UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-KSB

 

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended June 30, 2005

 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 0-7775

 

WESTLAND DEVELOPMENT CO., INC.

(Exact name of Westland as specified in its charter)

 

 

 

Westland's telephone number, including area code: 505-831-9600

 

Securities registered pursuant to Section 12(b) of the Act:None

 

Securities registered pursuant to Section 12(g) of the Act:

 

No Par Value Common Stock

(Title of Class)

 

Check whether the issuer (1) filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the past 12 months (or for suchshorter period that Westland was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. 

Yes x No o

 

Check if disclosure of delinquent filers in response to Item 405 ofRegulation S-B is not contained in this form, and no disclosure will becontained, to the best of Westland's knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-KSBor any amendment to this Form 10-KSB. x

 

State issuer's revenues for its most recent fiscal year:$23,202,901

 

State the aggregate market value of the voting stock held bynon-affiliates computed by reference to the price at which the stock was sold,or the average bid and asked prices of such stock, as of a specified date withinthe past 60 days. On September 28, 2005, there were 701,623 No Par Value Commonshares and 41,700 Class B shares owned by non-affiliates. The last date anystock was bought or sold August 25, 2005 and the price on that day was $20 pershare. Thus the aggregate market value of the voting stock held bynon-affiliates on September 28, 2005, was $13,868,380.

 

The number of shares outstanding of each of Westland's classes of commonstock, as of September 28, 2005, was: No Par Value Common: 709,828 shares; ClassB $1.00 Par Value: 85,100 shares.

 

No documents, other than exhibits, are incorporated herein by reference.

 

**PART I**

 

**ITEM 1: DESCRIPTION OF BUSINESS**

 

Westland Development Co., Inc., a New Mexico for-profit corporation("Westland"), is the successor to a community land grant corporation named Townof Atrisco, which itself was a successor to a Spanish community land grant namedthe Atrisco Land Grant. Information concerning the historical background ofthese predecessor organizations and the conversion in 1967 from a community landgrant corporation into a business corporation can be found in Westland's Form 10and its Form 10-K for the fiscal year ended June 30, 1974. With limitedexceptions, only lineal descendants of the incorporators of the Town of Atriscomay own shares of Westland's Common Stock.

Westland's executive offices are located in its own building at 401 CoorsBoulevard, NW, Albuquerque, New Mexico, 87121, telephone (505) 831-9600, on landwhich was originally part of the Atrisco Land Grant.

 

Westland's General Businesses.

 

Westland derives revenues through commercial and land leases,partnerships formed for various development projects, developed lot sales tohomebuilders and bulk land sales to other land developers.

 

A. Lands held for Investment.

 

Westland is the owner of approximately 57,000 acres of land located onthe west side of Albuquerque, New Mexico. Most of its property is held forlong-term investment and is leased for cattle grazing.

 

B. Land Development and Sale.

 

Over the past approximately 30 years, Westland developed six masterplanned areas, and sold all of them. Those master planned areas were previouslyidentified as Atrisco Urban Center and El Rancho Atrisco, Phases I through V.These lands, except for the Phase V master plan, which was abandoned due to theintroduction of the Petroglyph National Monument, have now been substantiallydeveloped and sold.

 

In 1998 the City of Albuquerque and the County of Bernalillo finalizedthe approval of a 6,400 acre master plan.. In November 1998 Westland and theCity of Albuquerque executed a Pre-Annexation Agreement. In 2000, the Cityannexed an initial 1,665 acres. In 2005 Westland completed construction at itsown cost a pump station, a 4.3 million gallon reservoir and 36-inch transmissionline for the water system to serve the initial 1,665 acres within the MasterPlan area and donated said facilities to the City of Albuquerque per the termsof the Pre-Annexation Agreement. The Pre-Annexation Agreement also requires thatthe City reimburse Westland its costs of constructing the sewer and waterutilities for the initial 1,665 acre by paying all Utility Expansion Chargespaid by or for residents within the Master Plan area to Westland until Westlandis repaid its costs of construction of the sewer and water utilities aggregatingapproximately $7.2 million dollars. Westland currently has under design, isdeveloping, is selling, or has sold lots or super pads to home builders in fivesubdivisions located within the Master Plan area (the Petroglyphs) aggregatingapproximately 412 acres, including Sundoro North (approximately 58 acres) andSundoro South (approximately 60 acres), Watershed (approximately 47 acres),Grasslands (approximately 70 acres planned for single family detached homes and70 acres of commercial and mixed uses), and Stormcloud (approximately 107acres). 

 

In addition, approximately $30,000,000 to $35,000,000 will also befinanced or borne by Westland for additional off site water and sewerdistribution and collection lines, drainage facilities, and roads within theMaster Plan Area. During the last fiscal year Westland has repaid loans obtainedto finance construction costs of the water system and the Zacate and CorderoBusiness Park.

 

There will be additional costs of development of the properties for sale.To the extent that Westland develops the properties, the costs will be borne byWestland for on site water and sewer distribution and collection lines, drainagefacilities, and roads within the annexed area with no reimbursement for thedevelopment of lots. Depending upon the growth of development in this area, itmay take 10 to 15 years for Westland to recover these costs throughsales.

 

 

Albuquerque has adopted impact fees for payment of certain other costsassociated with City development. The adoption of impact fees will increase thecost of developing land on Albuquerque's West side, which includes Westland'slands and may negatively impact Westland's revenues if it is not able to pass onthe impact fee to customers. Impact fees became payable to the City ofAlbuquerque on all subdivisions approved after July 1, 2005. Of the Master Plansubdivisions now under way, about one-half of Sundoro South, Grasslands andStormcloud are subject to impact fees.

 

Assuming continuation of the Company in more or less its current formwith its current management, management remains committed to the construction ofresidential, industrial and commercial developments for lease or sale.Westland's long term business philosophy is to create revenues by enhancing thevalue of Westland's land through careful planning and development, whileretaining ownership of a major portion of the land in perpetuity and to providedividends for its shareholders, when consistent with Westland's need for asufficient cash flow to meet current and near term operatingexpenses.

 

C. Oil and Gas and Grazing Leases.

 

Approximately 50,000 acres are leased to non-affiliated people for cattlegrazing. Because of the extreme drought in the area since 1998, Westland hasgranted rent abatements to the tenants in each of the last five fiscal years. In2003 Westland entered into a five-year lease at $.40 per acre per year with theheirs of the prior tenant.

 

Westland has entered into two oil and gas leases on portions of itsproperties. Management is not aware of any drilling or other activities havingbeen conducted on any of the leased property during the last two fiscal years.

 

Westland also owns and leases certain commercial buildings. (See "RevenueProducing Properties".)

 

D. Other Projects.

 

1. During fiscal 2004 the Company completed and sold many of the projectsthat have been ongoing for some years. Included in these projects was thePainted Sky Subdivision, Tierra Oeste, The Crossing, Cielo Oeste, commercial andresidential acreage located north of Dennis Chavez and Adjoining118th st. It also competedand sold its 50% interest in a facility developed for general storage as well asspecial storage for vehicles and boats. 

 

2. Westland previously reported that in 1994 it entered into alease/option arrangement related to approximately 100 acres located one milenorth of I-40 on Paseo del Volcan. Westland took possession and ownership of thefacility in 1997 as a result of default in the terms of the lease/option. ThePark contains a fully developed recreation and softball complex. This propertyis leased to an unrelated third party for $25,000 per year. 

 

3. During the later months of fiscal 2005, Westland filed with BernalilloCounty an application for approval of an approximately 15,000 acre master planarea located south of I-40. The planned area has been named Zacate and is in theearly stages of development and approval.

. 

4. Westland has a continuing corporate program of donating land orotherwise assisting in projects that Management believes have a long termbeneficial effect to the development and furtherance of the educational andhealth of the community and citizens. In the past it has donated lands forvarious purposes and continues to receive requests, which it has evaluated.During fiscal 2004, it donated 10 acres to a manufacturing company to assist itin locating its business to Albuquerque. Another owner donated approximately anadditional 40 acres, and the 50 acre parcel is being developed to meet themanufacturer's needs. In fiscal 2005, Westland donated 15 acres to AlbuquerquePublic Schools as a part of the sale of land. 

 

E. Reinvestment Properties

 

As part of Westland's plans to defer the tax burden arising from the saleof its lands to the National Park Service under threat of condemnation forinclusion in the Petroglyph National Monument, it reinvested the sale proceedsin the properties discussed below and two vacant land parcels. As a result ofthese purchases, Westland believes that it has deferred payment of taxes on thesales of land to the National Park Service. Westland extended this reinvestmentprogram to other money received as a result of the condemnation of any of itsproperties by any governmental unit. 

 

 

The Commercial properties are the following:  

 

 

 

 

 

 

 

 

Current Real Estate Market Conditions

 

The market conditions for the development and sale of properties inAlbuquerque appear to be stable for the near term. Westland has been able tosell the residential properties it has developed. Demand appears to becontinuing for lots in the areas being developed by Westland, and Management ishopeful that sales will increase next year if mortgage interest rates remain atrelatively low rates. Management believes that for the foreseeable future,residential, commercial and industrial construction will continue at a moderatepace in the Albuquerque real estate market.

 

Competition

 

Westland's industrial parks - Volcano Business Park and the industriallands within the planned area now compete, and will continue to compete, withother business and industrial parks in the Albuquerque area, including some thatare more established and some that are located nearer the major populationcenters of Albuquerque.

 

Residential subdivisions on Westland's land compete with other areas inthe Albuquerque housing market (essentially Bernalillo County and portions ofSandoval County and Valencia County), as well as with other subdivisions on thewest side of the City of Albuquerque. A number of large subdivisions to thenorth of Westland's 

land are nearly fully sold. Growth continues in other large subdivisionslocated about five to six miles north of Westland's lands as well as propertiesowned by others located on Albuquerque's Southwest Mesa.

 

The implementation of impact fees by the City of Albuquerque haveresulted in builders asking for discounted prices for lots, but has not, as yet,had any adverse effect on Westland's ability to sell property in competitionwith developers of land located in neighboring counties upon which no suchimpact fees may be assessed. (See "Governmental Regulations".)

 

Employees

 

As of June 30, 2005, Westland had nine full-time and seven part-timeemployees. Westland's president, who is also a director, is a full timeemployee. Ms. Georgia Baca, a director, is a part time employee. Westland alsohas contractual relationships with a person who is an officer and a director,who provides various services to Westland outside his duties as a director orofficer. 

 

Government Regulations

 

Westland's ability to undertake an active program of development of itsland and management of its rental properties (whether such development isperformed by Westland itself or by sale of Westland's land to others fordevelopment) is dependent on Westland's ability to comply with laws andregulations of the State of New Mexico, Bernalillo County, and the City ofAlbuquerque, applicable to general environmental protection, land-use planning,annexation, zoning and subdivisions. Both County and City regulate thesubdivision of land and impose zoning and building permit requirements. Thesubdivision regulations of both Bernalillo County and the City of Albuquerquerequire, as a condition of approval of proposed subdivisions, that adequateprovision be made by the developer for land use planning, water (both toquantity and quality), liquid waste disposal, solid waste disposal, sufficientand adequate roads and storm drain management.

 

During fiscal year 2003 the City of Albuquerque adopted a Planned GrowthStrategy, which may have a major negative impact on Westland's ability todevelop its unannexed lands for the foreseeable future. The existing annexedproperties in the Master Plan Area should not be affected by this newlegislation.

 

Although compliance with federal, state, and local provisions relating tothe protection of the environment, including laws regulating subdivisions andland-use planning and endangered species, has in recent years had no materialeffect upon the capital expenditures, earnings and competitive position ofWestland, no assurance can be given that this situation will continue. Requestsrelating to drainage, traffic flow and similar matters from the City ofAlbuquerque have occasionally delayed the receipt of necessary approvals andrequired modification of development proposals. The expected opening of theEclipse plant at Double Eagle II Municipal Airport to the north of Westland'sland on Paseo del Volcan may have an impact on the use of and planning forWestland's land in the vicinity of the airport. Management believes theconstruction of the Eclipse factory at Double Eagle II Airport and theconstruction of a manufacturing plant in the same area, will favorably impactthe value of Westland's lands. However, some City Council members are insistingthat the size of the connecting water line be so small as to prohibit tie-ins byother users, including Westland.

 

In the past at Westland's request, the City of Albuquerque createdSpecial Assessment Districts affecting the Atrisco Urban Center and El RanchoAtrisco areas for the financing of water, sewer, paving and other streetimprovements, and levied assessment liens on them. This mechanism may provide away to finance the improvements, and SAD's may be available for futuredevelopment of Westland's property. Recently enacted legislation now permits theuse of Public Improvement District bonds (PID's) for this purpose and this formof tax assessment financing may be available to Westland. Management isresearching this issue and no decision has been made at the time of this report.

 

A mandate by the State Legislature for implementation of Impact Fees mayresult in Westland's lands being disadvantaged because the fees that surroundingmunicipalities and counties charge may be less than those that will be chargedby Albuquerque and Bernalillo County. Bernalillo County began the assessment ofsuch fees on January 1, 1996, but Albuquerque has only recently implemented thefees. 

 

 

Availability of Water and Municipal Services

 

The unavailability of sufficient water has often been a major inhibitingfactor in the land development business in the Southwest. The extent ofWestland's water rights has not been determined, however, Westland retained theservices of two water specialists to investigate the existence of any Westlandwater rights and to otherwise consult with Westland on matters involvingavailability of water. As a result of these services, Westland has declared itsownership of a certain amount of water rights but the claimed rights have notbeen adjudicated to fully determine their validity. However, lack of ownershipof water rights by Westland would not be an inhibiting factor to the developmentof Westland's land if adequate water were to be made available through the newlycreated City-County Water Utility Authority and/or other water sources or bypurchase by Westland or by a developer that might purchase and develop land. Forexample, Tierra West Mobile Home Park was created on land sold by Westland nearNine Mile Hill and the recreation complex leased or purchased water rights anddrilled wells to meet their water needs.

 

Most of Westland's land lies outside the municipal limits of the City ofAlbuquerque and is not furnished with water or other services. Westlandexperienced little difficulty in having its previous developments furnished withservices, but the same cannot be assumed for other areas of Westland's land andfuture developments.

 

Other Factors Affecting Development of Westland's Land  

 

Various activist groups, as well as neighborhood organizationsoccasionally take actions that might have some impact upon or delay Westland'splans for the development of some of its lands. Management is aware that somepeople or small groups of people continually express opposition to Westland'soperating plans.

 

**ITEM 2: DESCRIPTION OF PROPERTIES**

 

The major physical assets owned by Westland are its land, which is ownedin fee simple. The land is mostly comprised of approximately 57,000 acres ofundeveloped land held for long-term investment. Approximately 6,400 acres arelocated in Westland's Master Plan area, of which 1665 acres have been annexedinto the City of Albuquerque and another 900 acre tract, called the AtriscoTerrace, was condemned by the City of Albuquerque for open space.

Westland also owns the Atrisco Urban Center office building, comprisingapproximately 11,097 square feet, 4,166 of which is leased to a Bank , while theremainder is used by Westland for its executive offices. This building iscollateral for a $712,500 bank line of credit obtained in July, 2002. Westlandalso owns seven commercial buildings that are leased to others. (See "Item 1.Business - Reinvestment Properties.")

Interstate Highway I-40, the main east-west highway through Albuquerque,crosses Westland's land. Access to Westland's land from Interstate 40 isprovided by the Coors Boulevard interchange near the eastern edge of Westland'sland, by the Unser Boulevard interchange at the western edge of the AtriscoUrban Center, by the 98th Street interchange to the west of the Atrisco UrbanCenter and by the Paseo del Volcan interchange where I-40, Paseo del Volcan andCentral Avenue meet. Running north from the I-40 interchange, Paseo del Volcantraverses about 4 1/2 miles of Westland's land to the Double Eagle II Airport.Bernalillo County has extended Paseo del Volcan south of the I-40 interchange tothe point at which it intersects Dennis Chavez Blvd. (formerly Rio Bravo) toform an inner loop for the City's southwest quadrant.

Westland and other landowners and developers (the Northwest LoopAssociation) dedicated land and have paid a portion of the design costs for theNorthwest Loop, which has been approved by the New Mexico State HighwayCommission. The Northwest Loop will extend for approximately 39 miles and willconnect I-40 and 1-25, through New Mexico State Highway 44, and will cross thewestern portion of Westland's land lying within the Rio Puerco Valley. In 1995Westland donated 169 acres for development of the Northwest Loop. Completion ofthe Northwest Loop is not expected for about 15 years.

Most of Westland's land is remote and not readily accessible, notserviced by utilities, and Management believes that the bulk of its land willnot be available for development in the foreseeable future. A large portion ofthe undeveloped land is leased for agricultural uses. (See "Item 1. Business.").The bulk of Westland's undeveloped land is held for long-terminvestment.

In the opinion of Westland's Management, its developed property isadequately covered by insurance.

 

**ITEM 3: LEGAL PROCEEDINGS**

 

Other than ordinary routine litigation incidental to Westland's business,neither Westland nor any member of management is the subject of any pending orthreatened legal proceedings.

 

**ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS**

 

No matters were submitted to a vote of security holders during the fourthquarter of the fiscal year ended June 30, 2005.

 

**PART II**

 

**ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERMATTERS.**

 

Because ownership of Westland's stock is restricted in the mannerdiscussed below, no established public trading market exists for Westland'soutstanding shares and, to the best of Westland's knowledge, no dealer has made,is making, or is attempting to create such a market from which to determine anaggregate market value of any of Westland's stock. In 1989, Westland enteredinto an arrangement with an independent stockbroker to broker transactions inWestland's stock between shareholders. The broker has informed Westland that theprice at which Westland's common stock had been bought and sold by Westland'sshareholders during the ninety (90) days preceding this date of this report hasbeen $20 per share.

 

Since 1982, the outstanding shares have been subject to restrictionsimposed by a majority of Westland's shareholders who amended Westland's Articlesof Incorporation. Those Articles prohibit (with certain limited exceptions)transfer of Westland stock to persons other than lineal descendants of theoriginal incorporators of the Town of Atrisco (a New Mexico Community Land GrantCorporation).

 

The following table sets forth as of September 15, 2005, the number ofholders of the classes of Westland's shares:

 

 

 

Dividends: During fiscal year ended June 30, 2005 Westland paid cashdividends to shareholders of $797,159, inclusive of associated costs. Subsequentto June 30, 2005, the Company paid a cash dividend of $1.00 per share for anaggregate dividend payment to the shareholders of $797,177, inclusive ofassociated costs .

 

**ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OFOPERATIONS**

 

In the past fiscal year, land sales were greater than during the prioryear as the Company experienced increased sales of improved residential lots anda 53 acre large parcel sale to Albuquerque Public Schools.

 

During fiscal 2005, Albuquerque continued the growth pattern that hasbenefited Westland during the past ten years. Albuquerque continues to be one ofthe fastest growing cities in the Southwest and, because of certain geographicaland other limitations on its growth, Westland's lands lie directly in the pathof future predictable growth patterns. Sales of improved residential lots infiscal 2004 were approximately $7,598,000, and large parcel sales wereapproximately $5,013,000. Sales of improved residential lots in fiscal 2005 wereapproximately $19,187,000 and large parcel sales were approximately$2,642,000.

Westland's future revenues will continue to be largely dependent upon thesale of land. The Company's assets are illiquid, comprising principallyundeveloped land. Sales are dependent upon the market conditions inAlbuquerque.

 

Westland anticipates making capital commitments for land developmentprojects over the next few years as the economy and opportunities dictate thatsuch expenditures would be warranted. Capital commitments may include specialassessment districts for roads and water and sewer lines on its land. In somecases infrastructure improvements are paid for by assessments, which increasethe value of Westland's land and make further 

development possible. Westland intends to incur capital expenditures whenmanagement determines such investments will increase the value of the land andgenerate future revenue.

Land is Westland's principal capital resource, and is valued, forfinancial accounting purposes, at its 1907 value plus the cost of improvements.Westland's balance sheet does not reflect the actual current value of thisasset. The Company has no current appraisals of the land and, therefore, theactual value of the land is not known. The carrying value of the land wasincreased during each of the last three fiscal years, due to increasedinvestment. The carrying value will be increased or decreased regularly asWestland acquires, sells or develops parcels of land. Management believes theJune 30, 2005 carrying value of the land is substantially less than its currentmarket value. Westland's balance sheet also segregates income-producingproperties, which consist of commercial real estate and improvements. The actualvalue of Westland's land varies depending on national and local marketconditions and the amount and proximity of roads, utilities and other amenitiesto the land under development. As Albuquerque continues to grow, the land valueof both developed and undeveloped land should increase.

As reported in prior years, Westland has received approval of its MasterPlan, the initial 1,600 acres of which are called The Petroglyphs, by both theCity of Albuquerque and Bernalillo County. The area lies north of Interstate 40and south of the Petroglyph National Monument between Unser Boulevard and Paseodel Vulcan Road. It consists of approximately 6,400 acres, but does not includeany land located within the Monument and will have no adverse impact on theMonument. During fiscal year 2001, the City of Albuquerque annexed the initial1,665 acres of the master planned area. This has permitted sewer and waterservices to be extended in an orderly manner to that acreage as it is beingdeveloped. Westland has agreed with the City that it will pay the cost of theinfrastructure normally paid for by the City for new development in the masterplanned area and will recover those costs through a fee charged by the City aseach lot is connected to the services. Sale of the initial parcels of landwithin the initially annexed area began in mid fall of calendar 2004, and areanticipated to continue into the foreseeable future.

 

Westland's long term business philosophy is to enhance the value of itsland through careful planning and development, while retaining ownership of amajor portion of the land in perpetuity and simultaneously increasing the valueof Westland's stock and to provide dividends for its shareholders, whenconsistent with Westland's need for a sufficient cash flow to meet currentoperating expenses.

 

Financial Condition:

During fiscal 2005, total assets increased to $41,959,595 from$40,343,148, and liabilities decreased from $24,496,595 to $21,608,056. Duringfiscal 2005 Westland invested $1,654,404 in income producing and other assetswhile during 2004 it invested $1,729,834 in such property and assets. Cash andcash equivalents increased by $587,520. Operations generated $6,077,333 duringthe period. In addition, the company reduced its indebtedness under short-termlines of credit and construction loans related to the Petroglyph development by$3,054,761, net. $797,159 was paid to shareholders in the form of dividends.Taken together, land held for development and income-producing properties, whichaggregate approximately $23,713,809, decreased by $7,049,863 net ofdepreciation. Of this decrease, $7,230,761 of costs associated with thePetroglyphs' water system were reclassified as a receivable from the City ofAlbuquerque.

 

At June 30, 2005, the Company maintained lines of credit with a localbank aggregating $7,000,000, collateralized by approximately $4,000,000 oftreasury securities. The purpose of these lines is to provide funds necessaryfor its continued expansion. At year-end, the outstanding balances totaled$1,290,000.

 

During fiscal 2006, the Company will be obligated to pay income tax ofapproximately $1,889,683 should replacement properties totaling $4,724,208, forlands sold under condemnation, not be reinvested. Management diligently seeksincome-producing properties for acquisition as replacement properties and fullyexpects to offset this tax obligation.

 

During the year fiscal year ended June 30, 2005, the Company utilizedcash generated from operations and cash on hand, as well as its liquidityarrangements, to cover its capital requirements and construction expenditures.The Company anticipates that internal cash generation and current debt capacitywill be sufficient to meet all of its capital requirements and constructionexpenditures for the current fiscal year. To cover the difference in the amountsand timing of cash generation and cash requirements, the Company intends to useshort-term borrowings under its current and future liquidity arrangements. AtJune 30, 2005, the two largest components of the Company's liabilities werenotes and mortgages payable of $11,200,342 and deferred taxes of $7,217,426. Themortgage debt service is paid from the receipt of rental revenue, and taxesdeferred by the acquisition of the properties subject to these 

mortgages will not have to be repaid until and if the properties aresold. Beginning in 2003, the Company entered into various construction contractsfor the development of a water infrastructure system for new residential andcommercial properties. In March, 2005 the water system was transferred to theCity of Albuquerque at a cost of $7,230,761. The Company will begin receivingreimbursement of the cost of this system beginning in March, 2006. 

 

Results of Operations**:**

 

In fiscal 2005, land revenues increased by $9,022,346 from $12,806,804 in2004 to $21,289,150. During 2005, non-condemnation large parcel land salesdecreased by $2,370,998 from $5,013,215 to $2,642,217. Improved lot salesincreased by $11,589,000 as sales within the Petroglyph Master Plan began. Therelated cost of land revenues increased by $7,608,418 from $3,790,191 in 2004 to$11,398,609. The gross profit ratio on all sales decreased from 71% to 38%because of the shift in sales efforts from large parcel sales to developed lotsales, which bear significantly higher improvement costs. Rental revenueincreased from $1,213,190 to $1,373,851 and the related costs increased from$309,596 to $430,782. General, administrative and operating expense decreased by$3,672 from $2,537,765 to $2,534,093.

 

**ITEM 7: FINANCIAL STATEMENTS**

 

**Report of Independent Registered Public AccountingFirm**

 

Stockholders

Westland Development Co., Inc.

 

We have audited the accompanying balance sheet of Westland DevelopmentCo., Inc. as of June 30, 2005, and the related statements of earnings,stockholders' equity and cash flows for each of the two years in the periodended June 30, 2005. These financial statements are the responsibility of theCompany's management. Our responsibility is to express an opinion on thesefinancial statements based on our audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. The Company is not required tohave, nor were we engaged to perform an audit of its internal control overfinancial reporting. Our audit included consideration of internal control overfinancial reporting as a basis for designing audit procedures that areappropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company's intended control over financialreporting. Accordingly, we express no such opinion. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in thefinancial statements, assessing the accounting principles used statementpresentation. We believe that our audits provide a reasonable basis for ouropinion.and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.

In our opinion, the financial statements referred to above presentfairly, in all material respects, the financial position of Westland DevelopmentCo., Inc. as of June 30, 2005, and the results of its operations and its cashflows for each of the two years in the period ended June 30, 2005 in conformitywith accounting principles generally accepted in the United States ofAmerica.

 

GRANT THORNTON LLP

 

Oklahoma City, Oklahoma

August 26, 2005

 

BALANCE SHEET

 

June 30, 2005

 

 

Cash and cash equivalents

Receivables

 

 

 

 

 

 

Stockholders' equity (note G)

 

      $ 41,959,595

 

STATEMENTS OF EARNINGS

 

Year ended June 30,

 

 

Revenues

 

Costs and expenses

 

 

Other (income) expense

 

 

 

 

 

 

 

 

 

STATEMENT OF STOCKHOLDERS' EQUITY

 

Years ended June 30, 2005 and 2004

 

 

 

 

 

 

 

.

 

 

 

Balances at June 30, 2005709,827$8,50085,100$85,100$491,061$19,766,878$20,351,539

 

STATEMENTS OF CASH FLOWS

 

Year ended June 30,

 

 

 

Increase in Cash and Cash Equivalents

 

Cash flows from operating activities

Cash received from land sales and collections on real estate

 

 

Cash flows from investing activities

 

 

Cash flows from financing activities

 

 

 

 

Cash and cash equivalents at end of year$ 9,517,329$ 8,929,809

 

STATEMENTS OF CASH FLOWS - CONTINUED

 

Year ended June 30,

**2005**        2004    

 

Reconciliation of Net Earnings to Net Cash Provided by OperatingActivities

 

Adjustments to reconcile net earnings to net cash provided by operatingactivities

 

 

 

NOTES TO FINANCIAL STATEMENTS

 

June 30, 2005 and 2004

 

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTINGPOLICIES

 

 

In 1892, the descendants of the owners of a land grant deeded in 1692 bythe Kingdom of Spain became incorporators of a land grant corporation named Townof Atrisco. Ownership of the Town of Atrisco was based on proportionateownership of the land grant. In 1967, the Town of Atrisco was reorganized andbecame Westland Development Co., Inc. (the "Company"), with the heirs receivingshares in the Company in proportion to their ancestors' interests in the Town ofAtrisco Corporation. The net assets of $232,582 at the date of reorganizationwere assigned as follows:

 

 

The Company estimated that it owned approximately 49,000 acres of land atthe date of incorporation as Westland Development Co., Inc. Such acreage wasused as the beginning cost basis for financial reporting purposes and was valuedat $127,400 ($2.60 per acre) based on an appraisal in 1973 which determined theapproximate value of the land in 1907. This date approximates the date that thePatent of Confirmation covering the land comprising the Atrisco Land Grant wasgiven to the Town of Atrisco by the United States of America. Since the date ofthe Patent of Confirmation, the Company's acreage has increased in market value,but a full determination of such value has not been made.

 

 

The Company develops, sells or leases its real estate holdings, most ofwhich are located in or near Albuquerque, New Mexico. The Company may use jointventures or participation in limited partnerships to accomplish theseactivities. Revenue sources for the years ended June 30, 2005 and 2004 consistprimarily of proceeds from land sales and governmental condemnations and rentalsfrom developed properties, such as single-tenant retail stores and office space.Land sales are primarily to commercial developers and others in the Albuquerquearea and certain governmental agencies, and the terms of sale include both cashand, to a lesser extent, internal financing by the Company. Any such financingis collateralized by the associated land. The Company has relied primarily uponcash land sales over the past several years due to the collection riskassociated with real estate contracts.

 

 

NOTES TO FINANCIAL STATEMENTS - CONTINUED

 

June 30, 2005 and 2004

 

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES -CONTINUED

 

 

Cash and cash equivalents are considered to include highly liquidinvestments with maturities of three months or less and money marketfunds.

 

The Company maintains its cash in bank deposit accounts which, at times,may exceed federally insured limits and in certain other funds which are notfederally insured. Cash equivalents include approximately $4,315,000 in a moneymarket account with an investment banking company. The Company has notexperienced any losses in such accounts and believes it is not exposed to anysignificant credit risk on cash and cash equivalents.

 

Restricted cash at June 30, 2005 represents amountstreasury securitiespledged as collateral against a $5 million construction line of credit to beused to pay construction contracts for the development of new residential andcommercial properties. 

 

 

Land and improvements held for future development are recorded at costnot to exceed net realizable value. Improvements consist of abstracts, surveys,legal fees, master and sector plans, infrastructure improvements and other costsrelated to land held by the Company which are allocated to respective tractsprimarily by specific identification of costs.

 

 

Income-producing properties and property and equipment are stated atcost, less accumulated depreciation, computed on a straight-line basis overtheir estimated lives of three to 30 years. The cost of the building in whichthe Company has its offices, a portion of which is rented to others, has beenallocated to income-producing properties and property and equipment based uponsquare footage.

 

 

Sales of developed lots to home builders are recognized on a case by casebasis dependent upon the transactions satisfaction of the full accrual methodrequirements of Statement of Financial Accounting Standards ("SFAS") No. 66"*Accounting for Sales of Real Estate"*. Under New Mexico law, conveyance may begin once a final plat is filedfor a given development. Obtaining a plat requires that the developer eithercomplete in its entirety the infrastructure related to the project or providefinancial guarantees in the form of bonds to ensure that the project will becompleted. Generally, a homebuilder will contract to 

 

NOTES TO FINANCIAL STATEMENTS - CONTINUED

 

June 30, 2005 and 2004

 

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES -CONTINUED

 

 

purchase a fixed number of lots in a given development. TheCompanyWestland's contracts generally require the homebuilder to conclude thepurchase of a small number of contracted lots (typically 5-10) at the time thefinal plat is recorded. Remaining lots are then scheduled in increments acertain number of days from 'substantial completion'. In this event, the Companyutilizes the City of Albuquerque Engineer's Acceptance Letter as the event thattriggers 'substantial completion'. The vast majority of the Company's sales tohomebuilders occur under non recourse cash transactions, subsequent to the'substantial completion' of the development and as such are recorded utilizingthe full accrual method. At the period ended June 30, 2005, the Company was notobligated under additional construction commitments related to any recordedsale. As such, there are no open transactions requiring percentage of completiontreatment pursuant to paragraphs 41 and 42 of SFAS 66.

 

Rental income is recognized when earned under lease agreements. Rentsreceived in advance are deferred until earned. Revenue from leases withescalating rental payments are recognized on a straight-line basis over theminimum lease term. For leases with provisions for additional rental paymentsbased on percentage of annual sales, contingent rental income is recognized whenthe lessee provides an accounting which reflects the contingent rental incomehas been earned under the terms of the lease agreements.

 

 

The company does not have any grazing lease income associated with anyland to which the Company has capitalized project costs. Once a project is underconstruction or costs related to the development of a project begins beingcapitalized, no further leasing activities occur which could be offset againstcapitalized costs under paragraph 10 of SFAS 67. No land held for oil and gasdrilling is subject to foreseeable future real estate development.

 

 

Deferred income tax assets or liabilities are determined based on thedifference between financial statement and tax bases of certain assets andliabilities as measured by the enacted tax rates in effect using the liabilitymethod. Valuation allowances are established by management when necessary toreduce deferred tax assets to the amount expected to be realized.

 

 

NOTES TO FINANCIAL STATEMENTS - CONTINUED

 

June 30, 2005 and 2004

 

 

Earnings per common share are based upon the weighted average number ofcommon shares outstanding during the year, including the number of no par valuecommon shares which may be issued in connection with eliminating fractionalshares (which resulted from the determination made by the Court in an heirshipcase) and the number of no par value common shares for which the Court ruledthat no incorporator or heirs existed (5,047 total shares). The Company has nopotential common stock items.

 

 

In preparing financial statements in conformity with accountingprinciples generally accepted in the United States, management is required tomake estimates and assumptions that affect certain reported amounts anddisclosures; accordingly, actual results could differ from thoseestimates.

 

 

Long-lived assets to be held and used are reviewed for impairment,generally on a property-by-property basis, whenever events or changes incircumstances indicate that the related carrying amount may not be recoverable.When required, impairment losses are recognized based upon the estimated fairvalue of the asset.

 

 

The Company utilizes derivative instruments with respect to the interestrate on a portion of its debt to achieve a more predictable cash flow, as wellas to reduce its exposure to rate fluctuations. These transactions are generallyinterest rate swap agreements and are entered into with financialinstitutions.

 

The Financial Accounting Standards Board's SFAS No. 133, *Accounting for Derivative Instruments and Certain HedgingActivities*, and subsequent pronouncements require thatall derivative instruments be recorded on the balance sheet at their respectivefair values. The Company has elected not to designate derivative instruments ashedges in accordance with SFAS No. 133, even if they would otherwise qualify asa hedge. Therefore, the changes in fair value of these instruments that occurprior to their maturity are reported in the statements of earnings as anunrealized gain or loss on interest rate swaps. As of June 30, 2005, the fairvalue of the agreement was not significant to the financial statements. Amountsrecorded as an unrealized gain or loss on interest rate swaps do not representcash gains and losses. Rather these amounts are temporary valuation swings basedon the anticipated future cash flows from the contract. The actual future cashflows will be based on the interest rate in effect at the time of settlement andmay be more or less than fair value estimates used at year-end. Actual cashsettlements are included in interest expense.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

 

 

 

NOTE B - REAL ESTATE CONTRACT RECEIVABLE

 

The real estate contract receivable at June 30, 2005 consists of acontract with variable interest (8% at June 30, 2005), is due in a lump-sumpayment of principal and interest at maturity in 2006 and is collateralized byland.

 

NOTE C - LAND AND IMPROVEMENTS HELD FOR FUTURE DEVELOPMENT AND UTILITYEXPANSION CHARGES

 

The Company estimates that it presently owns approximately 57,000 acresof land, primarily including land located within the boundaries of the Town ofAtrisco Land Grant and land located elsewhere which the Company has acquiredsince incorporation. Improvements are currently in process on approximately3,500 acres of the Company's land ('Master Plan' residential community).Improvements consist of abstracts, surveys, legal fees, master and sector plans,infrastructure improvements and other costs related to land held by the Companywhich are allocated to respective tracts primarily by specific identification ofcosts.

 

During the fiscal year ended June 30, 2004, the Company constructed awater infrastructure for the future development of new residential andcommercial properties. The total project cost was approximately $7,200,000, wascompleted in early July 2004, and was transferred to the City of Albuquerque inMarch 2005. The Company will receive Utility Expansion Charge ("UEC")reimbursements from the City of Albuquerque at an approximate rate of $2,619 perresidential hook up beginning in March 2006 until such time that the projectcost has been recovered. The Company anticipates a recovery rate of 400 hook ups($1,047,600) per year and anticipates full recovery within 7-10 years.

 

Plans for ultimate development of the remaining property have not beenfinalized.

 

Land and improvements consist of the following at June 30,2005:

 

 

 

NOTES TO FINANCIAL STATEMENTS - CONTINUED

 

June 30, 2005 and 2004

 

NOTE D - INCOME-PRODUCING PROPERTIES

 

Income-producing properties consist primarily of five single-tenantretail store buildings and a portion of the Company's office building and aresummarized as follows at June 30, 2005:

 

 

The Company's rentals from income-producing properties are principallyobtained from tenants through rental payments as provided for undernoncancelable operating leases. The lease terms range from one to 20 years andtypically provide for guaranteed minimum rent, five-year renewals at tenants'option, percentage rent and other charges to cover certain operating costs.Three of the Company's leases with total annual receipts of approximately$881,000 are with a single national retail drug store chain.

 

Minimum future rentals from income-producing properties on noncancelabletenant operating leases as of June 30, 2005 are as follows:

 

 

 

 

 

 

NOTES TO FINANCIAL STATEMENTS - CONTINUED

 

June 30, 2005 and 2004

 

NOTE E - NOTES AND MORTGAGES PAYABLE

 

Notes and mortgages payable are summarized as follows at June 30,2005:

 

 

 

 

 

NOTES TO FINANCIAL STATEMENTS - CONTINUED

 

June 30, 2005 and 2004

 

NOTE E - NOTES AND MORTGAGES PAYABLE (CONTINUED0

 

 

 

 

 

 

The interest rate swap agreement has not been designated as a hedginginstrument. The estimated fair value of the agreement at June 30, 2005 is notsignificant to the financial statements. The fair value of the agreement isdetermined by Compass Bank and is based on the estimated future net cash flowsanticipated under the terms of the agreement using the applicable yield curve asof the valuation date. The Company may be exposed to credit loss in the event ofnonperformance by Compass Bank, but does not anticipatenonperformance.

 

Aggregate required principal payments on notes and mortgages payable asof June 30, 2005 are as follows:

 

 

 

 

NOTES TO FINANCIAL STATEMENTS - CONTINUED

 

June 30, 2005 and 2004

 

NOTE F - INCOME TAXES

 

An analysis of the deferred income tax assets and liabilities as of June30, 2005 is as follows:

 

 

 

Income tax expense(benefit) consists of the following:

Year ended June 30,      

2005        2004     

 

 

NOTE F - INCOME TAXES - CONTINUED

 

The income tax provision is reconciled to the tax computed at statutoryrates as follows:

 

Year ended June 30,      

2005        2004     

 

 

 

 

 

 

NOTES TO FINANCIAL STATEMENTS - CONTINUED

 

June 30, 2005 and 2004

 

NOTE G - COMMON STOCK

 

Under its original Articles of Incorporation (the "Articles"), theCompany was authorized to issue 1,964,448 shares of common stock. During 1999,the Articles were amended to eliminate the authority to issue 736,668 shares ofClass A common stock for $1.45 per share. The remaining authorized stock is asfollows:

 

 

 

At June 30, 2005, 5,047 shares of no par value common stock, uponjudicial determination, can be distributed to stockholders of record as of thedate of incorporation.

 

There is no established market for the Company's common stock. At June30, 2005, 709,827 shares of the Company's no par value common stock were issuedand outstanding. There are 5,047 shares of no par value common stock issuable;1,872 shares which may be issued in connection with eliminating fractionalshares which resulted from the determinations made by the court in the heirshipcase and                        3,175 shares which represent shares for which the court in the heirshipcase ruled that no incorporator or heirs existed. The Company also hasreacquired and canceled 21,794 shares of no par value common stock which havebeen constructively retired. These shares have not been formally retired and, assuch, may be issuable to stockholders of record as of the date ofincorporation.

 

During the year ended June 30, 1999, the Board of Directors approvedprotection against takeover measures whereby a threat of change of three or moredirectors in any one year would result in directors threatened with replacementbeing granted an immediate Class B stock bonus of 5,000 shares if in office as adirector ten years or more, and 2,500 shares of Class B stock if in office as adirector for less than ten years. The maximum number of shares which could beissued under this agreement at June 30, 2005 is 35,000 shares.

 

On July 28, 2005, the Board of Directors approved payment of a $1 pershare dividend to be paid on August 18, 2005 to holders of record on August 11,2005.

 

 

NOTES TO FINANCIAL STATEMENTS - CONTINUED

 

June 30, 2005 and 2004

 

NOTE H - SEGMENT INFORMATION

 

The Company operates primarily in two industry segments. They are asfollows:

 

 

 

Financial information for each industry segment is summarized asfollows:

 

 

 

General corporate assets consist primarily of cash, furniture, equipmentand a portion of an office building, of which the remaining portion is includedin rentals. 

 

NOTE I - BENEFIT PLANS

 

The Company has certain defined contribution employee retirement plansthat provide for employee and employer contributions. The Company's contributionexpense for these plans was approximately $148,000 and $151,000 for 2005 and2004, respectively.

 

NOTE J - SALES TO MAJOR CUSTOMERS

 

Sales to major customers are summarized as follows:

 

During the year ended June 30, 2005, land sales to three customersindividually accounted for 23%, 19% and 13% of total revenues.

 

During the year ended June 30, 2004, land sales to three customersindividually accounted for 21%, 14% and 14% of total revenues.

 

 

NOTES TO FINANCIAL STATEMENTS - CONTINUED

 

June 30, 2005 and 2004

 

NOTE K - COMMITMENTS AND CONTINGENCIES

 

The Company is engaged in various lawsuits either as plaintiff ordefendant which have arisen in the conduct of its business which, in the opinionof management, based upon advice of counsel, would not have a material effect onthe Company's financial position or results of operations. At June 30, 2004, theCompany's balance sheet included an accrual of approximately $346,000 related toclaims asserted by other parties in conjunction with land development agreementstotaling approximately $1,300,000 with which the Company did not agree. TheCompany settled these disputes with no gain or loss through an agreement withthe City of Albuquerque during the current year whereby Westland transferred itsinterest in the Campos De Suenos well and its 1/2 interest in the Tierra Oestesewer line. All accruals related to this dispute have been removed during thecurrent year. 

 

The Company has entered into employment contracts with eight of its keyofficers and employees for periods of one to six years and may include automaticrenewals for 2 additional 3 year periods. In the event of involuntary employeetermination, these employees may receive from one to six times their annualcompensation. The remaining terms under the agreements range from one to sixyears and the maximum severance that could be paid under the contracts isapproximately $3,200,000.

 

The Company has deferred gains for tax reporting for the involuntaryconversion of land by govern-mental authorities resulting in deferred taxliabilities. The deferral requires that the Company replace the land with theproceeds of conversion within specified time limits. As of June 30, 2005, theCompany must purchase replacement property of at least $4,724,208 by June 30,2006 (extension to June 30, 2007 allowable), in order to comply with therequirements of its election for income tax deferral. If replacement property isnot purchased, the Company may be required to pay income taxes on theconversions of approximately $1,890,000 for the year ended June 30,2006.

 

NOTE L - FINANCIAL INSTRUMENTS

 

The following table includes various estimated fair value information,which pertains to the Company's financial instruments, and does not purport torepresent the aggregate net fair value of the Company. The carrying amounts inthe table are the amounts at which the financial instruments are reported in thefinancial statements.

 

 

The following methods and assumptions were used to estimate the fairvalue of each class of financial instruments:

 

 

NOTES TO FINANCIAL STATEMENTS - CONTINUED

 

June 30, 2005 and 2004

 

NOTE L - FINANCIAL INSTRUMENTS (CONTINUED)

 

 

The carrying amount approximates fair value because either the Companyhas the contractual right to receive immediate payment or because of shortmaturities of the financial instruments. Restricted cash approximates fair valueas the deposit account bears interest at market rates.

 

 

This note receivable is collateralized by real estate and accruesinterest at a variable rate. The fair value of the real estate note approximatesthe carrying amount.

 

 

The discounted amount of future cash flows using the Company's currentincremental borrowing rate is used to estimate the fair value of long-termutility expansion charges.

 

 

For fixed rate notes and mortgages, the discounted amount of future cashflows using the Company's current incremental rate of borrowing for similarliabilities is used to estimate fair value. The fair value of variable ratenotes approximates fair value because the rates adjust to market ratechanges.

 

The carrying amounts and estimated fair values of the Company's financialinstruments at June 30, 2005 are as follows:

 

amount                                                                                                                                               fair value  

 

 

 

 

 

**ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE**

 

There have been no changes in or disagreements with Accountants of thekind described by Item 304 of Regulation S-B at any time during Westland's two(2) most recent fiscal years.

 

**ITEM 8A. CONTROLS AND PROCEDURES****** 

 

The Company maintains controls and procedures designed to ensure thatinformation it must disclose in our filings with the SEC is recorded, processed,accumulated and reported on a timely basis. Our principal executive andfinancial officer has reviewed and evaluated the effectiveness of our disclosurecontrols and procedures, as defined in Exchange Act Rules 13a-15(e) and15d-15(e), as of June 30, 2005. Based on such evaluation, our principalexecutive and financial officer has concluded that, as of June 30, 2005, ourdisclosure controls and procedures were effective in timely alerting her tomaterial information related to the Company (and its consolidated subsidiaries)required to be included in our periodic SEC filings. 

 

CHANGES IN INTERNAL CONTROLS

 

There has been no change in our internal control over financial reportingduring the year ended June 30, 2005 that has materially affected, or isreasonably likely to materially affect, our internal control over financialreporting.

 

**ITEM 8B. OTHER INFORMATION**

 

There was no unreported information required to be disclosed in a Reporton Form 8-K during the fourth quarter of the year covered by this Form10-KSB.

 

**PART III**

 

**ITEM 9: DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS;COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT**

 

The following individuals served as Westland's directors and officersduring the fiscal year. Westland has no other promoters or controlpersons.

 

**Directors:**

 

Officer President and Director 

 

**Officers:**

 

 

 

 

The following is biographical information for eachdirector:

 

**Sosimo Sanchez Padilla** is a Class B director andis Chairman of the Board of Directors, Vice President and AssistantSecretary/Treasurer. Mr. Padilla has served as a Director since 1971 and hasbeen the Chairman of the Board of Directors for the last 15 years and is amember of the Company's Executive Committee. Mr. Padilla has been retired fromAlbuquerque Publishing Company for more than 13 years. Mr. Padilla has served onthe State of New Mexico Border Research Institute Support Council and NationalAssociation of Industrial and Office Properties; was Chairman of the New MexicoHighway Commission from 1982 to 1986; served as a Trustee for the University ofAlbuquerque; also served as a Director of the Westside Albuquerque Chamber ofCommerce; the Greater Albuquerque Chamber of Commerce, and the AlbuquerqueHispano Chamber of Commerce. Mr. Padilla was a founder of and for more than 20years served as a Director of the Bank of New Mexico. 

 

**Barbara Page** has been a Class A Director, amember of the Executive Committee and Westland's President and Chief Executiveand Chief Financial Officer since 1989. Ms. Page is a member of the AlbuquerqueEconomic Forum, is a member of National Association of Industrial and OfficeProperties, is a board member of Albuquerque Economic Development Inc., and isalso a member of the Albuquerque Chamber of Commerce, the Albuquerque West SideAssociation, the Albuquerque Hispano Chamber of Commerce and New Mexico HomeBuilders Association. Ms. Page also serves on the Advisory Board of EclipseAviation, a corporation whose business is the development of a new executivetype aircraft to be manufactured on Albuquerque's West Side.

 

**Joe S. Chavez** is a Class B director and hasserved as a Director since 1995 and as Secretary-Treasurer since the retirementof Mr. David C. Armijo at the end of 2003. He is a member of the Company'sExecutive Committee. Mr. Chavez served on the Petroglyph National MonumentAdvisory Committee. For more than the past decade, Mr. Chavez has been aco-owner of Regina's Dance Studio, a business specializing in the sale ofgymnastics equipment costume and ballet apparel and coordination of danceperformances and other functions. Mr. Chavez was employed as a Sales Consultantwith Casey Luna Ford and for more than nine years was . employed by GallesChevrolet as sales manager and director of its used car department. Mr. Chavezwas instrumental in the incorporation and coordination of EIQW (EmploymentInvolvement and Quality of Work Life). Mr. Chavez was employed for 20 years byKimbell Co., OBA Foodway, as Manager Director of storeoperations.****

 

**Josie G. Castillo**, has been a Class C Directorsince 1984, and served as the Company's Treasurer from 1985 to 1989. She is thea member of the Company's.. From 1983 until her retirement in 1995, she wasemployed by the Human Services Department of the State of New Mexico inAlbuquerque, New Mexico.

 

**Charles V. Pena** has been a Class A Director since1996. He is a member of the Company's Executive Committee. Mr. Pena retired fromSafeway stores after 19 years in that employment. During part of that time, hewas a member of the Retail Clerk's Union where he sat on two negotiatingcommittees and twice ran for the Presidency of the Union. Mr. Pena attended theUniversity of New Mexico and the University of Albuquerque, majoring in businesscourses. Since 1993, Mr. Pena owned and operated CJs New Mexican Food Restaurantin Albuquerque, New Mexico until its sale in August of 2004.

 

**Georgia M. Baca**, was appointed in 2004 to fillthe vacancy created by the death of a Class C director. Ms. Baca has beenemployed by Westland for more than the past 10 years. Ms. Baca is the Board'sliaison with shareholders as the Board's Shareholder Representative. 

 

**Troy K Benavidez**, is a Class C director who wasappointed in 2004 to fill the vacancy created by the retirement of a Class Cdirector. Mr. Benavidez is a graduate of Colorado College with a Bachelor degreein Economics. For the past two years, Mr. Benavidez has been employed as theState Government Affairs Manager for AstraZeneca Pharmaceuticals, LP, inAlbuquerque, New Mexico. Prior to that he served as the External RelationsDirector for the Honorable Jane M. Swift, Governor of Massachusetts; as theNorthern Regional Director for the Honorable Pete V. 

Domenici, U. S. Senator for New Mexico; as Chief of Staff to theHonorable Walter D. Bradley, Lt. Governor of New Mexico; and as Deputy Chief ofStaff for the Honorable Steven H. Schiff, U. S, Representative for the State ofNew Mexico.

 

**Ray Mares, Jr**., is a Class B directors waselected as a director at the 2004 meeting of shareholders. He had originallybeen appointed to the board to retirement of a Class B director. Mr. Mares is agraduate of Rio Grande High School in Albuquerque. He is also a graduate of theUniversity of New Mexico where he received a Bachelor degree in Business. Formore than the past ten years, Mr. Mares has been the Owner/Manager of BritewayServices in Albuquerque. Mr. Chavez served in the Naval Reserve as Front LineOperations, Hydraulics Structural-Line Trouble Shooter

 

**Randolph M. Sanchez**, was appointed in 2004 tofill the vacancy created by the retirement of a Class A director. Mr. Sanchezholds a B.S. degree in Business from Columbia College, Columbia, Missouri withemphasis on shopping center management. For the past 8 years, Mr. Sanchez hasbeen the manager of Coronado Center in Albuquerque, and for the 3 years priorthereto was the Marketing Director of that shopping center. Mr. Sanchez has alsobeen the manager of shopping centers located in New Jersey, North and SouthCarolina and in Texas. 

 

The following is biographical information for eachOfficer:

 

As stated above, Mr. Sosimo S. Padilla is the Chairman of the Board ofDirectors, a Vice President and Assistant Secretary/Treasurer. Ms. Barbara Pageis the President, Chief Executive Officer and Chief Financial Officer, and Mr.Joe Chavez is the Secretary-Treasurer for the Company. Other officers of theCompany are the following:

 

**Leroy J. Chavez** was appointed to the position ofVice President of Development on April 26, 1996. The Company has employed Mr.Chavez since August 1984, with his primary responsibility being the supervisionof engineering and development related to the Company's properties. Mr. Chavez'responsibilities include the development of the Company's projects as well asthe planning and zoning of its land holdings. Mr. Chavez holds a B.S. degreefrom the University of New Mexico in Civil Engineering. He is also thequalifying party for the Company's General Contractor's License.

 

**Brent Lesley** was appointed to the position ofVice President of Marketing on April 26, 1996. The Company has employed Mr.Lesley since May of 1986. Mr. Lesley's responsibilities are centered on the saleof real property, from undeveloped land to developed lots. Mr. Lesley'sresponsibilities also include overseeing the acquisition of property for theCompany's income property portfolio and the procurement of project financing onboth a construction and permanent basis. Mr. Lesley holds a B.S. degree fromIowa State University and an MBA degree from the University of NewMexico.

 

**Fred Ambrogi** was appointed to the position ofVice President in the Development Division on December 30, 1999. Mr. Ambrogi hasbeen a Company employee since February 1993. Mr. Ambrogi's responsibilitiesprimarily focus on the planning, design, oversight and coordination of specificCompany development projects, including the negotiation, oversight andcoordination of project related engineering and construction contracts. Mr.Ambrogi holds a B.F.A. degree from the University of New Mexico in Architecture.He has more than 26 years of experience in land development.

 

**Linda Blair** was appointed to the position of VicePresident in 2002. Ms. Blair has been with the Company since 1985. She is theCompany's Office Manager and she has the responsibility of managing theCompany's three cemeteries. Ms. Blair graduated from Kent State University in1972 with a B.A. degree in Spanish and Sociology.

 

**James B. Turk**became the Company's Controller inMarch of 2004. Mr. Turk holds a degree in Accounting from Adams StateUniversity. He was employed as an accountant by Grant Thornton from 1989 until1992. He has held the financial officer positions with Safe Car, Inc. (1992 to1996), Roses Southwest Papers, Inc. (1996 to 2000), From 2000 until joiningWestland's staff, Mr. Turk was a self employed financial consultant.

 

 

Family relationships

 

None of the Directors, nominees or other Officers of the Company isrelated (as first cousins or closer) by blood, marriage or adoption to any otherDirector, nominee, or Officer.

 

Meetings of the Board

 

The Board holds regular meetings monthly and special meetings as thebusiness of the Company requires. During the past fiscal year the Board held 10regular meetings, and one special meeting. All Board members with exception ofMr. Benavidez and Mr. Sanchez attended at least 90% of all directors meetingsduring the period that they served as a Company Director. Mr. Benavidez' travelschedule conflicted with several board meetings, and Mr. Sanchez' managerialduties conflicted with several meetings but both directors were available byphone if needed and was aware of each item that came before the board and wasable to express his agreement or disagreement with any board action undertakenat any meeting which he was unable to attend. 

 

Board Committees

 

The Company has no nominating or compensation committees, but does havean Executive Committee consisting of Mr. Sosimo Sanchez Padilla, Ms. BarbaraPage, Mrs. Josie Castillo Mr. Joe Chavez and Mr. Charles Pena. Pursuant to theCompany's Bylaws, the Executive Committee performs those functions delegated toit by the Board. The Executive Committee met 8 times during the past fiscalyear.

 

The Company has no Audit Committee. The entire board considers all auditand financial matters. 

 

During the year, the Company disbanded its Insider Transfer Committeewhich had been established to review for fairness the purchase or sale of itsstock by board members of other insiders. The board felt that because of othersafeguards this committee was no longer needed. 

 

ECS, Inc. (formerly El Campo Santo, Inc.)

 

ECS, Inc., is a wholly owned non-profit corporation that owns, managesand operates 3 cemeteries maintained by the Company. The members of Westland'sboard of directors are also the board of directors of this subsidiary.

 

Section 16(a) Beneficial Ownership Reporting Compliance.

 

No person is known to have failed to file on a timely basis any reportrequired to be filed by Section 16(a) of the Exchange Act during the most recentfiscal year or prior fiscal years. 

 

Code of Ethics

 

The Company has adopted a code of ethics that applies to those officersdescribed in Item 406 of Regulation S-B.

 

Beneficial Ownership Reporting Requirements

 

All Directors timely filed all required Forms 3 and Forms 4 relating totheir share ownership at the time they became Directors and to report theacquisition or disposition of shares during the year. 

 

**ITEM 10: EXECUTIVE COMPENSATION**

 

**EXECUTIVE COMPENSATION**

 

The following table sets forth the compensation for the fiscal year endedJune 30, 2005, 2004 and 2003, including bonuses and deferred cash compensation(if any), of the certain Directors, the Company's Chief Executive Officer andthe three other highest paid executive officers:

 

**SUMMARY COMPENSATION TABLE**

 

Annual Compensation

 

 

 

 

No other executive officer received $100,000 or more in total annualcompensation and bonuses at any time during the past three fiscalyears.

 

There were no options issued or outstanding at any time during the fiscalyear relating to the purchase of shares of any Class of the Company's securitiesby members of the Board of Directors.

 

During fiscal 2003, with the exception of Ms. Page, each director waspaid a bonus. Mr. Padilla and Mr. Anaya each received $50,000 and the otherdirectors each received $25,000. No other Bonuses have been paid to anyDirector. In February of 2004, all director fees were increased to $1,500 permonth. Mr. Padilla and Mr. Joe Chavez are paid an additional fee of $300 permonth for their extra services as Chairman of the Board and asSecretary-Treasurer, respectively. 

 

Applicable New Mexico gross receipts taxes are added to all amounts paidto directors.

 

The Company has no long-term compensation arrangements with its directorsother than those discussed herein. Certain officers and directors are employedunder consulting and employment contracts. See Item 12.

 

In 1995, the Company purchased for Ms. Page a $500,000 insurance policyon her life with the beneficiaries being Ms. Page's heirs. Since 1995, theCompany paid a total of $189,600 in premiums. The applicable taxable portion ofthe premiums were treated as income to Ms. Page and are reported herein in thediscussion of Ms. Page's total compensation during fiscal 2003 appearing in theSummary Compensation Table.

 

During fiscal 2003, the Company's board of directors declared the bonusesthat are described in the Summary Compensation Table. 

 

During fiscal 2004, the board of directors authorized a severance packagefor any director that is discussed in Item 12

 

Pension Plan**:**

 

Effective January 1, 1997, the Company established a Money PurchaseProfit Sharing Deferred Compensation Plan (the "97 Plan") and abandoned theSEP-IRA plan, which it had established in 1991. No payments were made to theabandoned plan after fiscal 1997. Under the '97 Plan, the Company contributed upto 15% of the aggregate earnings of participating employees. During fiscal 2004,2004 and 2005, $124,224, $151,172 and $147,507, respectively, were contributedby the Company pursuant to the '97 Plan.

 

Ms. Page, Mr. Leroy J. Chavez, Mr. Lesley, Mr. Ambrogi, and Ms. Blairparticipate in all employee benefit plans and participate in any bonuses, whichmay be declared by the Board of Directors.

 

**ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND RELATEDSTOCKHOLDER MATERS**

 

On September 15, 2005, there were 709,827 shares of No Par Value CommonStock and 85,100 shares of Class B Stock issued and outstanding. There are noother forms of authorized equity securities. The following table sets forth, asof September 15, 2005, the beneficial ownership of No Par Value Stock and ClassB Stock by each nominee and each present Director of the Company and by allofficers and Directors as a group. The information as to beneficial stockownership is based on data furnished by each person. Each person has sole votingand investment power as to all shares unless otherwise indicated. No person isknown by the Company to own beneficially 5% or more of its issued andoutstanding equity securities.

 

NOTE: "Beneficial ownership" of stock, as defined by the Securities andExchange Commission, includes stock which is not outstanding and not entitled tovote or receive dividends, but which an individual has the right to acquirewithin 60 days pursuant to a vested stock option. There are no unexercised stockoptions now issued or outstanding and there is no current intent by Managementto issue any options in the future.

 

 

 

 

**DIRECTORS**

 

 

 

**OFFICERS:**

 

The Company's other officers, none of whom are lineal descendants of anincorporator of the Town of Atrisco, New Mexico, cannot own shares of theCompany's common stock. 

 

Directors and Officers

 

 

 

**Beneficial Ownership Reporting Requirements.**

 

All Directors timely filed all required Forms 3 and Forms 4 relating totheir share ownership at the time they became Directors and to report theacquisition or disposition of shares during the year. 

 

There were no securities authorized for issuance under any equitycompensation plan during any period covered by this Form 10-KSB.

 

**Possible Future Change of Control**

 

The Company's Articles of Incorporation provide that the Company's sharesof common stock may be transferred only to lineal descendants of theincorporators of the Town of Atrisco, New Mexico. That restriction haseffectively prevented any person not an heir from attempting to acquire controlof the Company through the purchase of its shares. In August of 2005, inresponse to an offer from a third party to make an offer to the shareholders topurchase all of the issued and outstanding shares at a substantial price overthe then market price for the shares, the board of directors concluded that theshareholders should have the opportunity to consider such an offer and ifapproved by the owners of a majority of each class of stock, to amend thearticles of incorporation to facilitate the purchase and transfer of sharestendered for purchase. As part of the understanding with the person wanting tomake the offer, the Company's board of directors agreed that if the owners ofthe majority of each class of shares agreed to amend the articles ofincorporation that the board would resign to permit the new owner to appoint anew board of directors. If such a change of control should occur, the board ofdirectors would receive the number of shares of Class B common stock discussedherein in Item 12. 

 

 

Although the Management is not sure that there will ever be any formaloffer to the shareholders to purchase their shares, should any other similaroffer be presented to the Management, the same decision that the shareholdersare entitled to consider the offer would be made and a change of control mightoccur upon the conclusion of any such effort by any person to acquire the issuedand outstanding Company shares. 

 

**ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

 

**Transactions with Directors**

 

During fiscal 2003, with the exception of Ms. Page, each director waspaid a bonus. Mr. Padilla and a former director each received $50,000 and theother directors each received $25,000. No other Bonuses have been paid to anyDirector. In February of 2004, all director fees were increased to $1,500 permonth. Mr. Padilla, Mr. Joe Chavez and Mr. Pena are paid an additional fee of$300 per month for their extra services as Chairman of the Board, asSecretary-Treasurer and as Chairman of the Executive Committee, respectively.

 

Applicable New Mexico gross receipts taxes are added to all amounts paidto directors.

 

The Company reimburses Management for their out of pocket expenses forlobbying efforts that any of them may spend on behalf of the Company.

 

In 1995, the Company purchased for Ms. Page a $500,000 insurance policyon her life with the beneficiaries being Ms. Page's heirs. Since 1995, theCompany paid a total of $189,600 in premiums. The applicable taxable portion ofthe premiums were treated as income to Ms. Page and are reported herein in thediscussion of Ms. Page's total compensation during fiscal 2003 appearing in theSummary Compensation Table.

 

During fiscal 2004, the board of directors authorized a severance packagefor any director who retired prior to December 31, 2003. The amount offered isan amount equal to two years of the retiring director's annual director fees.Three Directors accepted the offer and resigned. 

 

In December of 2002 and confirmed in August of 2005 the board authorizedan issuance of Class B stock to board members upon either of two eventsoccurring. The first event would be when there is a threat of change of controlwith three or more director seats threatened and the second event would be whenan offer to acquire a majority of all issued and outstanding shares of Westlandcommon stock. In either event, each director who has served as a director for 10or more years will be granted a bonus of 5,000 such shares and each director whohas served less that 10 years will be granted a bonus of 2,500 shares. At thecurrent time, if such an event should occur, a total of 35,000 Class B shareswould be issued to the board of directors. 

 

Employment and Consulting Arrangements with CurrentOfficers**:**

 

Since December of 1991 Ms. Page has been employed as the Company'sPresident under a renewable five-year employment agreement. If Ms. Page isinvoluntarily terminated during the term of the agreement she shall be paid, inaddition to any salary earned to the date of such termination, an amount of cashequal to six times the amount of her annual salary plus the cash value of allother employment benefits that have accrued on the date oftermination.

 

Mr. Padilla, the Company's Chairman is paid $50,000 per year for hisservices to the Company under renewable five-year consulting agreements. If Mr.Padilla's consulting agreement is involuntarily terminated during the term ofthe agreement he is to be paid an amount of cash equal to six times the annualcompensation rate then in effect under the contract.

 

On April 22, 2005, the employment agreements of the Vice Presidents, Ms.Blair, Mr. Chavez and Mr. Lesley, were amended to provide that these officerswere to be employed for a period of six years with automatic extensions foradditional six year terms and providing that if an officer is involuntarilyterminated the employee will be paid the equivalent of six years salary plus thecash value of all other employment benefits that have accrued on the date oftermination. Vice President Ambrogi has a three year employment agreement datedJune 3, 2003, that provides that if he is involuntarily terminated he will bepaid the equivalent of one years salary, plus the cash value of all otheremployment benefits that have accrued on the date of termination. 

 

 

**ITEM 13: EXHIBITS AND REPORTS ON FORM 8-K.**

 

(a) Exhibits

 

 

 

 

 

10. Material Contracts:

 

10.13 Amended Employment Agreement with Barbara Page dated February 24,2004 filed with Westland's Annual Report on Form 10-KSB for the fiscal yearended June 30, 2004, and incorporated herein by reference.

 

 

The following documents are files as exhibits to this Form10-KSB:

 

 

 

Computation of Per Share Earnings:

 

Statement regarding computation of per share earnings is incorporated byreference to Note A(9) to the Financial Statements incorporated herein byreference to Westland's Annual Report to Shareholders for the Fiscal year endedJune 30, 2005.

 

Subsidiaries of Westland:

 

Westland has the following subsidiaries:

 

 

 

All other exhibits required by Item 601 of Regulation S-B areinapplicable to this filing.

 

(b) Reports on Form 8-K: 

 

No reports of Form 8-K during the last quarter of the period covered bythis Report.

 

**ITEM 14: PRINCIPAL ACCOUNTANTS FEES AND SERVICES**

 

 

 

 

The services comprising the fees consisted of tax preparation and taxadvisory services.

 

 

 

The products and services comprising the fees consisted of accountingresearch and general advisory services.

 

followed by the Board of Directors include a review the timeliness andquality of past services and bills as well as a review of the cost for similarservices provided by qualified audit and tax firms in Albuquerque, New Mexicowith a view to determining the fairness of the services rendered and the feesbilled by Grant Thornton. 

 

 

 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, Westlandcaused this report to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 

WESTLAND DEVELOPMENT CO., INC.

 

 

 

 

In accordance with the Exchange Act, this report has been signed below bythe following persons in behalf of Westland and in the capacities and on thedates indicated.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certification

 

I, Barbara Page, the principal executive and financial officer, ofWestland Development Co., Inc., certify that:

 

1, I have reviewed this annual report on Form 10-KSB of WestlandDevelopment Co., Inc., SEC file No 0-7775;

 

2. Based on my knowledge, this annual report does not contain any untruestatement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this annualreport;

 

3. Based on my knowledge, the financial statements, and other financialinformation included in this annual report, fairly present in all materialrespects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this annualreport;

 

4. I am responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) andinternal control over financial reporting (as defined in Exchange Act rules13a-15(f) and 15d - 15(f) for the registrant and have:

 

 

 

 

 

5. I have disclosed, based on my most recent evaluation, to theregistrant's auditors and the registrant's board of directors: 

 

 

 

 

Date: September 28, 2005

 

 

There are no other certifying officers.

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, U.S.C.

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

In connection with the Annual report of Westland Development Co., Inc.,(the "Company"), on Form 10-KSB for the year ending June 30, 2005, as filed withthe SEC on the date hereof (the "Report"), I, Barbara Page, the principalexecutive and financial officer, of the Company, certify, pursuant to Section1350, Chapter 63 of Title 18 U.S.C. as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002, that:

 

1 The Report fully complies with the requirement of Section 13(a) or15(d) of the Securities Exchange Act of 1934; and

 

2) The information contained in the Report fairly presents, in allmaterial respects, the financial condition and results of operations of theCompany.

 

Date: September 28, 2005

 

_______________________________________________________

Barbara Page, principal executive and financial officer