. The results of operations for the year ended
        December 31, 2005, consists of property rental operations expense of $6,000.
        As
        previously discussed, the Property was sold by STP to Holualoa, effective
        November 9, 2004 and has been accounted for as a discontinued operation as
        discussed in Note 3 to the accompanying consolidated financial statements.
        The
        Company recognized a gain on sale of building of $69,000 for the year ended
        December 31, 2005. This adjustment reflects the decrease between the previous
        estimates made for income taxes and the actual income taxes due of $49,000
        and
        the reversal of $20,000 in accrued expenses, associated with the sale of
        the
        Property.
  Related
        Party Transactions .
        During
        2005, the Company received $68,000 from two companies that are partially
        owned
        by four of the Company ’ s
        executives or directors. These receipts were reimbursements for administrative
        expenses incurred by the Company in 2005 and 2004 on behalf of the related
        parties. These are recorded as a reduction of general and administrative
        expense
        for 2005 and 2004. At December 31, 2005, $15,000 of these reimbursements
        are
        recorded as related party receivables in the accompanying consolidated balance
        sheet
 
 Effective
        November 1, 2003, the Company entered into a month-to-month sublease of the
        Company ’ s
        offices
        with a company that is owned by a majority shareholder of the Company. The
        monthly rent is $2,000, which is at market rate. The Company received $24,000
        for each of the years ended December 31, 2005 and 2004. These receipts from
        the
        sublease were recorded as a reduction in rental
        expense, included in general and administrative expense. At December 31,
        2005,
        all of the sublease payments had been received.
 13
 **Table
                of Contents**
 **Index
                to Financial
                Statements**
 A
        note
        payable of $1,800,000, due December 2, 2004, bearing an interest rate of
        10%,
        with interest due monthly, was owed to Southwest Holdings, Ltd, an affiliate of
        the DRD 97 Trust, a major shareholder of the Company. On November 9, 2004,
        the
        principal amount of $1,800,000, along with accrued interest due of $5,000,
        was
        paid in full to Southwest Holdings, LTD as discussed above and in Note 3
        of the
        accompanying consolidated financial statements.
 
 **Capital
        Requirements**
 
 During
        the year ended December 31, 2005, the Company utilized $778,000 in cash to
        fund
        lease costs, development costs and capital additions for the oil and gas
        interests. Future costs to complete the four development wells, as discussed
        in
        Note 4, should they prove to be producing properties, will be approximately
        $153,000 and will be funded from Company cash.
 
 Other
        than the events described above, the Company does not have any material plans
        for future capital expenditures at the present time.
 
 **Impact
        of Inflation**
 
 Inflation
        has not had a significant impact on the Company ’ s
        results
        of operations.
 
 **Safe
        Harbor Statement Under the Private Securities Litigation Reform Act of
        1995**
 
 Certain
        statements contained in this report, including statements containing the
        words “ believes, ”  “ anticipates, ”  “ intends, ”  “ expects, ”  “ estimates, ” and “ plans ” and
        words of similar import, constitute “ forward-looking
        statements ” within
        the meaning of the Private Securities Litigation Reform Act of 1995 and are
        subject to the safe harbors created thereby. Such forward-looking statements
        involve known
        and
        unknown risks, uncertainties and other important factors that may cause the
        actual results to be
        materially different from the forward-looking statements. Such factors include,
        among others, the following, the risk that the working interests in the SAEC
        oil
        and gas properties and the operations of SA Oil
        may
        not be profitable; the risk that the Company will continue to recognize losses
        from operations unless and until the Company is able to make profitable
        acquisitions; the risk that all of the foregoing factors
        or other factors could cause fluctuations in the Company ’ s
        operating results and in the price of the Company ’ s
        common
        stock; and other risks detailed in this report and from time to time in the
        Company ’ s other
        filings with the Securities and Exchange Commission. Given these uncertainties,
        readers should not place undue reliance on such forward-looking
        statements.
 
 **Recent
        Accounting Pronouncements**
 
 In
        December 2004, the FASB issued Revised Statement No. 123, ACCOUNTING FOR
        SHARE-BASED PAYMENT ( “ SFAS
        No.
        123(R) ” ).
        This
        statement requires the Company to recognize the grant-date fair value of
        stock
        options in the statement of operations. This Statement requires that companies
        account for these share-based transactions using the fair-value-based method,
        and eliminates a company ’ s
        ability
        to account for these transactions using the intrinsic value method of accounting
        in APB Opinion No. 25. For small business issuers, Statement No. 123(R) was
        effective as of the beginning of the first interim or annual reporting period
        that begins after December 15, 2005. The adoption of this standard will not
        have
        any impact on the Company ’ s
        financial condition or results of operations, as there are no outstanding
        stock
        options as of December 31, 2005.
 14
 **Table
                of Contents**
 **Index
                to Financial
                Statements**
 In
        March
        2005, the FASB issued FASB Interpretation No. 47 ( “ FIN
        47 ” ),
        ACCOUNTING FOR CONDITIONAL
        ASSET RETIREMENT OBLIGATIONS, an interpretation of FASB Statement No. 143.
        FIN
        47 clarifies that an entity is required to recognize a liability for a legal
        obligation to perform an asset
        retirement activity if the fair value can be reasonably estimated even though
        the timing and (or) method of settlement are conditional on a future event.
        FIN
        47 was required to be adopted for annual reporting periods ending after December
        15, 2005. Management has determined that the adoption of this standard will
        not
        have a material impact on the Company ’ s
        financial condition or results of operations.
 
 In
        May
        2005, the FASB issued SFAS No. 154, ACCOUNTING CHANGES AND ERROR CORRECTIONS
        - a
        replacement of APB Opinion No. 20 and FASB Statement No. 3, which provides
        guidance on the accounting for and reporting of accounting changes and error
        corrections. The statement requires retrospective application to prior
        periods ’ financial statements of changes in accounting principles, unless it is
        impracticable to determine the period-specific effects of the cumulative
        effect
        of the change. The guidance provided in Accounting Principles Board (APB)
        Opinion No. 20 for reporting the correction of an error in previously issued
        financial statements remains unchanged and requires the restatement of
        previously issued financial statements. SFAS No. 154 was effective for
        accounting changes and corrections of errors made in fiscal years beginning
        after December 15, 2005. Management has determined that the adoption of this
        standard will not have any impact on the Company ’ s
        financial condition or results of operations.
 15
 **Table
                    of Contents**
 **Index
                    to Financial
                    Statements**


**Item
              7.**
            **Financial
                Statements and Supplementary
                Data**





**STRATFORD
        AMERICAN CORPORATION AND SUBSIDIARIES**
  **Index
          to Consolidated Financial
          Statements**
  PageReport of Independent
                Registered Public Accounting Firm
              
              17Consolidated Balance
                Sheet
                at December 31, 2005
              
              18Consolidated
                  Statements of Operations for the years endedDecember
                  31, 2005 and 2004
              
              19Consolidated
                  Statements of Shareholders’Equity for the years endedDecember
                  31, 2005 and 2004
              
              20Consolidated
                  Statements of Cash Flows for the years endedDecember
                  31, 2005 and 2004
              
              21Notes to Consolidated
                Financial Statements
              
              22
 
 Certain
        schedules are omitted as the required information is inapplicable or not
        present
        in amounts sufficient to require submission of the schedule, or because the
        required information is presented in the consolidated financial statements
        or
        notes thereto.
 16
 **Table
                of Contents**
 **Index
                to Financial
                Statements**
  **REPORT
          OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
          FIRM**
 
 
 
 The
        Board
        of Directors
 Stratford
        American Corporation:
  
 We
        have
        audited the accompanying consolidated balance sheet of Stratford American
        Corporation and subsidiaries as of December 31, 2005, and the related
        consolidated statements of operations, shareholders ’ equity,
        and cash flows for each of the years in the two-year period ended December
        31,
        2005. 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 audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the 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 Stratford American
        Corporation and subsidiaries as of December 31, 2005, and the results of
        their
        operations and their cash flows for each of the years in the two-year period
        ended December 31, 2005, in conformity with U.S. generally accepted accounting
        principles.
 
 /s/
        KPMG
        LLP
 
 
 Phoenix,
        Arizona
 March
        27,
        2006
 17
 **Table
                of Contents**
 **Index
                to Financial
                Statements**
 **STRATFORD
        AMERICAN CORPORATION AND
        SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEET**
 **December
        31, 2005**
   **ASSETS**Cash
                    and cash equivalents
                
                $
                6,282,000Receivables:Oil
                    and gas
                
                
                296,000Related
                    party
                
                
                15,000Other
                
                
                12,000Oil
                    and gas interests, net
                
                
                1,615,000Other
                    assets
                
                
                123,000$
                8,343,000**LIABILITIES
                    AND SHAREHOLDERS’ EQUITY**Accounts
                    payable
                
                $
                114,000Accrued
                    liabilities
                
                
                121,000Net
                    liabilities of discontinued operations
                
                
                6,000Minority
                    interest
                
                
                79,000Total
                    liabilities
                
                
                320,000Commitments
                    and contingencies (See Note 11)Shareholders’
                  equityNon-redeemable
                    preferred stock, par value, $.01 per share;authorized
                    50,000,000 shares, none issuedCommon
                    stock, par value $.01 per share; authorized 100,000,000 shares;
                    issued and outstanding 11,078,105 shares
                
                
                111,000Additional
                    paid-in capital
                
                
                28,511,000Accumulated
                    deficit
                
                
                (20,588,000
                )Treasury
                    stock, 1,967 shares at cost
                
                
                (11,000
                )8,023,000$
                8,343,000
 See
          accompanying notes to consolidated financial statements.
 18
 **Table
                of Contents**
 **Index
                to Financial
                Statements**
 **STRATFORD
        AMERICAN CORPORATION AND
        SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **Years
        ended December 31, 2005 and 2004**
 
 **2005**
              ****
              **2004**REVENUES:Oil
                  and gas revenues
              
              $
              1,605,000
              
              $
              1,002,000Interest
                  and other income
              
              
              194,000
              
              
              25,0001,799,000
              
              
              1,027,000EXPENSES:General
                  and administrative
              
              
              625,000
              
              
              631,000Depreciation,
                  depletion and amortization
              
              
              337,000
              
              
              306,000Oil
                  and gas operations
              
              
              339,000
              
              
              229,0001,301,000
              
              
              1,166,000Income
                    (loss) from continuing operations before income
                    taxes
              
              
              498,000
              
              
              (139,000
              )Income
                  tax expense
              
              
              22,000
              
              
              17,000Income
                  (loss) from continuing operations
              
              
              476,000
              
              
              (156,000
              )DISCONTINUED
                  OPERATIONS:Income
                  (loss) from operations
              
              
              (6,000
              )
              
              423,000Gain
                  on sale of building, net of tax benefit of $49,000 for the year
                  ended
                  December 31, 2005 and net of tax expense of $430,000 for the year
                  ended
                  December 31, 2004
              
              
              69,000
              
              
              5,326,000Minority
                  interest
              
              
              (3,000
              )
              
              (1,269,000
              )Income
                  from discontinued operations
              
              
              60,000
              
              
              4,480,000Net
                  income
              
              $
              536,000
              
              $
              4,324,000Basic
                  and diluted income (loss) per share:Income
                  (loss) from continuing operations
              
              $
              0.04
              
              $
              (0.01
              )Income
                  from discontinued operations
              
              
              0.01
              
              
              0.40Basic
                  and diluted income per share
              
              $
              0.05
              
              $
              0.39Shares
                  used to compute income (loss) per share
              
              
              11,078,105
              
              
              11,078,105
 
 See
        accompanying notes to consolidated financial statements.
 19
 **Table
                of Contents**
 **Index
                to Financial
                Statements**
 **STRATFORD
        AMERICAN CORPORATION AND
        SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF SHAREHOLDERS** **’** **EQUITY**
 **Years
        ended December 31, 2005 and 2004**
  **Common
                  Stock**
              ****
              **Additional**
                **Paid-In**
              ****
              **Accumulated**
              ****
              **Treasury
                  Stock**
              ****
              **Total
                  Shareholders’**
              ********
              ****
              **Shares**
              ****
              **Amount**
              ****
              **Capital**
              ****
              **Deficit**
              ****
              **Shares**
              ****
              **Amount**
              ****
              **Equity**Balance,December
                  31, 2003
              
              
              11,078,105
              
              $
              111,000
              
              $
              28,511,000
              
              $
              (25,448,000
              )
              
              1,967
              
              $
              (11,000
              )
              $
              3,163,000Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              4,324,000
              
              
              
              
              
              
              
              
              4,324,000Balance,December
                  31, 2004
              
              
              11,078,105
              
              
              111,000
              
              
              28,511,000
              
              
              (21,124,000
              )
              
              1,967
              
              
              (11,000
              )
              
              7,487,000Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              536,000
              
              
              
              
              
              
              
              
              536,000Balance,December
                  31, 2005
              
              
              11,078,105
              
              $
              111,000
              
              $
              28,511,000
              
              $
              (20,588,000
              )
              
              _1,967
              
              $
              (11,000
              )
              $
              8,023,000
 
 See
        accompanying notes to consolidated financial statements
 20
 **Table
                  of Contents**
 **Index
                  to Financial
                  Statements**
 **STRATFORD
        AMERICAN CORPORATION AND
        SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **Years
        ended December 31, 2005 and 2004**
 
 **2005**
              ****
              **2004**CASH
                  FLOWS FROM CONTINUING OPERATING ACTIVITIES:Net
                  income (loss) from continuing operations
              
              $
              476,000
              
              $
              (156,000
              )Adjustments
                  to reconcile net income (loss) from continuing operations to net
                  cash provided by operating activities:Depreciation,
                  depletion and amortization
              
              
              337,000
              
              
              306,000Changes
                  in assets and liabilities:Increase
                  in oil and gas, related party and other receivables
              
              
              (132,000
              )
              
              (80,000
              )Increase
                  in oil and gas interests
              
              
              (381,000
              )
              
              (172,000
              )Increase
                  in other assets
              
              
              (3,000
              )
              
              (27,000
              )Increase
                  in accounts payable
              
              
              35,000
              
              
              19,000Increase
                  in accrued liabilities
              
              
              18,000
              
              
              61,000NET
                  CASH PROVIDED BY (USED IN) CONTINUING OPERATING ACTIVITIES
              
              
              350,000
              
              
              (49,000
              )CASH
                  FLOWS FROM CONTINUING INVESTING ACTIVITIES:Advances
                  to joint operators for development of oil and gas
                  properties
              
              
              (377,000
              )
              
              (47,000
              )Purchases
                  of property and equipment
              
              
              (1,000
              )
              
              0NET
                  CASH USED IN CONTINUING INVESTING ACTIVITIES
              
              
              (378,000
              )
              
              (47,000
              )CASH
                  FLOWS OF DISCONTINUED OPERATIONS: (Revised - See Note 2)Operating
                  cash flows
              
              
              (386,000
              )
              
              22,419,000Investing
                  cash flows
              
              
              0
              
              
              7,468,000Financing
                  cash flows
              
              
              0
              
              
              (23,800,000
              )NET
                  CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS
              
              
              (386,000
              )
              
              6,087,000NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              (414,000
              )
              
              5,991,000CASH
                  AND CASH EQUIVALENTS, beginning of year
              
              
              6,696,000
              
              
              705,000CASH
                  AND CASH EQUIVALENTS, end of year
              
              $
              6,282,000
              
              $
              6,696,000SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:Interest
                  paid during the year
              
              $
              0
              
              $
              1,216,000Taxes
                  paid during the year
              
              $
              394,000
              
              $
              7,000
 See
        accompanying notes to consolidated financial statements.
 21
 **Table
                of Contents**
 **Index
                to Financial
                Statements**
 **STRATFORD
        AMERICAN CORPORATION AND
        SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2005 and 2004**
 
 NOTE
        1
        - NATURE OF BUSINESS
 
 Stratford
        American Corporation and its subsidiaries (the “ Company ” )
        owns
        working and/or royalty interests in oil and gas properties that are primarily
        located in Oklahoma and Texas. The Company is not an operator with respect
        to
        any oil or gas properties. Rather, the Company participates in a property
        interest through a joint operating agreement. The Company is required to
        pay its
        allocable share of drilling and operating expenses based on its working
        interest, and participates in any discovery on the same basis. As a participant,
        the Company has only limited management rights with respect to any interest.
        The
        Company has no other significant operations and has one business
        segment.
 
 NOTE
        2
        - SIGNIFICANT ACCOUNTING POLICIES
 
 Basis
        of Presentation
 
 The
        consolidated balance sheet and statements of operations have been prepared
        in
        accordance with U.S. generally accepted accounting principles. Certain
        prior-year amounts have been reclassified to conform to the current year
        presentation to reflect the investing portions of the cash flows attributable
        to
        the oil and gas operations with no effect on net income. In addition, the
        Company has separately disclosed the operating, investing and financing portions
        of the cash flows attributable to its discontinued operations, which in prior
        periods were reported on a combined basis as a single amount.
 
 Estimates
 
 The
        preparation of financial statements in conformity with U.S. generally accepted
        accounting principles requires the Company to make certain estimates and
        judgments that affect the reported amounts of assets, liabilities, revenues
        and
        expenses, and related disclosure of contingent assets and liabilities. On
        an
        on-going basis, the Company evaluates its estimates, including those related
        to
        investments, oil and gas interests and contingencies and litigation. The
        Company
        bases its estimates on historical experience and on various other assumptions
        that are believed to be reasonable under the circumstances, the results of
        which
        form the basis for making judgments about the carrying values of assets and
        liabilities that are not readily apparent from other sources. Actual results
        may
        differ from these estimates under different assumptions or
        conditions.
 
 Principles
        of Consolidation and Presentation
 
 The
        consolidated financial statements include the accounts of the Company and
        its
        wholly owned and majority owned subsidiaries. All significant inter-company
        accounts and transactions have been eliminated in consolidation. Minority
        interest expense is recorded for the 20% minority interest held by outside
        investors in Scottsdale Thompson Peak, LLC.
 22
 **Table
                  of Contents**
 **Index
                  to Financial
                  Statements**
 Cash
        and Cash Equivalents
 
 Cash
        and
        cash equivalents include cash on hand and all highly liquid investments with
        original maturities of three months or less. The carrying amount approximates
        fair value because of the short maturity of the financial instruments.
  Revenue
        Recognition
 
 The
        Company uses the sales method of accounting for crude oil revenues and for
        natural gas reserves.
        Under this method, revenues are recognized based on actual volumes of oil
        and
        gas sold to the purchasers.
 
 Concentration
        of Credit Risk
 
 Financial
        instruments that potentially expose the Company to concentrations of credit
        risk
        consist primarily of unsecured accounts receivable from purchasers of crude
        oil
        and natural gas products.
 
 The
        Company maintains its cash in bank deposit accounts, which, at times, may
        exceed
        federally insured limits. The Company has not experienced any losses in such
        accounts and believes it is not exposed to any significant credit risk on
        cash
        and cash equivalents.
 
 Property
        and Equipment
 
 Oil
        and
        Gas Properties - The Company utilizes the successful efforts method of
        accounting for its oil and gas properties as promulgated by Statement of
        Financial Accounting Standards No. 19, FINANCIAL ACCOUNTING AND REPORTING
        BY OIL
        AND GAS PRODUCING COMPANIES. Under this method all costs associated with
        productive wells are capitalized while nonproductive exploration costs are
        expensed. Capitalized costs relating to proven properties are depleted using
        the
        straight-line method over periods ranging from five to seven years.
 
 Capitalized
        costs of individual properties abandoned or retired are charged to accumulated
        depletion, depreciation and amortization. Proceeds from sales of individual
        properties are credited to property costs. No gain or loss is recognized
        until
        the entire basis of all of the properties is sold or abandoned.
 
 Impairment
        of Long-Lived Assets
 
 In
        accordance with SFAS No. 144, long-lived assets, such as property, plant
        and
        equipment, and purchased intangibles subject to amortization, are reviewed
        for
        impairment whenever events or changes in circumstances indicate that the
        carrying amount of an asset may not be recoverable. Recoverability of assets
        to
        be held and used is measured by a comparison of the carrying amount of an
        asset
        to estimated undiscounted future cash flows expected to be generated by the
        asset. If the carrying amount of an asset exceeds its estimated future cash
        flows, an impairment charge is recognized by the amount by which the carrying
        amount of the asset exceeds the fair value of the asset. Assets to be disposed
        of would be separately presented in the balance sheet and reported at the
        lower
        of the carrying amount or fair value less costs to sell, and are no longer
        depreciated. The assets and liabilities of a disposed group classified as
        held
        for sale would be presented separately in the appropriate asset and liability
        sections of the balance sheet.
 23
 **Table
                  of Contents**
 **Index
                  to Financial
                  Statements**
 Environmental
 
 The
        Company is subject to extensive federal, state and local environmental laws
        and
        regulations. These laws, which are constantly changing, regulate the discharge
        of materials into the environment. Environmental changes affecting the oil
        and
        gas properties in which the Company owns interests may have an impact on
        the
        Company ’ s
        future
        financial position or results of operations.
 
 Income
        Taxes
 
 Income
        taxes are accounted for under the asset and liability method. Deferred tax
        assets and liabilities
        are recognized for the future tax consequences attributable to differences
        between the financial statement carrying amounts of existing assets and
        liabilities and their respective tax bases and operating loss
        and
        tax credit carryforwards. Deferred tax assets and liabilities are measured
        using
        enacted tax rates expected
        to apply to taxable income in the years in which those temporary differences
        are
        expected to be recovered
        or settled. The effect on deferred tax assets and liabilities of a change
        in tax
        rates is recognized in income in the period that includes the enactment
        date.
 
 Income
        (Loss) Per Common Share
 
 The
        Company calculates basic and diluted income (loss) per share in accordance
        with
        the provisions of Statement of Financial Accounting Standards No. 128, EARNINGS
        PER SHARE. Basic income (loss) per share is computed using the weighted-average
        number of common shares outstanding during each period. Diluted income (loss)
        per share reflects the potential dilution that could occur if securities
        or
        other contracts to issue common stock were exercised or converted into common
        stock or resulted in the issuance of common stock that then shared in the
        income
        of the Company. In calculating diluted income (loss) per share for the year
        ended December 31, 2005, 0 common stock equivalents were included. In
        calculating diluted income (loss) per share for the year ended December 31,2004,
        common stock equivalents consisting of 290,000 stock options have been excluded
        because their inclusion would have been antidilutive.
 
 Employee
        Stock Options
 
 The
        Company has elected to follow Accounting Principles Board Opinion No. 25,
        ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (APB 25) and related interpretations
        in
        accounting for its employee stock options and to adopt the “ disclosure
        only ” alternative treatment under Statement of Financial Accounting Standards No.
        123,
        ACCOUNTING FOR STOCK-BASED COMPENSATION
        (SFAS 123). Under APB 25, the Company uses the intrinsic method to account
        for
        stock options. SFAS 123 requires the use of fair value option valuation models
        that were not developed for use in valuing employee stock options. Under
        SFAS
        No. 123, deferred compensation is recorded for the excess of the fair value
        of
        the stock on the date of the option grant, over the exercise price of the
        option. The deferred compensation is amortized over the vesting period of
        the
        option.
 
 Had
        the
        Company determined compensation cost based on the fair value at the grant
        date
        for its stock options under SFAS No. 123, the Company ’ s
        pro
        forma net income and income per share amounts would have been:
 24
 **Table
                  of Contents**
 **Index
                  to Financial
                  Statements**
  **Years
                          ended December 31,**
                      ********
                      ****
                      **2005**
                      ****
                      **2004**Net
                          income - as reported
                      
                      $
                      536,000
                      
                      $
                      4,324,000Less:Total
                            stock based employee compensation expense determined
                            under fair value
                            method for stock options
                      
                      
                      0
                      
                      
                      0Net
                          income - pro forma
                      
                      $
                      536,000
                      
                      $
                      4,324,000Basic
                          and diluted income per share - as reported
                      
                      $
                      0.05
                      
                      $
                      0.39Basic
                          and diluted income per share - pro forma
                      
                      $
                      0.05
                      
                      $
                      0.39
 NOTE
        3 -
        REAL ESTATE INVESTMENTS/DISCONTINUED OPERATIONS
  On
        August
        30, 2004, Scottsdale Thompson Peak, LLC ( “ STP ” ),
        entered into a Purchase and Sale Agreement ( “ the
        Agreement ” )
        with
        Holualoa Arizona, Inc, an Arizona corporation ( “ Holualoa ” )
        to sell
        the Company ’ s
        real
        estate segment, which consisted primarily of an office building located in
        Scottsdale, Arizona ( “ the
        Property ” ).
        The
        Agreement called for the closing of the sale of the Property by the
        end
        of November 2004 at a price of $31,400,000. The transaction closed on November
        9, 2004. Debt service
        obligations of $23,401,000, which were inclusive of a $20,000,000, 5.9% loan,
        a
        $2,500,000, 6% loan and a $1,800,000, 10% loan, were paid out of the cash
        proceeds from the sale of the Property. Discontinued operations in the
        consolidated statements of operations reflect the results of operations of
        the
        Property sold in November 2004, including allocated interest expense for
        the
        periods presented. Interest expense was allocated to discontinued operations
        based on the outstanding debt specifically identified above. Net cash proceeds
        from the November 9, 2004 sale of the Property to STP, of which the Company
        owns
        80% of the membership interests in, were $7,468,000. The Company ’ s
        80%
        share of the proceeds was approximately $5,974,000. The Company has not made
        any
        decisions as to the use of the proceeds from the sale of the Property and
        is
        currently evaluating the best use of these proceeds. Should the Merger
        Agreement, discussed in Item 1 - Description of Business - Subsequent Events
        and
        in Part II - Item 5 - Market for Common Equity and Related Stockholder Matters
        -
        Dividends. JDMD intends to finance the merger through use of the cash reserves
        of the Company, which will become available immediately upon the effectiveness
        of the merger, and cash available to JDMD from its business activities unrelated
        to Stratford.
 The
        Company recognized a gain of $5,326,000, net of estimated tax of $430,000,
        from
        the sale of the Property. Completion of the Company ’ s
        2004
        tax returns in September of 2005 resulted in $49,000 lower income tax
        liabilities than originally estimated. Also, a reserve established for estimated
        expenses of $20,000, relating to the sale, was reversed when it was determined
        that all costs had been paid. Accordingly, for the year ended December 31,
        2005,
        the Company recognized a gain on sale of building of $69,000. The real estate
        segment has been accounted for as a **** discontinued
        operation and, accordingly, its net liabilities, results of operations and
        cash
        flows are segregated for all periods presented in the accompanying condensed
        consolidated financial statements.
 25
 **Table
                      of Contents**
 **Index
                      to Financial
                      Statements**
 The
        components of net liabilities of discontinued operations as of December 31,
        2005
        consist of accounts payable of $6,000. These liabilities will be adjusted
        in the
        future if the Company ’ s
        estimate of remaining costs changes. The effect of any future adjustments
        to net
        liabilities of discontinued operations would be presented in the income
        statement as an adjustment to the previously recorded gain on sale of building.
        The components of net liabilities of discontinued operations as of December
        31,
        2004 consist of income taxes payable of $430,000 and accounts payable of
        $26,000.
 
 Following
        is a summary of the operating results of the discontinued operations for
        the
        years ended December 31, 2005 and 2004:
 
 **Years
                  ended December 31,**
              ********
              ****
              **2005**
              ****
              **2004**Revenues
              
              $
              0
              
              $
              2,070,000Expenses
              
              
              (6,000
              )
              
              (1,647,000
              )Gain
                  on sale of building
              
              
              69,000
              
              
              5,326,000Minority
                  interest share of net income
              
              
              (3,000
              )
              
              (1,269,000
              )Income
                  from discontinued operations
              
              $
              60,000
              
              $
              4,480,000
  Had
        the
        sale of the Property been completed as of January 1, 2004, the Company would
        have reported the following:
 
 **Years
                  ended December 31,**
              ********
              ****
              **2005**
              ****
              **2004**Total
                  revenue
              
              $
              1,799,000
              
              $
              1,027,000Net
                  income (loss)
              
              $
              476,000
              
              $
              (156,000
              )Basic
                  and diluted income (loss) per share
              
              $
              0.04
              
              $
              (0.01
              )Pro
                  Forma weighted average shares outstanding:
              
              
              11,078,105
              
              
              11,078,105
  26
 **Table
                        of Contents**
 **Index
                        to Financial
                        Statements**
  NOTE
        4
        - OIL AND GAS ACTIVITIES
 
 The
        Company, through its wholly-owned subsidiary Stratford American Energy
        Corporation ( “ SAEC ” ),
        purchased working interests in 23 oil and gas properties located in Oklahoma
        and
        Texas, effective April 1, 2002. Subsequent to the 2002 purchase, the Company
        has
        participated in the successful drilling of new producing wells, and as of
        December 31, 2005, has working interests in 40 producing oil and gas properties.
        Development, lease costs and equipment expenditures, by the Company, through
        SAEC, during 2005 were $722,000. $425,000 was spent on drilling costs for
        eleven
        development wells the Company elected to participate in, of which eight are
        now
        producing properties. As of December 31, 2005, $83,000 of these expenditures
        were prepaid to two operators for the drilling of three development wells
        which
        the Company elected to participate in. These development wells are expected
        to
        be completed in the second quarter of 2006. In exchange for $281,000 lease
        costs
        paid, the Company received a 10% working interest in 14,000 acres of land
        that
        these wells will be drilled on. $16,000 was spent on equipment purchases
        for
        four producing properties. Total capitalized costs of the SAEC properties
        and
        accumulated depletion and amortization are as follows:
  **December
                  31, 2005**Oil
                  and gas interests at December 31, 2004
              
              $
              985,0002005
                  development, lease and equipment additions
              
              
              702,000(net
                  of dry-hole costs of $20,000)Less
                  accumulated depletion and amortization
              
              
              (457,000
              )$
              1,230,000
 
 The
        Company recognized depletion expense of $158,000 and $122,000 for the years
        ended December
        31, 2005 and 2004, respectively and amortization expense of $1,000 for each
        of
        the years ended December 31, 2005 and 2004.
 
 In
        addition to the oil and gas interests, acquisition costs of $68,000 are being
        amortized equally over
        a
        seven-year period, which is the estimated life of the wells. The Company
        recognized amortization expense of $8,000 and $9,000 for the years ended
        December 31, 2005 and 2004, respectively. Total accumulated amortization
        of
        acquisition costs is $35,000 at December 31, 2005, leaving net acquisition
        costs
        of $33,000 on the books of the Company, which are reported within other assets
        in the accompanying consolidated balance sheet.
 
 The
        Company, through its wholly-owned subsidiary SA Oil and Gas Corporation
        ( “ SA
        Oil ” ) owns
        working and/or royalty interests in 87 oil and gas properties located in
        Oklahoma and Texas. Total capitalized costs of the SA Oil properties and
        accumulated depletion and amortization are follows:
 
 **December
                  31, 2005**Oil
                  and gas interests at December 31, 2004
              
              $
              3,673,0002005
                  development and equipment additions
              
              
              50,000Less
                  accumulated depletion and amortization
              
              
              (3,344,000
              )$
              379,000
 27
 **Table
                  of Contents**
 **Index
                  to Financial
                  Statements**
 Oil
        and
        gas interests are being depleted equally over a seven-year period, which
        is the
        estimated life of the wells. The Company recognized depletion expense of
        $134,000 for each of the years ended December 31, 2005 and 2004 and amortization
        expense of $13,000 and $16,000 for the years ended December 31, 2005 and
        2004,
        respectively.
 
 In
        addition to the oil and gas interests, acquisition costs of $48,000 are being
        amortized equally over
        a
        seven-year period. The Company recognized amortization expense of $8,000
        and
        $7,000 for the years
        ended December 31, 2005 and 2004, respectively. Total accumulated amortization
        of acquisition costs is $34,000 at December 31, 2005, leaving net acquisition
        costs of $14,000 on the books of the Company, which are reported within other
        assets in the accompanying consolidated balance sheet.
 
 Stratford
        American Resource Corporation ( “ SARC ” )
        originally paid $38,000 for a nominal working interest in five oil and gas
        wells. The wells were fully depleted at December 31, 2005. In September of
        2005,
        a well that had previously been shut-in was recompleted and returned to
        production. The Company paid $6,000 in drilling and equipment costs. These
        costs
        are being amortized equally over a five-year period, which is the estimated
        life
        of the well .
  Total
        net
        oil and gas interests at December 31, 2005 are $1,615,000. Total net acquisition
        costs, relating
        to the oil and gas properties, are $47,000 at December 31, 2005.
 
 NOTE
        5- FAIR VALUE OF FINANCIAL INSTRUMENTS
 
 The
        carrying amount of cash and cash equivalents, receivables, accounts payable
        and
        accrued liabilities approximates fair value as they are expected to be collected
        or paid within 90 days of year end.
 
 NOTE
        6
        - STOCK OPTION PLAN
 
 In
        July
        1998, the Company adopted a Stock Option Plan (the “ Plan ” ).
        Common
        stock reserved for grants to key employees of the Company under the Plan
        in each
        calendar year is based on a percentage of total common stock outstanding
        in each
        such calendar year. The aggregate number of shares of common stock for which
        options may be granted or for which stock grants may be made to any one
        individual participating in the Plan may not exceed 500,000 shares per year
        or
        2,000,000 shares over the term of the Plan. Options become exercisable over
        a
        specific period of continuous employment according to each grant awarded,
        but
        may not be exercised more than ten years from the Date of Grant. The options
        under the Plan were granted at the fair market value of the Company ’ s
        stock
        at the date of grant as determined by the Company ’ s
        Board
        of Directors.
  In
        January 2000, the Board granted stock options to certain directors to purchase
        190,000 shares of common stock. The 2000 options were exercisable at $1.25
        per
        share, fully vested at grant date. The options
        expired on January 3, 2005. There were 100,000 options originally granted
        to
        certain directors in 1998 and previously extended expired in November 2003.
        The
        Board extended these options with an exercise price of $0.50 for a period
        of two
        years with a new expiration date in November 2005. The fair value on the
        extension date was less than the exercise price; therefore, no compensation
        expense was recorded. These options were not extended and expired in November
        2005. In October 2002, 50,000 options granted to a consultant for services
        performed in 1999 expired. The options were fully vested at grant date and
        were
        valued at $15,000 and charged to compensation expense in 1999. The Board,
        on
        October 11, 2002, extended these options with an exercise price of $0.79
        for a
        period of two years with a new expiration date of October 2004. These options
        have expired. There was no compensation expense recognized for any options
        in
        2005.
 28
 **Table
                      of Contents**
 **Index
                      to Financial
                      Statements**
 No
        stock
        options were extended and no new stock options were granted in 2005. There
        are
        no stock options outstanding as of December 31, 2005.
 
 NOTE
        7
        - INCOME TAXES
 
 The
        Company incurred current federal income tax expense of $2,000, due to
        alternative minimum tax limitations on net operating loss carryforwards applied
        to income from continuing operations and incurred current state income tax
        expense of $27,000 on income from continuing operations for the year ended
        December 31, 2005. The income tax expense of $22,000, for continuing operations
        for the year ended December 31, 2005, reflects a credit of $7,000 attributable
        to a refund received for overpayment of estimated taxes for the year ended
        December 31, 2004.  Income of $60,000 from discontinued operations was
        offset by net operating loss carryforwards for the year ended December 31,
        2005.  Income of $5,247,000 from discontinued operations was offset by
        federal net operating loss carryforwards for the year ended December 31,
        2004.
  A
        reconciliation of the provision for income taxes on
        income from continuing operations for the years ended December 31, 2005 and
        2004, and the amount that would be computed using the statutory federal income
        tax rate are as follows:
  **2005**
              
              
              **2004**Computed
                  income taxes at statutory federal income rate of 34%
              
              $
              184,000
              
              
              34.00
              %
              
              $
              (53,000
              )
              
              34.00
              %State
                income taxes, net of federal effect
              
              
              18,000
              
              
              3.33
              %
              
              
              11,000
              
              
              (7.05
              %)Change
                in federal valuation allowance
              
              
              (288,000
              )
              
              (53.22
              %)
              
              
              53,000
              
              
              (34.00
              %)Other
              
              
              108,000
              
              
              19.96
              %
              
              
              6,000
              
              
              (3.85
              %)$
              22,000
              
              
              4.07
              %
              
              $
              17,000
              
              
              (10.90
              %)
  The
        provision for income taxes on income from continuing operations for the years
        ended December 31, 2005 and 2004, consisted of the following:
  **2005**
                
                **2004****Current**
                
                **Deferred**
                
                **Total**
                
                **Current**
                ****
                **Deferred**
                ****
                **Total**Federal
                
                $
                2,000
                
                $
                0
                
                $
                2,000
                
                $
                0
                
                $
                0
                
                $
                0State
                
                
                20,000
                
                
                0
                
                
                20,000
                
                
                17,000
                
                
                0
                
                
                17,000$
                22,000
                
                $
                0
                
                $
                22,000
                
                $
                17,000
                
                $
                0
                
                $
                17,000
  During
        the year ended December 31, 2005, the Company paid $450,000 in estimated
        state
        and federal income taxes. Estimated taxes paid of $8,000 were attributable
        to
        income from continuing operations for the year ended December 31, 2005. Taxes
        were paid in 2005 of $442,000, for estimated tax liabilities for the year
        ended
        December 31, 2004, of which $430,000 was attributable to income from the
        gain on
        sale of discontinued operations and $12,000 was attributable to income from
        continuing operations. Upon completion of the Company ’ s
        2004
        state and federal income tax returns in September of 2005, the Company was
        entitled to income tax refunds of $56,000 for overpayment of estimated taxes,
        of
        which $49,000 was attributable to income from discontinued operations and
        $7,000
        was attributable to income from continuing operations for the year ended
        December 31, 2004. The refunds were received in October and November of 2005.
 29
 **Table
                    of Contents**
 **Index
                    to Financial
                    Statements**
 The
        following carryforwards are available at December 31, 2005, to offset future
        taxable income and income taxes as follows:
 
 **Year
                  Expires**
              ****
              **Amount**Net
                  operating loss
              
              2006-2022
              
              $
              3,015,000General
                  business credit
              
              2019
              
              
              5,000Alternative
                  minimum tax credit
              
              
              
              
              
              80,000
 
 If
        certain substantial changes in the Company ’ s
        ownership should occur, there would be an annual
        limitation on the amount of the carryforwards which can be utilized, which
        could
        potentially impair
        the ability to utilize the full amount of the carryforward.
 
 Deferred
        income tax assets (liabilities) included in the consolidated balance sheet
        at
        December 31, 2005 consisted of the following:
 
 Deferred
                  tax asset:Allowance
                  for mining interest impairment
              
              $
              369,000Net
                  operating loss carryforwards and federal tax credits
              
              
              1,110,000Differences
                  in depreciation and depletion
              
              
              135,000Total
                  deferred tax assets before valuation allowance
              
              
              1,614,000Deferred
                  tax liability:Differences
                  in depreciation
              
              
              (9,000
              )Valuation
                  allowance
              
              
              (1,605,000
              )Net
                  deferred tax asset
              
              $
              0
  The
        valuation allowance for the deferred tax assets as of January 1, 2005 was
        $1,893,000. The net change in the total valuation allowance for the year
        ended
        December 31, 2005 was a decrease of $288,000. The Company believes it is
        more
        likely than not that all or a portion of the net deferred tax asset will
        not be
        utilized.
 
 NOTE
        8
        - OPERATING LEASE COMMITMENTS
 
 The
        aggregate future minimum lease commitments under a non-cancelable operating
        lease for the Stratford American Corporation corporate offices are as
        follows:
 30
 **Table
                    of Contents**
 **Index
                    to Financial
                    Statements**
 Year
                  ending December 31:2006
              
              
              106,0002007
              
              
              87,000Total
              
              $
              193,000
 
 The
        lease
        expires in October 2007. The Company has no options for renewal under the
        current lease.
 
 Rent
        expense, including base rent and additional charges, was $84,000 and $104,000
        for the years ended December 31, 2005 and 2004, respectively. Rental expense
        for
        each of the two years was reduced by income received from subleases. (See
        Note
        9)
 
 NOTE
        9
        - RELATED PARTY TRANSACTIONS
 
 During
        2005, the Company received $68,000 from two companies that are partially
        owned
        by four of the Company ’ s
        executives or directors. These receipts were reimbursements for administrative
        expenses incurred by the Company on behalf of the related parties. These
        are
        recorded as a reduction of general and administrative expense for 2005 and
        2004.
        At December 31, 2005, $15,000 of these reimbursements are recorded as related
        party receivables in the accompanying consolidated balance sheet.
 
 The
        Company has a month-to-month sublease of the Company ’ s
        offices
        with a company that is owned by a majority shareholder of the Company. The
        monthly rent is $2,000, which is at market rate. The Company received $24,000
        for each of the years ended December 31, 2005 and 2004. These receipts from
        the
        sublease were recorded as a reduction in rental expense, included in general
        and
        administrative expense. At December 31, 2005, all of the sublease payments
        had
        been received.
  NOTE
        10 - NET INCOME (LOSS) PER SHARE
 
 In
        accordance with the provisions of FASB Statement of Financial Accounting
        Standards No. 128 ( “ Statement
        128 ” ),
        EARNINGS PER SHARE, basic earnings (loss) per share is computed on the basis
        of
        the weighted-average number of common shares outstanding during the periods.
        Diluted earnings (loss) per share is computed based upon the weighted-average
        number of common shares plus the assumed issuance
        of common shares for all potentially dilutive securities. The computations
        of
        basic and diluted net income (loss) per share are as follows:
 31
 **Table
                      of Contents**
 **Index
                      to Financial
                      Statements**
 **Years
                  Ended December 31,**
              ********
              ****
              **2005**
              ****
              **2004**Basic
                  earnings (loss) per share:NumeratorNet
                  income (loss) from continuing operations, net of income
                  tax
              
              $
              476,000
              
              $
              (156,000
              )Income
                  from discontinued operations, net of income tax
              
              
              60,000
              
              
              4,480,000Net
                  income applicable to common shares
              
              $
              536,000
              
              $
              4,324,000DenominatorWeighted
                  average common shares outstanding
              
              
              11,078,105
              
              
              11,078,105Basic
                  earnings (loss) per share from:Continuing
                  operations
              
              $
              0.04
              
              $
              (0.01
              )Discontinued
                  operations
              
              
              0.01
              
              
              0.40Net
                  income per share applicable to common shares - basic
              
              $
              0.05
              
              $
              0.39Diluted
                  earnings (loss) per share:NumeratorNet
                  income (loss) from continuing operations, net of income
                  tax
              
              $
              476,000
              
              $
              (156,000
              )Income
                  from discontinued operations, net of income tax
              
              
              60,000
              
              
              4,480,000Net
                  income applicable to common shares
              
              $
              536,000
              
              $
              4,324,000DenominatorWeighted
                  average common shares outstanding
              
              
              11,078,105
              
              
              11,078,105Effect
                  of dilutive securities - stock options
              
              
              0
              
              
              0Weighted
                  average diluted common shares outstanding
              
              
              11,078,105
              
              
              11,078,105Diluted
                  earnings (loss) per share from:Continuing
                  operations
              
              $
              0.04
              
              $
              (0.01
              )Discontinued
                  operations
              
              
              0.01
              
              
              0.40Net
                  income per share applicable to common shares - diluted
              
              $
              0.05
              
              $
              0.39Stock
                  options not included in diluted income per share
              
              
              0
              
              
              290,000
  32
 **Table
                of Contents**
 **Index
                to Financial
                Statements**
 NOTE
        11 -
        COMMITMENTS AND CONTINGENCIES
 
 The
        Company has adopted the disclosure provisions of the Financial Accounting
        Standards Board Interpretation
        No. 45, GUARANTOR ’ S
        ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTEES,
        INCLUDING INDIRECT GUARANTEES OF INDEBTEDNESS OF OTHERS. Interpretation
        45 requires disclosures about obligations under certain guarantees the guarantor
        has issued. While
        the
        Company has various indemnity obligations included in contracts entered into
        in
        the normal course
        of
        business, these obligations are primarily in the form of indemnities that
        could
        result in immaterial
        increases of future costs, but do not represent significant commitments or
        contingent liabilities of
        the
        indebtedness of others.
 33
 **Table
                of Contents**
 **Index
                to Financial
                Statements**


**Item
              8.**
            **Changes
                In and Disagreements with Accountants on Accounting and Financial
                Disclosure**





The
        Company has not changed its accountants nor had any disagreements with
        accountants on matters of accounting principles or practices, financial
        statement disclosures, or auditing scope or procedures during its two most
        recent fiscal years.


**Item
              8A.**
            **Controls
                and Procedures**


Our
        Chief
        Executive Officer, our President and our Controller, based on the evaluation
        of
        our disclosure controls and procedures (as defined in rules 13a-15(e) or
        15d-15(e) of the Securities Exchange Act of 1934, as amended) required by
        paragraph (b) of Rule 13a-15 or Rule 15d-15, have concluded that, as of December
        31, 2005, our disclosure controls and procedures were effective to ensure
        that
        the information we are required to disclose in reports that we file or submit
        under the Securities Exchange Act of 1934 is recorded, processed, summarized
        and
        reported within the time periods specified in Securities and Exchange Commission
        rules and forms and that such information was accumulated and communicated
        to
        our Chief Executive Officer, our President and our Controller, in a manner
        that
        allowed for timely decisions regarding disclosure.
 
 During
        the last fiscal quarter, there was no change in our internal control over
        financial reporting identified in connection with the evaluation required
        by
        paragraph (d) of Rule 13a-15 or Rule 15d-15 that has materially affected,
        or is
        reasonably likely to materially affect, our internal control over financial
        reporting.


**PART
      III**





**Item
              9.**
            **Directors
                and Executive Officers; Compliance With Section 16(a) of the Exchange
                Act**




**Directors
        and Executive Officers**
  The
        following table sets forth certain information with respect to the current
        directors and executive officers of the Company:
 
 **Name**
              ****
              **Age**
              ****
              **Position,
                  Tenure and Experience**David
                  H. Eaton
              
              70
              
              Mr.
                  Eaton has served as Chairman of the Board of Directors of the Company
                  since February 1988, and as its Chief Executive Officer since June
                  1988.
                  Mr. Eaton serves as a Director of Stratford American Resource Corporation
                  (“SARC”), Stratford American Energy Corporation (“SAEC”), Stratford
                  American Gold Venture Corporation (“SAGVC”) and Stratford American Oil and
                  Gas Corporation (“SAOGC”), as a Director and Chief Executive Officer of
                  Stratford American Car Rental Systems, Inc. (“SCRS”), and as a Director
                  and the President of Stratford American Properties Corporation
                  (“SAPC”).
                  Mr. Eaton’s principal occupation is serving as a managing member of
                  JDMD.  The principal business of JDMD is (i) making investments in
                  businesses, companies, and properties by means of acquisitions
                  of stock,
                  partnership interests, limited liability company memberships, and
                  direct
                  acquisitions of property and assets, and (ii) holding and managing
                  such
                  investments.Gerald
                  J. Colangelo
              
              66
              
              Mr.
                  Colangelo has been a Director of the Company since April 1989.
                  He is also
                  a Director of SCRS, SAPC and SAGVC. Mr. Colangelo currently is
                  the Chief
                  Executive Officer of the Phoenix Suns of the National Basketball
                  Association. Additionally, Mr. Colangelo is responsible for bringing
                  Major
                  League Baseball to Phoenix,
                  Arizona.
  34
 **Table
                  of Contents**
 **Index
                  to Financial
                  Statements**
  **Name**
                      ****
                      **Age**
                      ****
                      **Position,
                          Tenure and Experience**Richard
                          H. Dozer
                      
                      48
                      
                      Mr.
                          Dozer has been a Director of the Company since March 1998.
                          Mr. Dozer
                          joined the Phoenix Suns Professional Basketball franchise
                          in July 1987 as
                          Business Manager, was promoted to Vice President and Chief
                          Operating
                          Officer in June 1989, and served in that position until
                          March 1995, when
                          he was named President of the Arizona Diamondbacks, where
                          he serves
                          today.Dale
                          M. Jensen
                      
                      56
                      
                      Mr.
                          Jensen has been a Director of the Company since March 1998.
                          Mr. Jensen was
                          the co-founder and former Executive Vice President of Information
                          Technology, Inc., a computer software provider to banks
                          and savings and
                          loan associations. Mr. Jensen retired from that position
                          when Information
                          Technology, Inc. was sold in 1995 and has been managing
                          his personal
                          investments since that time. Mr. Jensen’s current investment holdings
                          include ranch and farm properties, oil and gas development
                          and
                          exploration, real estate development, including world class
                          golf courses,
                          hotels, restaurants and convention centers, High Five Entertainment
                          and an
                          interest in the Phoenix Suns and the Arizona
                          Diamondbacks.Mel
                          L. Shultz
                      
                      55
                      
                      Mr.
                          Shultz has been a Director and the President of the Company
                          since May
                          1987. Mr. Shultz is also a Director and the President of
                          SCRS, SARC, SAEC,
                          SAGVC, and SAOGC, and a Director of SAPC.  Mr. Shultz’s principal
                          occupation is serving as a managing member of JDMD.  The principal
                          business of JDMD is (i) making investments in businesses,
                          companies, and
                          properties by means of acquisitions of stock, partnership
                          interests,
                          limited liability company memberships, and direct acquisitions
                          of property
                          and assets, and (ii) holding and managing such investments.  In
                          addition, Mr. Shultz has served as a member of Theater
                          Development &
                          Management, L.L.C., the manager of Phoenix Downtown Theatre,
                          L.L.C., since
                          January 1999.  The principal business of Phoenix Downtown Theatre is
                          the ownership and management of the Dodge Theatre.
 Mitchell
                    S. Vance
                
                43
                
                Mr.
                    Vance has been a Director of the Company since July 1998. From
                    February
                    1993 to March 1998, Mr. Vance was a Partner of Pacific Mezzanine
                    Investors, a private investment firm based in Newport Beach,
                    California,
                    which invests in private equity and debt securities primarily
                    for
                    leveraged buyouts and for late-stage venture investments, and
                    manages over
                    $350 million of capital for eight institutional limited partners.
                    From
                    1990 to 1993, Mr. Vance was a General Partner of Tessler, Geisz
                    and Vance,
                    a New York based private leveraged buyout firm. Previously, Mr.
                    Vance was
                    an associate with the leveraged buyout firm of Levine, Tessler,
                    Leichtman
                    & Company in Beverly Hills, California. He began his career as
                    an
                    investment manager with First Westinghouse Capital Corporation
                    in
                    Pittsburgh, Pennsylvania. Mr. Vance has been a board member of
                    Suiza Foods
                    Corporation, Smarte Carte, Inc. and is currently a board member
                    of Vantage
                    Mobility International.Daniel
                    E. Matthews
                
                55
                
                Mr.
                    Matthews was appointed Treasurer and Secretary of the Company
                    on December
                    1, 1999. Mr. Matthews has been the Controller of the Company
                    since May
                    1997 and served as Manager of Treasury Operations for Express
                    America
                    Mortgage Corporation from 1992 - 1996. Mr. Matthews is also the
                    Treasurer
                    and Secretary of SCRS, SARC, SAEC, SAGVC, SAPC and
                    SAOGC.
 The
        Board
        of Directors currently consists of six members holding seats to serve as
        members
        until the next Annual Meeting of Stockholders or until their respective
        successors are duly elected and qualified, unless they earlier resign or
        are
        removed from office. The Company’s Bylaws presently provide for a Board of
        Directors of not less than three (3) nor more than fifteen (15) in number,
        with
        the exact number to be fixed as provided in the Company’s Bylaws.


35
 **Table
                of Contents**
 **Index
                to Financial
                Statements**


**Committees
      of the Board of Directors**





The
      Company does not maintain a separately-designated standing audit committee.
      The Board
      of
      Directors, as a whole, serves as the audit committee. Richard H. Dozer qualifies
      as an “ audit
      committee financial expert ” as
      defined by the SEC pursuant to the Sarbanes-Oxley Act of 2002.





The
      Company does not maintain separately-designated compensation or nominating
      committees. The functions typically performed by these committees are performed
      by the full Board of Directors.





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
      requires the Company’s directors and officers, and persons who own more than ten
      percent of a registered class of the Company’s equity securities, to file with
      the SEC initial reports of ownership and reports of changes in ownership of
      the
      Company’s equity securities. Officers, directors and greater than 10%
      stockholders are required by SEC regulations to provide the Company with copies
      of all Section 16(a) reports they file. To the Company’s knowledge, based solely
      upon a review of the copies of such reports furnished to the Company and written
      representations that no other reports were required, the Company believes that,
      during the fiscal year ended December 31, 2005, all filing requirements
      applicable to our officers, directors and greater than ten percent beneficial
      owners were complied with.




**Code
      of Business Conduct and Ethics**





The
      Company has adopted a Code of Business Conduct that applies to all of its
      directors, officers and employees. Our code of Business Conduct and Ethics
      was
      filed as Exhibit A to our Definitive Proxy Statement (Schedule 14A) filed with
      the Securities and Exchange Commission on April 29, 2004.




**Item
              10.**
            **Executive
                Compensation**


**Compensation
        of Directors**
 
 The
        Company generally does not compensate its directors for services as such,
        but
        reimburses them for reasonable expenses involved in attending meetings.
 
 On
        November 9, 1998, Richard H. Dozer and Mitchell S. Vance were each granted
        the
        option to purchase 50,000 shares of the common stock of the Company at an
        exercise price of Fifty Cents ($0.50) per common share. The options were
        awarded
        pursuant to the Company ’ s
        1998
        Stock Incentive Plan and became vested in full as of the date of the grants.
        The
        options expired on November 9, 2005. On January 3, 2000, David H. Eaton and
        Mel
        L. Shultz were each granted the option to purchase 95,000 shares of the common
        stock of the Company at an exercise price of One Dollar and Twenty-Five Cents
        ($1.25) per common share. The options were awarded pursuant to the
        Company ’ s
        1998
        Stock Incentive Plan and became vested in full as of the date of the grants.
        The
        options expired on January 3, 2005. All directors are eligible for awards
        under
        the Company ’ s
        1998
        Stock Incentive Plan.
 36
 **Table
                  of Contents**
 **Index
                  to Financial
                  Statements**
 **Executive
        Compensation**
 
 The
        following table sets forth the compensation paid to the Chief Executive Officer
        and the President of the Company (collectively, the “Named Executive Officers”)
        for services rendered in all capacities to the Company during the periods
        indicated. Compensation for each of the Company’s other executive officers was
        less than $100,000 during such periods.
  **Summary
        Compensation Table**
  **Long
                  Term****Compensation****Awards****Securities****Annual
                  Compensation**
              
              **Other
                  Annual**
              
              **Underlying****Name
                  and Principal Position**
              
              **Year
                  Ended**
              
              **Salary
                  ($)**
              
              **Compensation**
              
              **Options/SARs
                  (#)**David
                  H. Eaton
              
              
              2005
              
              $
              7,921
              
              $
              0
              
              
              0Chief
                  Executive Officer
              
              
              2004
              
              $
              7,921
              
              $
              0
              
              
              02003
              
              $
              7,921
              
              $
              50,000
              
              
              0Mel
                  L. Shultz
              
              
              2005
              
              $
              7,921
              
              $
              0
              
              
              0President
              
              
              2004
              
              $
              7,921
              
              $
              0
              
              
              02003
              
              $
              7,921
              
              $
              50,000
              
              
              0
  **Option
        Grants in Last Fiscal Year**
 
 During
        2005, the Company made no option grants to the executive officers listed
        in the
        Summary Compensation Table above.
 
 **Aggregated
        Option/SAR Exercises in Last Year and FY-End Option/SAR
        Values**
  **Name**
              ****
              **Shares**
                **acquired**
                **on
                  exercise(#)(1)**
              ****
              **Value**
                **realized**
                **($)**
              ****
              **Number
                  of securities**
                **underlying
                  unexercised**
                **options/SARs
                  at**
                **FY-end
                  (#)**
                **exercisable/****unexercisable**
              ****
              **Value
                  of**
                **unexercised**
                **in-the-money**
                **options/SARs
                  at**
                **FY-end
                  ($)**
                **exercisable/****unexercisable**David
                  H. Eaton
              
              0
              
              0
              
              0/0
              
              0/0Mel
                  L. Shultz
              
              0
              
              0
              
              0/0
              
              0/0
  (1)
              No
                  stock options were exercised in 2005 by the Named Executive
                  Officers.
  37
 **Table
                of Contents**
 **Index
                to Financial
                Statements**


**Item
              11.**
            **Security
                Ownership of Certain Beneficial Owners and
                Management**




The
        following table sets forth certain information, as of December 31, 2005,
        with
        respect to the number of shares of the Company’s Common Stock beneficially owned
        by individual directors and director nominees, by all directors and officers
        of
        the Company as a group and by persons known to the Company to own more than
        5%
        of the Company’s Common Stock. Unless otherwise indicated below, to the
        Company’s knowledge, all persons below have sole voting and investment power
        with respect to their shares, except to the extent authority is shared by
        spouses under applicable law. This information is based upon the Company’s
        records and the persons’ filings with the Securities and Exchange
        Commission.
 **Name
                    and Address of**
                  **Beneficial
                    Owner**
                ****
                **Common
                    Shares**
                ****
                **Percent
                    Of**
                  **Total(1)**JDMD
                    Investments, LLC(2)
                  2400
                    E. Arizona Biltmore Circle
                  Phoenix,
                    Arizona 85016
                
                3,287,298
                
                29.7%The
                    DRD 97 Trust(3)
                  2200
                    E. River Road, Suite 105
                  Tucson,
                    Arizona 85718
                
                2,551,189
                
                23.0%Bulgheroni
                    SPA
                  Via
                    Buccan 33
                  21056
                    Induno Olona (VA) Italy
                
                1,396,700
                
                12.6%David
                    H. Eaton(2)
                    (4 )
                  2400
                    E. Arizona Biltmore Circle
                  Phoenix,
                    Arizona 85016
                
                886,824.5
                
                8.0%DCE
                    Investments, LLC(2)
                    (5)
                  2400
                    E. Arizona Biltmore Circle
                  Phoenix,
                    Arizona 85016
                
                821,824.5
                
                7.4%Gerald
                    J. Colangelo(2)
                  201
                    E. Jefferson Street
                  Phoenix,
                    Arizona 85004
                
                821,824.5
                
                7.4%KBKM
                    Real Estate, LLC(2)
                    (5)
                  201
                    E. Jefferson Street
                  Phoenix,
                    Arizona 85004
                
                821,824.5
                
                7.4%Mel
                    L. Shultz2)
                  2400
                    E. Arizona Biltmore Circle
                  Phoenix,
                    Arizona 85016
                
                821,824.5
                
                7.4%
 38
 **Table
                      of Contents**
 **Index
                      to Financial
                      Statements**
 **Name
                      and Address of**
                    **Beneficial
                      Owner**
                  ****
                  **Common
                      Shares**
                  ****
                  **Percent
                      Of**
                    **Total(1)**Mel
                      L. and Beth Jane Shultz Revocable Trust(2)
                    2400
                      E. Arizona Biltmore Circle
                    Phoenix,
                      Arizona 85016
                  
                  821,824.5
                  
                  7.4%Dale
                      M. Jensen(2)
                    4021
                      E. Lamar Road
                    Paradise
                      Valley, Arizona 85253
                  
                  821,824.5
                  
                  7.4%Richard
                      H. Dozer(3)
                    401
                      E. Jefferson Street
                    Phoenix,
                      Arizona 85004
                  
                  3,334
                  
                  *Mitchell
                      S. Vance(3)
                    26
                      Burning Tree Road
                    Newport
                      Beach, California 92660
                  
                  0
                  
                  0%*All
                      directors, director nominees and officers as a group (6
                      persons)
                  
                  3,355,632
                  
                  30.3%
 *
                Less
                    than 1%.
 (1)
              Percentage
                  of ownership is based on 11,078,105 shares of common stock outstanding
                  as
                  of February 28, 2006.
 (2)
              Mr.
                  Jensen, the Mel L. Shultz and Beth Jane Shultz Revocable Trust,
                  DCE
                  Investments, LLC and KBKM Real Estate, LLC each own a 25% interest
                  in
                  JDMD. Messrs. Jensen, Shultz, Colangelo and Eaton, the managers
                  of JDMD,
                  share voting and investment power with respect to the shares held
                  by JDMD.
                  Accordingly, the number of shares reported for each of Messrs.
                  Colangelo,
                  Eaton, Jensen and Shultz, the Shultz Revocable Trust, DCE Investments,
                  LLC
                  and KBKM Real Estate, LLC represents 25% of the number of shares
                  owned by
                  JDMD.
 (3)
                All
                    2,551,189 shares of common stock are owned by DRD Trust. As trustees
                    of
                    DRD Trust, Donald R. Diamond and Joan B. Diamond have the power
                    to vote,
                    dispose or direct the shares owned by DRD
                    Trust.
 (4)
              Includes
                  65,000 shares of common stock issued to the Eaton Trust, David
                  H. Eaton
                  and Carol E. Eaton as trustees, in exchange for shares of SA Oil
                  and Gas
                  Corporation previously owned.
 (5)
              On
                  October 31, 2005, Gerald Colangelo and Eaton Trust transferred
                  their 25%
                  interest in JDMD to KBKM Real Estate, LLC and DCE Investments,
                  LLC,
                  respectively.


**Item
              12.**
            **Certain
                Relationships and Related
                Transactions**




All
        transactions between the Company and its officers, directors, principal
        shareholders or affiliates have been and will be on terms no less favorable
        to
        the Company than can be obtained from unaffiliated third parties and have
        been
        and will be approved by a majority of the disinterested directors of the
        Company.
 39
 **Table
                  of Contents**
 **Index
                  to Financial
                  Statements**


**Item
              13.**
            **Exhibits,
                List and Reports on Form
                8-K**




(a)
              Financial
                  Statements and Financial Statement Schedules; Exhibits-
                  See“Item
                  7 - Financial Statements and Supplementary Data”above.
  The
        Exhibits listed on the accompanying Exhibits Index are filed as part of,
        or  incorporated
        by reference into, this report.
  Contracts
        with management and any compensatory plans or arrangements relating to
        management are as follows:
 
 Number
              Description
  10.20
              Stratford
                  American Corporation 1998 Stock Incentive Plan.  Incorporated
                  by reference as Exhibit 2 to the Company’s
                  Definitive Proxy Statement (Schedule 14A) for its annual meeting
                  of
                  shareholdersheld
                  on July 8, 1998, which was filed with the Securities and Exchange
                  Commission on April 28,
                  1998.
 
 (b)
              Reports
                  on Form 8-K
  No
        reports on Form 8-K were filed during the fourth quarter of 2005:
  The
        following report on Form 8-K was filed subsequent to the fourth quarter ended
        December 31, 2005:
  On
        February 1, 2006, the Company filed a Form 8-K dated January 31, 2006, relating to
        an
        Agreement and Plan of Merger with JDMD Investments, LLC, an Arizona limited liability
        company, Stratford Holdings, LLC, an Arizona limited liability company, and
        Stratford Acquisition, LLC, an Arizona limited liability company and
        wholly-owned subsidiary of Stratford Holdings, pursuant to which Stratford
        Acquisition will merge with and into the Company, with the Company continuing
        as
        the surviving corporation.


**Item
              14.**
            **Principal
                Accountant Fees and
                Services**




The
        following is a summary of the fees billed to us by KPMG, LLP, our independent
        auditors, for professional services rendered for the fiscal years December
        31,
        2005 and December 31, 2004:
 40
 **Table
                  of Contents**
 **Index
                  to Financial
                  Statements**
 **Fee Category**
              ****
              **Fiscal
                  2005
                  Fees**
              ****
              **Fiscal
                  2004
                  Fees**Audit
                Fees (1)
              
              $
              90,000
              
              $
              82,000Audit-Related
                  Fees (2)
              
              
              0
              
              
              7,000Tax
                  Fees (3)
              
              
              66,000
              
              
              44,000All
                  Other Fees (4)
              
              
              0
              
              
              0Total
                Fees
              
              $
              156,000
              
              $
              133,000
  (1)
              Audit
                  Fees consist of aggregate fees billed for professional services
                  rendered
                  for the audit of our annual financial statements and review of
                  the interim
                  financial statements included in quarterly reports for the fiscal
                  years
                  ended December 31, 2005 and December 31, 2004,
                  respectively.
 (2)
              Audit-Related
                  Fees consist of aggregate fees billed for assurance and related
                  services
                  that are reasonably
                  related to the performance of the audit or review of our financial
                  statements andare
                  not reported under“Audit
                  Fees.”During the fiscal year ended December 31, 2005, there were no Audit
                  Related Fees billed. During the fiscal year ended December 31,
                  2004, Audit
                  Related Fees were billed for professional services rendered in
                  connection
                  with the sale of the real estate
                  segment.
 (3)
              Tax
                  Fees consist of aggregate fees billed for professional services
                  rendered
                  in connection with tax preparation, tax consultation, and statutory
                  filings for the fiscal years ended December 31, 2005 and December
                  31,
                  2004, respectively.
 (4)
              During
                  the fiscal years ended December 31, 2005 and 2004, there were no
                  fees
                  billed for products and services provided by the principal accountant
                  other than those set forth above.
  The
        Board
        of Directors, functioning as the audit committee, believes that the non-audit
        services provided by KPMG LLP are compatible with maintaining the
        auditor ’ s
        independence. None of the time devoted by KPMG LLP on its engagement to audit
        the Company ’ s
        financial statements for the years ended December 31, 2005 and 2004 is
        attributable to work performed by persons other than KPMG LLP employees.
        Before
        KPMG LLP is engaged by the Company or its subsidiaries to render any audit
        or
        non-audit services, the engagement is approved by the Board of Directors,
        functioning as the audit committee, and all such services are approved, and
        were
        approved, in this manner.


41
 **Table
            of Contents**
 **Index
            to Financial
            Statements**


**SIGNATURES**




In
          accordance with the requirements of the Section 13 or 15 (d) of the Exchange
          Act, the registrant caused this report to be signed on its behalf by the
          undersigned, thereunto duly authorized.
 **STRATFORD
                    AMERICAN CORPORATION**
                  RegistrantDate: 
                    March 31, 2006
                By:
                /s/ 
                  David H. EatonDavid
                    H. Eaton, Chairman of the Board and
                  Chief
                    Executive Officer
 Pursuant
          to the requirements of the Securities and Exchange Act of 1934, this report
          has
          been signed below by the following persons on behalf of the registrant
          and in
          the capacities and on the dates indicated.


Date: 
                      March 31, 2006
                  By:
                  /s/ 
                    David H. EatonDavid
                      H. Eaton, Chairman of the Board and
                    Chief
                      Executive Officer
                    (Principal Executive
                      Officer)
 Date: 
                          March 31, 2006
                      By:
                      /s/  Mel
                        L. ShultzMel
                          L. Shultz, President and Director
 Date: 
                              March 31, 2006
                          By:
                          /s/  Gerald
                            J. ColangeloGerald
                              J. Colangelo,
                              Director
 Date: 
                                  March 31, 2006
                              By:
                              /s/ 
                                Richard H. DozerRichard
                                  H. Dozer, Director
 Date: 
                                      March 31, 2006
                                  By:
                                  /s/ 
                                    Dale M. JensenDale M. Jensen,
                                    Director
 Date: 
                        March 31, 2006
                    By:
                    /s/ 
                      Mitchell S. VanceMitchell S. Vance,
                      Director
 Date: 
                        March 31, 2006
                    By:
                    /s/  Daniel
                      E. MatthewsDaniel
                        E. Matthews
                      Controller,
                        Secretary &Treasurer
  42
 **EXHIBITS
        INDEX**
 
 Exhibits
        31.1, 31.2, 31.3 and 32 are filed with this report. The Company hereby
        incorporates all other exhibits by reference pursuant to Rule 12b-32, each
        of
        which (except Exhibits 3.3, 10.9, 10.10, 10.11, 10.12, 10.13, 10.14, 10.15,
        10.16, 10.17, 10.18, 10.19, 10.20, 10.21, 10.22, 14.1 and 21.1) was filed
        as an
        exhibit to the Company ’ s
        Registration on Form 10, which was filed July 22, 1988, and amended on October
        7, 1988, and December 8, 1988. Exhibit 3.3 was filed with the
        Company ’ s
        Registration Statement on Form S-1 on June 12, 1989, with the Securities
        and
        Exchange Commission. Exhibit 10.9 was filed as Exhibit 2.1 to the
        Company ’ s
        Form
        8-K, which was filed with the Securities and Exchange Commission on October
        28,
        1998. Exhibit 10.10 was filed as Exhibit 10.39 to the Company ’ s
        form
        10-KSB for the year ended December31, 1998, which was filed with the Securities
        and Exchange Commission on March 31, 1999. Exhibits 10.11, 10.12, and 10.13
        were
        filed with the Company ’ s
        Form
        10-KSB for the year ended December 31, 1999 which was filed with the Securities
        and Exchange Commission on March 30, 2000. Exhibit 10.14 was filed with the
        Company ’ s
        Form
        10-KSB for the year ended December 31, 2000, which was filed with the Securities
        and Exchange Commission on March 30, 2001. Exhibit 10.15 was filed as Exhibit
        2.1 to the Company ’ s
        Form
        8-K, which was filed with the Securities and Exchange Commission on May 2,
        2001.
        Exhibit 10.16 was filed as Exhibit 2.1 to the Company ’ s
        Form
        8-K, which was filed with the Securities and Exchange Commission on June
        18,
        2002. Exhibit 10.17 was filed as Exhibit 2.1 to the Company ’ s
        Form
        8-K, which was filed with the Securities and Exchange Commission on December
        26,
        2002. Exhibit 10.18 was filed as Exhibit 10.1 to the Company ’ s
        Form
        8-K, which was filed with the Securities and Exchange Commission on December
        26,
        2002. Exhibit 10.19 was filed with Form 10-KSB for the year ended December
        31,
        2002, which was filed with the Securities and Exchange Commission on March
        31,
        2003. Exhibit 10.20 was filed with the Company ’ s
        Definitive Proxy Statement (Schedule 14A) for its annual meeting of shareholders
        held on July 8, 1998, which was filed with the Securities and Exchange
        Commission on April 28, 1998. Exhibit 10.21 was filed as Exhibit 99.2 to
        the
        Company ’ s
        Form
        8-K, which was filed with the Securities and Exchange Commission on November
        15,
        2004. Exhibit 10.22 was filed as Exhibit 2.1 to the Company ’ s
        Form
        8-K, which was filed with the Securities and Exchange Commission on February
        1,
        2006. Exhibit 14.1 was filed as Exhibit A with the Company ’ s
        Definitive Proxy Statement (Schedule 14A) for its annual meeting of shareholders
        held on June 20, 2004, which was filed with the Securities and Exchange
        Commission on April 29, 2004. Exhibit 21.1 was filed with the
        Company ’ s
        Form
        10-KSB for the year ended December 31, 2003, which was filed with Securities
        and
        Exchange Commission on March 31, 2004.
 
 **Number**
              **Description**3.1
              Articles
                  of Incorporation3.2
              By-laws3.3
              Articles
                  of Amendment to Articles of Incorporation4.1
              Form
                  of Common Stock Certificate4.2
              Form
                  of Series“A”Preferred Stock Certificate4.3
              Articles
                  IV of the Articles of Incorporation4.4
              Article
                  III of the Bylaws10.1
              Indemnification
                  Agreement, dated as of May 19, 1988, between the Company and Mel
                  L.
                  Shultz10.2
              Schedule
                  of Omitted Indemnification Agreements10.3
              Indemnification
                  Agreement, dated as of February 19, 1988, relating to
                  guarantees10.4
              Indemnification
                  Agreement, dated as of May 10, 1988, relating to
                  guarantees10.5
              Registration
                  Agreement, dated as of February 19, 199810.6
              Agreement,
                  dated as of February 18, 1988, relating to restrictions against
                  preferred
                  shares
  43
 **Number**
                **Description**
 10.7
              Trust
                  Agreement, dated as of June 18, 198710.8
              Share
                  Sale and Registration Agreement, dated January 31, 198910.9
              Acquisition
                  Agreement between Stratford American Car Rental Systems, Inc. and
                  Dollar
                  Rent A Car Systems, Inc. dated September 24, 199810.10
              Net
                  Lease Agreement between Stratford American Car Rental Systems,
                  Inc. and
                  Dollar Rent A Car Systems, Inc. dated October 1, 199810.11
              Post-Closing
                  Statement between Dollar Rent A Car Systems, Inc. and Stratford
                  American
                  Car Rental Systems, Inc. dated January 27, 199910.12
              Settlement
                  Agreement between Stratford American Resource Corporation, Energy
                  Investments Advisors, Inc., Oil & Gas Advisors, Inc., Petroleum
                  Advisors & Co., Samuel B. Davis, and Hugh J. Davis, dated October 6,
                  199910.13
              Purchase
                  Agreement by and between Foot Creek Corporation of Arizona and
                  Grandilla
                  (Arizona), Inc. and Stratford American Car Rental Systems, Inc.
                  dated
                  December 29, 199910.14
              Operating
                  Agreement between DVI Raintree, LLC, Stratford American Corporation
                  and
                  Colonial Raintree, LLC dated October 26, 200010.15
              Stock
                  Purchase Agreement, dated March 22, 2001 by and among SA Oil and
                  Gas
                  Corporation, the shareholders of SA Oil and Gas Corporation and
                  Stratford
                  American Corporation.10.16
              Purchase
                  and Sale Agreement, dated June 5, 2002 by and between Crown Energy
                  Drilling Production Fund 2001-1 Limited Partnership and Stratford
                  American
                  Energy Corporation10.17
              Purchase
                  and Sale Agreement, dated July 17, 2002, by and between Opus West
                  Corporation, a Minnesota corporation, and Stratford American
                  Corporation10.18
              Letter
                  Agreement between Stratford American Corporation, JDMD Investments,
                  L.L.C., Diamond Ventures, Inc., Golden Gate Apartments, Ltd., L.P.,
                  Auriga
                  Properties, Inc., DRD-97 Trust and David Goldstein10.19
              Operating
                  Agreement of Scottsdale Thompson Peak, LLC10.20
              Stratford
                  American Corporation 1998 Stock Incentive Plan10.21
              Purchase
                  and Sale Agreement, dated August 30, 2004, by and between
                  Holualoaholualoa,Holualoa
                  Arizona, Inc. and Scottsdale Thompson Peak, LLC10.22
              Agreement
                  and Plan of Merger, dated January 31, 2006, by and
                  betweenJDMD
                  Investments, L.L.C., Stratford Holdings, L.L.C., and
                  StratfordAcquisition,
                  L.L.C.14.1
              Code
                  of Ethics21.1
              Subsidiaries31.1
              Certification
                  pursuant to Section 302 of the Sarbanes-Oxley Act of
                  200231.2
              Certification
                  pursuant to Section 302 of the Sarbanes-Oxley Act of
                  200231.3
              Certification
                  pursuant to Section 302 of the Sarbanes-Oxley Act of
                  200232
              Officer
                  Certification pursuant to Section 906 of the Sarbanes-Oxley Act
                  of
                  2002
  Note:  Shareholders
        may obtain copies of Exhibits by making written request to the Secretary
        of the
        Corporation and paying copying costs of $0.10 per page, plus postage.  44