UNITED
        STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C.
      20549


FORM
      10-KSB




£           
      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934




For
                the fiscal
                year


OR


x           
      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934





For
      the
      transition period from January 1, 2007 to September 30, 2007





Commission
      file number: 000-23819





WILSON
      HOLDINGS, INC.


(Exact
      name of registrant as specified in its charter)





Nevada
            
            76-0547762(State
                or other jurisdiction
              of
                incorporation or organization)
              8121
                Bee Caves Road, Austin, Texas
              (Address
                of principal executive offices)
            
            (I.R.S.
                Employer
              Identification
                No.)
              78746
              (Zip
                Code)





(512)
      732-0932


(Issuer’s
      telephone number, including area code)




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





Title
                of Each
                Class
            Name
                of Each Exchange
                on Which RegisteredCommon
                Stock, par value $0.001 per share
            American
                Stock Exchange





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


None




Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. £




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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. x Yes £
      No




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-K. £




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act) £  Yes   x  No




State
      issuers revenues for its most recent fiscal year. $4,444,500




The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates of the registrant, based upon the closing sale price of its
      common stock on December 26, 2007 was approximately $7,095,824(affiliates being,
      for these purposes only, directors, executive officers and holders of more
      than
      5% of the registrant’s common stock).




As
      of
      December 26, 2007 the registrant had 23,135,539 outstanding shares of common
      stock.







Wilson
      Holdings, Inc.




Whenever
      we refer in this filing to “Wilson Holdings,” “the Company,” “we,” “us,” or
“our,” we mean Wilson Holdings, Inc., a Nevada corporation, and, unless the
      context indicates otherwise, its predecessors and subsidiaries, including its
      wholly-owned
      subsidiaries, Wilson
      Family Communities, Inc., a Delaware corporation(“WFC”), and Green
      Builders, Inc., a Texas corporation (“Green Builders”).  All
      references in this report to “$” or “dollars” are to United States of America
      currency.


Table
                  of ContentsItem
                  1.
              Description
                  of Business
              1Item
                  2.
              Description
                  of Property
              19Item
                  3.
              Legal
                  Proceedings
              19Item
                  4.
              Submission
                  of Matters to a Vote of Security
                  Holders
              19Item
                  5.
              Market
                  for Common Equity and Related Stockholder
                  Matters
              20Item
                  6.
              Management’s
                  Discussion and Analysis or Plan of
                  Operation.
              22Item
                  7.
              Financial
                  Statements
              32Item
                  8.
              Changes
                  in and Disagreements With Accountants on Accounting
                  and Financial Disclosure
              32Item8A.
              Controls
                  and Procedures.
              32Item
                  8B.
              Other
                  Information.
              33Item
                  9.
              Directors,
                  Executive Officers, Promoters and Control Persons
                  and Corporate Governance; Compliance with Section 16(a) of the
                  Exchange
                  Act
              34Item
                  10.
              Executive
                  Compensation
              34Item
                  11.
              Security
                  Ownership of Certain Beneficial Owners and
                  Management and Related Stockholder Matters
              34Item
                  12.
              Certain
                  Relationships and Related Transactions, and Director
                  Independence
              34Item
                  13.
              Exhibits
              34Item
                  14.
              Principal
                  Accountant Fees and Services
              34
  -i-




CAUTIONARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS




This
      Annual Report on Form 10-KSB for the transition period from January 1, 2007
      to
      September 30, 2007 contains forward-looking statements. All statements regarding
      our expected financial position and operating results, our business strategy,
      and our financing plans are forward-looking statements. These statements can
      sometimes be identified by our use of forward-looking words such as “may,”
“will,” “anticipate,” “estimate,” “expect,” “project,” or “intend.” These
      forward-looking statements reflect our plans, expectations and beliefs and,
      accordingly, are subject to certain risks and uncertainties.  We
      cannot guarantee that any of such forward-looking statements will be
      realized.




Statements
      regarding factors that may cause actual results to differ materially from those
      contemplated by such forward-looking statements, or cautionary statements,
      include, among others, those under the caption “Management’s Discussion and
      Analysis or Plan of Operation - Overview,” and elsewhere in this Annual Report
      on Form 10-KSB, including in conjunction with the forward-looking statements
      included in this Annual Report on Form 10-KSB.  All of our subsequent
      written and oral forward-looking statements (or statements that may be
      attributed to us) are expressly qualified by the cautionary
      statements.  Our forward-looking statements are based on information
      available to us today, and we will not update these statements.  Our
      actual results may differ significantly from the results discussed.









EXPLANATORY
      NOTE




In
      September 2007 our Board of Directors approved an amendment to our Bylaws to
      change our fiscal year-end from December 31 to September 30, effective with
      our
      2007 fiscal year, in order to align our fiscal year more closely with our
      business cycle.  In this report, when we refer to “fiscal 2007” we are
      referring to the fiscal period from January 1, 2007 to September 30,
      2007.  When we refer to “fiscal 2008” we are referring to the fiscal
      year from October 1, 2007 to September 30, 2008.




-ii-


PART
      I




Item
      1.            
Description of Business




Overview




Wilson
      Holdings, Inc. is a real estate development and homebuilding company. We are
      focused on the acquisition of undeveloped land that we believe, based on our
      understanding of population growth patterns and infrastructure development,
      is
      strategically located. The acquisition of land for development has required,
      and
      is expected to continue to require, the majority of our financial resources.
      We
      have funded these real estate acquisitions primarily with bank debt. In tandem
      with our land acquisition efforts and based upon our market analysis, we also
      prepare land for homebuilding and commenced homebuilding activities in June
      2007. We believe that the central Texas economy will continue to expand, and
      with this expansion our strategic land purchases, land development activities
      and homebuilding activities will allow us to capitalize on the new population
      growth centers we expect will be created.




We
      commenced our homebuilding operations in June 2007 with the purchase of Green
      Builders, Inc. We are in the process of developing the Green Builders brand
      and
      our homebuilding strategy which is to build homes that are environmentally
      responsible, resource efficient and consistent with local style. Our home
      designs will be selected and prepared for each of our markets based on local
      community tastes and the preferences of homebuyers, with substantially all
      of
      the construction work performed by subcontractors.




Until
      we
      commenced our homebuilding operations in June 2007, the primary focus of our
      business had been the sale of developed lots to homebuilders, including national
      homebuilders. During the second quarter 2007, demand for finished lots from
      national homebuilders was reduced and orders placed for some of our finished
      lots were cancelled. We believe that retaining these lots for use by our new
      homebuilding business is the most efficient use of our finished lots and will
      allow us to generate homebuilding revenue to replace revenue from the loss
      of
      sales of these finished lots. We believe that national homebuilders are trying
      to reduce their real estate holdings and their demand for real estate has been
      reduced in all parts of the country, including areas which have been less
      affected from the recent slowdown in housing starts, such as central Texas.
      We
      plan to build homes on the majority of the lots that we currently have under
      development, will sell some of our lots to other homebuilders and may build
      our
      homes on lots that we purchase from other land builders or
      developers.






Industry
      Overview




The
      real
      estate industry is fragmented and highly competitive. We compete with numerous
      developers, builders and others for the acquisition of property and with local,
      regional and national developers, homebuilders and others with respect to the
      sale of residential lots. Additionally we compete with local, regional and
      national homebuilders in the sale of new homes, and with homebuilders and
      developers for raw materials, skilled labor, and to obtain financing on
      commercially reasonable terms.




A
      primary
      focus of our business has been the sale of developed lots to homebuilders,
      including national homebuilders. During the second quarter of calendar 2007,
      demand for finished lots from national homebuilders was reduced and orders
      placed for some of our finished lots were cancelled. We believe that retaining
      these lots for use by our new homebuilding business is the most efficient use
      of
      our finished lots and will allow us to generate homebuilding revenue to replace
      revenue from the loss of sales of these finished lots. We believe that national
      homebuilders are trying to reduce their real estate holdings and their demand
      for real estate has been reduced in all parts of the country, including areas
      which have been less affected from the recent slowdown in housing starts, such
      as central Texas.




Although
      central Texas has been less affected than other areas, national real estate
      trends impact home buyers and lenders and we believe that sales of new homes
      in
      our market may slow in fiscal 2008 due to these national trends. Given our
      relative lack of exposure to areas of the country that have been hardest hit
      by
      the slowdown in the residential real estate industry, we believe that we can
      strategically acquire lots from national builders who are trying to reduce
      their
      holdings as we as enter into joint venture arrangements with other land
      developers and builders in order to preserve cash in case the slowdown impacts
      our business for a longer period than expected. Our activities have been focused
      in the central Texas area. Most of our competitors have substantially greater
      financial resources than we do, as well as much larger staffs and marketing
      organizations. However, we believe we compete effectively in our existing market
      as a result of our development and homebuilding expertise, our environmentally
      conscious approach and our reputation as a producer of quality residential
      lots.  Since our activities to date have been in the central Texas
      area we also believe we have significantly less exposure to some of the issues
      impacting larger homebuilders in areas where the real estate environment is
      less
      robust than in Texas.




1




Our
      Strategy




Our
      business strategy is focused on two segments:




·
            Homebuilding
                and related services; and




·
            Land
                acquisition, development and related services.




Homebuilding
      and Related Services




Our
      strategy is to target “green” building.  Green building today is most
      often thought of in terms of products and technology.  True green
      building is an approach to the entire business from land planning to plan design
      and from administration procedures to field processes.  Green is
      recognition that there are other options and choices within most areas of how
      we
      conduct our business.  We start the homebuilding process by evaluating
      our process options for earth-friendly alternatives that are attainable yet
      reasonably cost-effective and are a sustainable value for the
      customer.  In our homebuilding activities, we follow earth-friendly
      and efficient processes such as:




·
            considering
                employees’ attitude and awareness of efficiency in their work space,
                processes and daily routines;




·
            partnering
                with vendors and trades in the field to eliminate waste, and create
                earth-friendly processes and procedures for job sites that are efficient
                and mutually beneficial;




·
            incorporating
                sustainable building practices and energy-saving systems that respond
                to
                the demands of a particular environment in a specific region;




·
            monitoring
                the marketplace and industry for new technology;




·
            emphasizing
                job-site awareness, supervision and communication pursuing earth-friendly
                procedures;




·
            evaluating
                the marketplace for new home design and product technology acceptance;




·
            exploring
                earth-friendly options for consumer choice, efficient applications
                and
                implementations;




·
            emphasizing
                lot and site considerations, home orientations, sustainable lot
                improvements, low-maintenance landscaping and energy, water, green
                materials and methods; and




·
            Using
                environmentally-friendly products.




Land
      Acquisition




Our
      plan
      for land development is to secure land strategically, based on our understanding
      of population growth patterns and infrastructure development. We believe that
      national homebuilding companies focus their acquisition efforts on very large
      tracts of land. National homebuilders have also significantly reduced their
      land
      acquisition efforts as the industry has struggled in recent months. In our
      opinion, these factors create an opportunity for us to secure high-quality,
      smaller tracts that may be overlooked, as well as tracts that national
      homebuilders may be trying to sell in an effort to reduce their land holdings.
      Additionally, by providing a timely and diligent land acquisition effort with
      decisions approved locally, we expect to have an advantage in the pursuit of
      larger tracts that may become available in our market.




We
      expect
      to use our available assets, (primarily cash from issuances of equity and
      subordinated notes, cash drawn from our credit facility, plus cash from
      operations) for land acquisition, development and homebuilding activities.
      We
      are not limited by the amount we can invest in any particular stage of
      development of the land. Almost all of the land and related development projects
      will be financed by conventional real estate loans or through the use of our
      current credit facility. Additionally, we defer payment for land when possible
      and use owner-financed payment plans, such as the rolling option. The rolling
      option has a variety of forms. One variation allows us to pay the landowner
      for
      sections of lots as they are actually needed and utilized in our business.
      We
      expect that a substantial portion of our future revenues will be generated
      through the development of subdivisions and land sales.




2


Our
      anticipated land sales will include sections of lots that are ready for
      immediate home construction with all infrastructures in place, as well as
      sections of lots that have all necessary approvals to begin construction but
      have yet to be physically improved.




While
      we
      anticipate that the majority of our revenues will come from sales to national
      and regional homebuilders, we also expect additional revenues from the sale
      of
      lots and homebuilding services to smaller, local builders. Lot sales to local
      builders will typically involve fewer lots per transaction than sales to larger
      national and regional companies.




We
      plan
      to support the purchase of land and development of our communities with specific
      analysis of our target markets. We intend to utilize more thorough research
      processes used within industries such as the auto, retail and banking to go
      beyond benchmarking the current competition in the marketplace. For example,
      successful automakers target their products to a type of consumer, based on
      the
      consumer’s age range, family and lifestyle attributes.  We will
      utilize a similar approach, gathering consumer preference data and customizing
      our product offerings for a variety of buyer segments.  We strive to
      attract a diverse group of buyers by designing multi-product neighborhoods
      within each community that will be desirable for homebuyers at differing income
      levels and with different needs.  By providing a more customized
      product mix of varying lot sizes and amenities in our communities and addressing
      underserved segments, we believe we can accelerate the absorption of our
      subdivisions and earn superior returns for our stockholders.




Land
      Development and Related Services




In
      tandem
      with our land acquisition efforts and based upon our strategic market analysis,
      we plan to subcontract for the preparation of land for development. We seek
      to
      add value to the land through the process of development, which may include
      permitting and constructing water and wastewater infrastructure, master-planning
      of the community, and the construction of roads and community amenities. We
      also
      plan to sell entitled land to others for development. Entitled land is land
      subject to development agreements, tentative maps or recorded plats, depending
      on the jurisdiction within which the land is located.




In
      conjunction with our land acquisition activities, we expect a portion of our
      land revenues to come from sales of entitled land, developed land and bulk
      lot
      sales. To date, our revenues have been derived from lot sales and sales of
      undeveloped parcels of land plus revenues from services provided to two
      homebuilder customers. The revenue from these sales has been consolidated into
      our results. We expect that sales of large parcels of land and sections of
      developed lots will be sporadic, resulting in fluctuations in our revenues
      and
      gross margins, while the sale of parcels of developed lots and delivery of
      services to homebuilders will be less volatile.




We
      intend
      to invest in real estate and real estate related activities and are not limited
      as to the percentage of our assets that we may invest in any single type of
      investment or as to the kinds of real estate assets in which we can invest.
      A
      vote of our security holders is not required to change the allocation or
      concentration of such assets. However, we may be subject to certain limits
      from
      time to time because of covenant requirements under our agreements with
      lenders.




Current
      and Future Properties




We
      intend
      to sell some of the lots in our various projects and buy and sell additional
      properties on an opportunistic basis as market conditions warrant. We believe
      that our properties are adequately insured, and are suitable for their intended
      purposes. Because of the nature of our land sales and land development services
      operations, significant amounts of property are held as inventory in the
      ordinary course of our business.




Details
      of the properties we own or have options to purchase are set forth
      below:




3




Name
                of Project
            Date
                Purchased /Optioned
            Location
            Finished
              Lots/
              Homes
            Approx-
              imate
              AcreageOwned
            Approx-
              imate
              Acreage
              Under
              OptionRutherford
                West
            June
                30, 2005
            Northern
                Hays County, Texas, Hays Independent School District
            54
            521
            n/aGeorgetown
                Village
            August
                22, 2005
            The
                City of Georgetown, Texas, Georgetown Independent School
                District
            50
            149
            419Villages
                of New Sweden
            October
                18, 2005
            Eastern
                Travis County, Texas, Pflugerville Independent School
                District
            -
            521
            -Elm
                Grove
            December
                15, 2005
            The
                City of Buda, Texas, Hays Independent School District
            -
            30
            61Highway
                183
            May
                31, 2005
            U.S.
                Route 183 at Evelyn Rd., Travis County, Texas
            -
            5
            n/a




Rutherford
      West– Rutherford West is a
      residential community located southwest of Austin.Rutherford
      West is planned as an
“earth-friendly” acreage development and each lot includes a deed restricted
      conservation easement.We commenced the
      developmentof this project
      in October 2006 and will continue through 2010in five phases by geography
      and/or
      regulation which limit the amount of the land that is able to be developed.Phase 1 for this property
      is financed through a development loan.  The loan is secured by the
      property being developed at an interest rate of prime plus 0.5%.  The
      loan requires monthly interest payments and principal pay downs as lots are
      closed.  The outstanding balance of the loan is approximately $1.5
      million.  Phases 2 through 5 are financed through a land
      loan.  The loan is secured by the land.  The interest rate
      is 12.5% annually and requires monthly interest payments.  The
      outstanding balance of the loan is $7.3 million.  The loan matures in
      March 2009.  It is renewable for an additional year for a fee of 1% of
      the principal balance at the time of the extension.




Georgetown
      Village —Georgetown Village is a mixed use master-planned development in
      Williamson County, located just north of Austin, Texas in
      Georgetown.  We purchased the land for this projectpursuant
      to
      an option contract in August 2005.  Under the option contract we are
      required to purchase a minimum of 30 acres per year through 2017.  We
      own approximately 150 acres as of September 30, 2007.  We commenced
      the development of this project in January 2006 and will continue through
      2013.  We have completed development on a total of 120 lots in Section
      6. To date, 50 lots are finished and ready for delivery and we have
      delivered 70 lots. The property is pledged as collateral on a $3.0 million
      land,
      development, and construction loan, with an outstanding balance of approximately
      $470,000 as of September 30, 2007 which matures in March 2008.  The
      loan for Section 6 requires monthly interest payments and principal pay downs
      as
      lots are closed.  Interest payments are at 0.5% over prime and are due
      monthly and principal payments are due as lots are closed.  We closed
      on Section 9 which is approximately 130 acres of this project in
      2007.  The loan for Section 9 is financed through our credit
      facility.  Construction commenced on this section in October
      2007.




Villages
      of New Sweden —New
      Sweden is a master planned, mixed-use community which includes single family
      residential homes, commercial properties, an onsite school, an amenity center,
      a
      fire station, and an open green space in Manor, Texas.  We purchased
      the land for this project in October 2005 with a combination of bank financing,
      seller financing and cash on hand. The development of this project will commence
      in fiscal 2008, and will continue through 2017.  The property is
      pledged as collateral for a $4.7 million land loan and seller-financed notes
      totaling  $2.5 million.  The interest rate on the land loan
      is 12.5% with interest payable monthly.  The interest payments on the
      seller-financed notes are fixed at 7% for approximately $1.9 million of the
      notes and at prime plus 2% for the remaining $600 thousand. The total principal
      payments for the seller financed notes are due annually in the amount of
      approximately $1.1 million in 2007, $0.3 million in 2008, $0.5 million in 2009
      and $0.5 million in 2010.  The land loan and seller-financed notes
      payable mature in March 2009 and October 2010, respectively.




Elm
      Grove— Elm Grove
      is a residential
      project located south of Austin, Texas in the city of Buda.  The
      master plan includes single-family residential and open green space all within
      walking distance to Elm Grove elementary school.  We acquired the
      first phase of land for this project in December 2006 with a combination of
      bank
      financing and cash on hand.  Development of this project commenced May
      2007 and will continue through 2010.  The property is pledged as
      collateral on an approximate $3 million land, development, and construction
      loan, with an outstanding balance of approximately $1.44 million as of September
      30, 2007.  Interest payments are at 0.5% over prime and the principal
      on the loan will be paid downs as lots are closed.




4




Highway
      183— We own
      approximately five acres in Travis County which are currently under an option
      agreement to sell to an outside buyer.  Ten of the original fifteen
      acres located along the Highway 183 corridor were condemned by the State in
      2007.




Our
      business plan for land development is to secure land strategically, based on
      our
      understanding of population growth patterns and infrastructure development
      in
      central Texas and its surrounding areas.  We believe that our
      management team has the expertise to acquire large tracts of land in central
      Texas, and get them entitled in a relatively short time frame.  In our
      opinion, this creates an opportunity for us to secure high-quality tracts that
      may have been overlooked or which larger homebuilders are trying to
      sell.  Additionally, we have developed a set of guidelines which
      address environmental responsiveness, resource efficiency, and cultural
      sensitivity.  Some of our guidelines are:




·
            planning
                of homesite orientation;




·
            preserving
                natural open space;




·
            respecting
                conservation easements;




·
            connecting
                and enhancing our communities with walking and biking paths that
                provide
                easy access for meeting neighbors;




·
            reserving
                land to provide public space for neighborhood public gardens;




·
            establishing
                common areas irrigated with “gray water” along with rainwater collection
                and drip irrigation systems that will help minimize water usage;




·
            ensuring
                that storm water runoff is filtered and/or treated by the use of
                wet ponds
                and vegetative filter strips prior to its release;




·
            respecting
                the local history of the land and cultural diversity;




·
            creating
                mixed-used communities that encourage foot traffic with less vehicular
                traffic;




·
            seeking
                opportunities to enhance our relationships with builders, partners,
                governmental agencies, and partnerships with environmental and
                community-based organizations; and




·
            restoring
                or recycling of existing structures.




Geographic
      Expansion




We
      are
      pursuing a strategic expansion philosophy based on potential growth
      opportunities within what we believe are the most stable areas throughout the
      United States. We plan to grow by investing available capital in our existing
      market and into operations and strategic acquisitions in new markets. Based
      on
      current market conditions and issues that are facing the national homebuilders,
      we may delay our expansion into future markets until such time as we believe
      that conditions are favorable for expansion. We will expand into additional
      markets that show the following trends:




·
            a
                steady increase in the employment rate over the past three to five
                years;




·
            an
                unemployment rate below the national average;




·
            population
                growth reported steady and positive population rates greater than
                the
                national average;




·
            an
                increase in average home price or less devaluation than the national
                average;




·
            the
                presence of national builders that have been active for a considerable
                amount of time (Greater than ten years);




·
            being
                rated in the top 50 cities with the most stable growth rate;
                and




·
            being
                rated in the top 50 cities moving in the direction of being
                environmentally sensitive either in their governmental attitudes
                or in
                their planning and entitlement processes for each city.


5






Through
      strategic acquisitions in markets with the qualifications above we hope to
      gain
      established land positions and inventories; existing relationships with local
      governments, land owners, and developers; and a positive impact on our sources
      of revenues. This diversification strategy will mitigate the effects of regional
      economic cycles and position us for greater future growth.




Target
      Market and Market Data




Our
      current market, Austin, Texas has an unemployment rate of 3.5% in November
      2007,
      which is far below the national average of 4.5%. Job growth continues to be
      strong with a projected annual growth of 29,500 jobs in September 2007 according
      to the Texas Workforce Commission.










The
      low
      unemployment rate, strong job growth rate and the slow down of the expected
      starts among national builders has created a short fall of housing starts and
      closings in the Austin market area. The number of closings exceeds starts for
      the first time since 2002, according to Metrostudy, a national market research
      company. We believe that this shortfall may provide opportunities for new
      homebuilders.


6








Texas
      currently leads the nation in job growth, according to Metrostudy. We believe
      that this job growth will continue and that Texas will continue to be among
      the
      strongest housing markets in the country.











We
      believe that recent media attention and events focusing on “green” living and
      sustainability has increased awareness of green building.  A recent
      survey conducted by McGraw Hill indicated that the profile of the green home
      owner was highly educated and 45 years old.  According to the
      Brookings Institution Metropolitan Policy Program, Austin adults are more likely
      to have a college degree, and are more likely to have graduate degrees than
      the
      U.S. averages.  Newcomers to the Austin market are also more likely to
      have college degrees.  We believe that these factors make central
      Texas a desirable location for “green” homebuilding.





Homebuilders,
      developers and market researchers generally consider a 24 month supply of vacant
      developed lots to be at equilibrium in the marketplace. As indicated in the
      chart below, the Austin market during the 3rd
      quarter
      2007 had less than a 21 month supply of vacant developed lots.  Both
      developers and builders have decreased their production of new homes and lot
      inventory.  We are carefully considering the inventory that does exist
      to maximize market opportunities.  The homes and lots developed by us
      have been designed to take advantage of the short fall of supply and the
      reduction of lot positions by the national builders as a result of their
      national condition.


7










Water
      District
      Receivables




A
      Water
      Control and Improvement District or a Municipal Utility District No. 1
      (collectively a “District”), is a political subdivision of the State of Texas,
      subject to the oversight of the Texas Environmental Quality Commission, or
      TCEQ.




Districts,
      by definition, may in engage in some, or all, of the following: residential
      and
      commercial supply of water and wastewater services, solid waste disposal,
      wastewater treatment, conservation, irrigation, drainage, fire fighting,
      emergency services, and recreational facilities. Texas law gives a District
      the
      power to incur debt, levy taxes, charge for specific services, and adopt rules
      for those services, enter into contracts, obtain easements, and condemn
      property.




Typically,
      Districts are formed by real estate developers in areas where the provision
      of
      utility services will not otherwise be furnished by another public or private
      entity (e.g., an area outside the geographic confines of a city or village,
      or a
      rural area). Funding for a District’s initial creation and operating costs and
      for its infrastructure (e.g. pipelines, water storage plants, and treatments
      facilities or payments for capacity in such facilities under wholesale supply
      agreements with third parties) usually comes from the developer because the
      District has no funds available for these purposes when it is first
      created.  In certain Districts (as further discussed below), a
      developer may also fund, and receive payment from the District for, costs of
      land set aside for endangered species protection.  Once a critical
      mass of taxable property (usually residential houses) is constructed in a
      District, the District is able to provide its own financing for operating costs;
      however, the developer often continues to provide funding for infrastructure
      through the period of full build-out of the District.




Any
      creation, operating and infrastructure costs of a District paid by the developer
      are repaid by the District from time to time pursuant to a reimbursement
      agreement whereby the District issues its bonds payable from ad valorem taxes
      on
      property in the District and uses the bond proceeds to repay the developer’s
      costs for these District items.  Issuance of the District’s bonds is
      subject to prior review and approval by the TCEQ and the Texas Attorney
      General’s office.




8


The
      time
      period for issuance of a District’s bonds (which are issued in installments over
      a period of many years usually continuing through the period of full build
      out
      of the District) and the consequent recovery period of the developer’s costs for
      a District can be over either a long or short period of
      time.  If  development in the District moves at a rapid
      pace, full recovery of a developer’s initial creation and operating costs (which
      is usually made from the District’s first bond issue) can occur, but cannot be
      guaranteed, in as quickly as within twelve to eighteen months after District
      creation.  Residential developments that grow more slowly will,
      accordingly, result in a more extended period of time for the recovery of the
      District’s initial creation and operating costs.  And, since the full
      recovery of all the developer’s costs for infrastructure during the full build
      out of the District goes on for the life of the subdivision development, the
      pace at which the District issues its bond installments from time to time (and
      the corresponding recovery of the developer’s costs incurred for infrastructure
      from time to time during the build out period) is closely related to the pace
      at
      which houses (and corresponding taxable property value) are added in the
      District.




A
      District typically charges its customers for the following
      services:




·
            an
                initial tap fee ranging from approximately $600 to $2,000 to cover
                the
                cost of installing the water and sewer tap;




·
            an
                annual ad valorem tax to recover its annual operating costs and to
                pay
                debt service on any District bonds which have been issued; and




·
            monthly
                fees for water and wastewater services, based primarily on a consumption
                model.




The
      costs
      for these services are determined by the District and are usually not reviewed
      by any county or state review board for reasonableness. These tap fee and
      monthly service costs are in addition to the developer-funded creation,
      operating and infrastructure costs described above.




District
      operations are usually geographically limited to the lands within the District
      which pay District ad valorem property taxes. If a nearby area lacks any utility
      service, a District could annex that area or otherwise provide service to it
      subject to reaching an equitable agreement with the owner of the land to be
      annexed or otherwise served and meeting certain state law requirements. However,
      Districts rarely agree to expand their services unless the original developer
      is
      agreeable and the owner of the annexed land is willing to enter into a
      reimbursement agreement similar to the one the original developer signed with
      the District.




We
      currently have the community of Villages of New Sweden planned that is within
      the boundaries of New Sweden Municipal Utility District No. 1 and the community
      of Rutherford West planned in Greenhawe Water Control and Improvement District
      No. 2. We incur development costs for the initial creation and operating costs
      of these Districts and continuing costs for the water, sewer and drainage
      infrastructure for these Districts. Also, in the case of Greenhawe Water Control
      and Improvement District No. 2, we have paid for property set aside by us for
      the preservation of endangered species and that District will reimburse those
      costs from future District bond sales, too. Under reimbursement agreements
      with
      each of these Districts, we expect to be reimbursed partially for the
      above-described developments costs. The Districts will issue bonds from time
      to
      time, in installments, to repay us as there is sufficient assessed value of
      property in each District to enable it to issue bonds to raise funds to repay
      us
      while maintaining a reasonable tax rate so as not to impair continued
      development within the District. As homes are constructed within the District,
      the assessed value increases. It can take several years before there is enough
      assessed value to recapture the costs. At this time, we estimate that we will
      recover approximately 50 to 100% of eligible initial creation and operating
      costs spent through September 2007 at such time as each District issues its
      first bond issue. Usually a District issues its first bond issue only after
      completion of construction of approximately 200 houses. Since developer-funded infrastructure
      costs
      have been minimal to date in each District, we have no estimate of the
      percentage of those costs which will be recovered from each District or the
      time
      when they will be recovered.  To the extent that the estimates are
      dramatically different to the actual facts, it could have a material effect
      on
      the financial statements.




Regulation




The
      housing and land development industries are subject to increasing environmental,
      building, zoning and real estate sales regulations by various federal, state
      and
      local authorities. Such regulations affect home building by specifying, among
      other things, the type and quality of building materials that must be used,
      certain aspects of land use and building design. Some regulations affect
      development activities by directly affecting the viability and timing of
      projects.




9


We
      must
      obtain the approval of numerous governmental authorities that regulate such
      matters as land use and level of density, the installation of utility services,
      such as water and waste disposal, and the dedication of acreage for open space,
      parks, schools and other community purposes. If these authorities determine
      that
      existing utility services will not adequately support proposed development,
      building moratoria may be imposed. As a result, we use substantial resources
      to
      evaluate the impact of government restrictions imposed upon new residential
      development. Furthermore, as local circumstances or applicable laws change,
      we
      may be required to obtain additional approvals or modifications of approvals
      previously obtained or we may be forced to stop work. These increasing
      regulations may result in a significant increase in resources between our
      initial acquisition of land and the commencement and the completion of
      developments. In addition, the extent to which we participate in land
      development activities subjects us to greater exposure to regulatory
      risks.




The
      residential homebuilding industry is also subject to a variety of local, state
      and federal statutes, ordinances, rules and regulations concerning the
      protection of health and the environment. These environmental laws include
      such
      areas as storm water and surface water management, soil, groundwater and
      wetlands protection, subsurface conditions and air quality protection and
      enhancement. Environmental laws and existing conditions may result in delays,
      may cause us to incur substantial compliance and other costs and may prohibit
      or
      severely restrict homebuilding activity in environmentally sensitive regions
      or
      areas.




Employees




On
      September 30, 2007, we had 19 full-time employees, one part-time employee and
      three full-time consultants. None of our employees are represented by a labor
      union and we consider our relations with our employees and consultants to be
      good.




Company
      History




Wilson
      Holdings, Inc. is a Nevada corporation formed
      on August 4, 1987.  We were originally incorporated as
      Pandora's Golden Box and were renamed Cole Computer Corporation in
      February 1999. Effective October 11, 2005 pursuant to an Agreement and Plan
      of
      Reorganization dated as of September 2, 2005 by and among us, a majority
      of our
      stockholders, Wilson Acquisition Corp. and Wilson Family Communities, Inc.,
      Wilson Family Communities became our wholly-owned subsidiary.  In June
      2007 we acquired Green Builders, Inc. and commenced homebuilding operations
      under the Green Builders name.




WFC’s
      business was originally conducted in 2002, by Athena Equity Partners-Hays,
      L.P.,
      a Texas limited partnership, or Athena.  Athena engaged in various
      land acquisition and development activities, including the purchase, entitling,
      and sale of a 2,400 acre mixed-use tract composed of office, retail and
      residential lots in central Texas.  From October 2003 to May 2005,
      Athena did not have significant operations.  In May 2005, Athena
      merged with WFC.




10


Risk
      Factors





Set
      forth
      below and elsewhere in this Report and in other documents we file with the
      Securities and Exchange Commission are risks and uncertainties that could cause
      actual results to differ materially from the results contemplated by the forward
      looking statements contained in this Report.  Prospective and existing
      investors are strongly urged to carefully consider the various cautionary
      statements and risks set forth in this Report and our other public
      filings.





Risks
      Related to Our Business





We
      have only recently commenced our homebuilding operations and there is no
      assurance that we will be successful.





We
      commenced our homebuilding operations in June 2007 though the acquisition of
      Green Builders, Inc.  While members of our management team have
      extensive experience in homebuilding, our company has never conducted
      homebuilding operations and there is no assurance that we will be
      successful.





A
      significant decline in demand for new homes would adversely affect our
      business.




The
      homebuilding industry continues to experience a significant decline in demand
      for newly built homes in many markets.  While the central Texas market
      has not been as significantly impacted by this decline, if demand for new houses
      were to decline it could have a significant impact on our
      business.  In addition, even in the central Texas market is not as
      significantly impacted as other areas, national real estate trends impact home
      buyers and lenders which could lead to a slowdown in sales of new homes in
      the
      central Texas area which could negatively impact our business.




Demand
      for new homes is sensitive to economic conditions over which we have no
      control.




Demand
      for homes is sensitive to changes in economic conditions such as the level
      of
      employment, consumer confidence, consumer income, the availability of financing
      and interest rate levels. Although the market has experienced some increase
      in
      mortgage interest rates over the past year, mortgage interest rates remain
      lower
      than their historical averages. If mortgage interest rates increase or if any
      of
      these other economic factors adversely change nationally, or in the market
      in
      which we operate, the ability or willingness of prospective buyers to purchase
      new homes could be adversely affected.




Our
      results of operations and financial condition are greatly affected by the
      performance of the real estate industry.





Our
      real
      estate activities are subject to numerous factors beyond our control, including
      local real estate market conditions, substantial existing and potential
      competition, general national, regional and local economic conditions,
      fluctuations in interest rates and mortgage availability and changes in
      demographic and environmental conditions. Real estate markets have historically
      been subject to strong periodic cycles driven by numerous factors beyond the
      control of market participants.


Real
      estate investments often cannot easily be converted into cash and market values
      may be adversely affected by these economic circumstances, market fundamentals,
      competition and demographic conditions. Because of the effect these factors
      have
      on real estate values, it is difficult to predict with certainty the level
      of
      future sales or sales prices that will be realized for individual
      assets.


Our
      real
      estate operations are also dependent upon the availability and cost of mortgage
      financing for potential customers, to the extent they finance their purchases,
      and for buyers of the potential customers’ existing residences.





Increasing
      interest rates could cause defaults for homebuyers who financed homes using
      non-traditional financing products, which could increase the number of homes
      available for resale.




During
      the recent time of high demand in the homebuilding industry, many homebuyers
      financed their purchases using non-traditional adjustable rate or interest
      only
      mortgages or other mortgages, including sub-prime mortgages that involve
      significantly lower initial monthly payments. As a result, new homes have been
      more affordable in recent years. However, as monthly payments for these homes
      increase either as a result of increasing adjustable interest rates or as a
      result of principal payments coming due, some of these homebuyers could default
      on their
      payments and have their homes foreclosed, which would increase the inventory
      of
      homes available for resale. In addition, if lenders perceive deterioration
      in
      credit quality among homebuyers, lenders may eliminate some of the available
      non-traditional and sub-prime financing products or increase the qualifications
      needed for mortgages or adjust their terms to address any increased credit
      risk.
      In general, if mortgage rates increase or lenders make it more difficult for
      prospective buyers to finance home purchases, it could become more difficult
      or
      costly for customers to purchase our homes, which would have an adverse affect
      on our sales volume.




11




Inflation
      can adversely affect us, particularly in a period of declining home sale
      prices.




Inflation
      can have a long-term impact on us because increasing costs of land, materials
      and labor may require us to attempt to increase the sale prices of homes in
      order to maintain satisfactory margins. However, in the event the housing market
      in central Texas were to decline, we may be forced to decrease prices in order
      to maintain sales volume. This deflation in sales price, in addition to
      impacting our margins on new homes, also reduces the value of our land inventory
      and makes it more difficult for us to recover the full cost of previously
      purchased land in new home sales prices or, if we choose, to dispose of land
      assets. In addition, depressed land values may cause us to walk away from
      deposits on option contracts if we cannot satisfactorily renegotiate the
      purchase price of the optioned land.




We
      face significant competition in our efforts to sell homes.




The
      homebuilding industry is highly competitive. We compete with numerous national,
      regional and local homebuilders. This competition with other homebuilders could
      reduce the number of homes we deliver, or cause us to accept reduced margins
      in
      order to maintain sales volume.




We
      also
      compete with the resale of existing homes, including foreclosed homes, sales
      by
      housing speculators and available rental housing. In the event that demand
      for
      homes has slows, competition, including competition with homes purchased for
      speculation rather than as places to live, will create increased downward
      pressure on the prices at which we are able to sell homes, as well as upon
      the
      number of homes we can sell.




Our
      current operating business has a limited operating history and
      revenues.





In
      October 2005, we acquired Wilson Family Communities, Inc., or WFC, which has
      a
      limited operating history. Accordingly, our business is subject to substantial
      risks inherent in the commencement of a new business enterprise in an intensely
      competitive industry. The business of WFC was conducted, beginning in 2002,
      by
      Athena Equity Partners-Hays, L.P., or Athena, to engage in land acquisition
      and
      development and, beginning in 2005, to provide homebuilder services. Prior
      to
      its merger with WFC, Athena did not generate significant revenues, and, through
      September 30, 2007, our company has generated revenues of only approximately
      $4.4 million and has incurred cumulative net losses of approximately $13
      million.  We recently entered the homebuilding business and have
      little experience building homes and there is no assurance that we will be
      successful.





There
      can
      be no assurance that we will be able to successfully acquire, develop and/or
      market land, develop and market our homebuilder services, commence our
      homebuilding activities, generate revenues, or ever operate on a profitable
      basis. Any investment in our company should be considered a high-risk investment
      because the investor will be placing funds at risk in a company with unknown
      costs, expenses, competition, and other problems to which new ventures are
      often
      subject. Investors should not invest in our company unless they can afford
      to
      lose their entire investment.





We
      have incurred a significant amount of debt but will require additional
      substantial capital to continue to pursue our operating strategy.





We
      had
      approximately $13.1 million in cash and cash equivalents at September 30, 2007.
      We have secured lines of credit totaling approximately $55 million.
      Approximately $2.7 million has been drawn against these lines of credit as
      of
      September 30, 2007.





We
      have
      issued and sold an aggregate of $16.75 million in principal amount of
      convertible promissory notes since December 2005. These notes bear interest
      at a
      fixed rate of 5.0% per annum, with the principal amount of such notes
      convertible into shares of our common stock at the rate of one share per $2.00
      of principal, which conversion rate is subject to proportionate adjustment
      for
      stock splits, stock dividends and recapitalizations as well as an anti-dilution
      adjustment which will apply if we sell shares of our common stock in the future
      at a price per share of less than $2.00, provided that such conversion rate
      may
      not be reduced below a rate of one share of common stock for each $1.00 of
      note
      principal.


12




Our
      growth plans will require substantial amounts of cash for earnest money
      deposits, land purchases, development costs and interest payments, and to
      provide financing or surety services to our homebuilder clients. Until we begin
      to sell an adequate number of lots and services to cover our monthly operating
      expenses, costs associated with our sales, marketing and general and
      administrative activities will deplete cash. Our articles of incorporation
      contain no limits on the amount of indebtedness we may incur.





Market
      conditions may reduce the amount available to us under our lines of
      credit.





Due
      to
      covenants in our lines of credit and the market conditions surrounding the
      mortgage and related industries, we may not be able to utilize the entire line
      of available funds. The amount available under our line of credit is tied to
      the
      appraisal value of our real estate holdings or property on which we have an
      option.  In the event that there is a devaluation of our land holdings
      upon which our line of credit is secured, the lenders under our primary line
      of
      credit may elect to reduce the amount of credit available to us under the
      line.





We
      may seek additional credit lines to finance land purchases and development
      costs.





Through
      September 30, 2007, we have closed on four major land development projects.
      The
      majority of our expenditures in the past have been for inventory, consisting
      of
      land, land development and land options totaling over $3.2 million as of
      September 30, 2007. To secure additional inventory, we will be required to
      put
      up earnest money deposits, make cash down payments, and acquire acreage tracts
      and pay for certain land development activities costing several million dollars.
      This amount includes the development of land, including costs for the
      installation of water, sewage, streets and common areas. In the normal course
      of
      business, we enter into various land purchase option agreements that require
      earnest money deposits. In order for us to start or continue the development
      process, we may incur development costs before we exercise an option agreement.
      We currently have approximately $525,000 in capitalized development costs,
      earnest money and deposits outstanding of which the entire amount would be
      forfeited and expensed if we were to cancel all of these
      agreements.





Should
      our financing efforts be insufficient to execute our business plan, we may
      be
      required to seek additional sources of capital, which may include partnering
      with one or more established operating companies that are interested in our
      emerging business or entering into joint venture arrangements for the
      development of certain of our properties. However, if we were required to resort
      to partnering or joint venture relationships as a means to raise needed capital
      or reduce our cost burden, we likely will be required to cede some control
      over
      our activities and negotiate our business plan with our business or joint
      venture partners.





We
      are vulnerable to concentration risks because our initial operations have been
      limited to the central Texas area and we have focused on the residential rather
      than commercial market.





Our
      real
      estate activities have to date been conducted almost entirely in the central
      Texas region, which we define as encompassing the Austin Metropolitan
      Statistical Area and the San Antonio Metropolitan Statistical Area. This
      geographic concentration, combined with a limited number of projects that we
      plan to pursue, make our operations more vulnerable to local economic downturns
      and adverse project-specific risks than those of larger, more diversified
      companies.





The
      performance of the central Texas economy will affect our sales and,
      consequently, the underlying values of our properties. For example, the economy
      in the Austin MSA is heavily influenced by conditions in the technology
      industries. During periods of weakness or instability in technology industries,
      we may experience reduced sales, particularly with respect to “high-end”
properties, which can significantly affect our financial condition and results
      of operations. The San Antonio MSA economy is dependent on the service industry
      (including tourism), government/military and businesses specializing in
      international trade. To the extent there is a significant reduction in tourism
      or in staffing levels of military or other government employers in the San
      Antonio MSA, we would expect to see reduced sales of lower priced homes due
      to a
      likely reduction in lower paying tourism- and government-related
      jobs.





In
      addition, we have focused our development efforts on residential rather than
      commercial properties. Economic shifts affect residential and commercial
      property markets, and thus our business, in different ways. A developer with
      diversified projects in both sectors may be better able to survive a downturn
      in
      the residential market if the commercial market remains strong. Our focus on
      the
      residential sector can make us more vulnerable than a diversified
      developer.


13




Fluctuations
      in market conditions may affect our ability to sell our land at expected prices,
      if at all, which could adversely affect our revenues, earnings and cash
      flows.





We
      are
      subject to the potential for significant fluctuations in the market value of
      our
      land inventories.  Our land and homes under development represent our
      primary assets.  There is a lag between the time we acquire control of
      undeveloped land and the time that we can improve that land for sale to home
      builders or begin building homes. This lag time varies from site to site as
      it
      is impossible to determine in advance the length of time it will take to obtain
      government approvals and permits. The risk of owning undeveloped land can be
      substantial as the market value of undeveloped land can fluctuate significantly
      as a result of changing economic and market conditions. Inventory carrying
      costs
      can be significant and can result in losses in a poorly performing development
      or market. Material write-downs of the estimated value of our land inventories
      could occur if market conditions deteriorate or if we purchase land at higher
      prices during stronger economic periods and the value of those land inventories
      subsequently declines during weaker economic periods. We could also be forced
      to
      sell land or lots for prices that generate lower profit than we anticipate,
      and
      may not be able to dispose of an investment in a timely manner when we find
      dispositions advantageous or necessary. Furthermore, a decline in the market
      value of our land inventories may give rise to a breach of financial covenants
      contained in our credit facilities, which could cause a default under one or
      more of those credit facilities.





Homebuilding
      is subject to warranty and liability claims in the ordinary course of business
      that can be significant.




As
      a
      homebuilder, we are subject to home warranty and construction defect claims
      arising in the ordinary course of business. We are also subject to liability
      claims arising in the course of construction activities. We record warranty
      and
      other reserves for the homes we sell based on historical experience in our
      markets and our judgment of the qualitative risks associated with the types
      of
      homes built. We have, and many of our subcontractors have, general liability,
      property, errors and omissions, workers compensation and other business
      insurance. These insurance policies protect us against a portion of our risk
      of
      loss from claims, subject to certain self-insured retentions, deductibles and
      other coverage limits. However, because of the uncertainties inherent in these
      matters, we cannot provide assurance that our insurance coverage or our
      subcontractor arrangements will be adequate to address all warranty,
      construction defect and liability claims in the future. Additionally, the
      coverage offered by and the availability of general liability insurance for
      construction defects are currently limited and costly. There can be no assurance
      that coverage will not be further restricted and become even more
      costly.




We
      may be subject to risks as a result of our entry into joint
      ventures.





We
      have
      made the decision to be very selective in our immediate growth plans and to
      seek
      joint venture partners for both future and existing land transactions. While
      joint ventures by their very nature tend to have a lower pure dollar margin
      they
      also transfer risk to the joint venture entity thus helping preserve the
      viability of our company. However, to the extent that we undertake joint
      ventures to develop properties or conduct our business, we may be liable for
      all
      obligations incurred by the joint venture, even though such obligations may
      not
      have been incurred by us, and our share of the potential profits from such
      joint
      venture may not be commensurate with our liability. Moreover, we will be exposed
      to greater risks in joint ventures should our co-ventures’ financial condition
      become impaired during the term of the joint venture, as creditors will
      increasingly look to our company to support the operations and fund the
      obligations of the joint venture.





Our
      operations are subject to weather-related risks.





Our
      land
      development operations and the demand for our homebuilder services may be
      adversely affected from time to time by weather conditions that damage property.
      The central Texas region is prone to tornados, hurricanes entering from the
      Gulf
      of Mexico, floods, hail storms, severe heat and droughts.  In 2007,
      the central Texas region has received significant levels of rain that have
      delayed and in some cases stopped construction projects.  We maintain
      only limited insurance coverage to protect the value of our assets against
      natural disasters. Additionally, weather conditions can and have delayed our
      development and construction projects by weeks or months, which could delay
      and
      decrease our anticipated revenues. To the extent we encounter significant
      weather-related delays, our business would suffer.


14




The
      availability of water could delay or increase the cost of land development
      and
      adversely affect our future operating results.




The
      availability of water is becoming an increasingly difficult issue in the central
      Texas region and other areas of the southwestern United States. Many
      jurisdictions are now requiring that builders provide detailed information
      regarding the source of water for any new community that they intend to develop.
      Similarly, the availability of treatment facilities for sanitary sewage is
      a
      growing concern. Many urban areas have insufficient resources to meet the demand
      for waste-water and sanitary sewage treatment. To the extent we are unable
      to
      find satisfactory solutions to these issues with respect to future development
      projects, our operations could be adversely affected.





If
      our customers are not able to obtain suitable financing, our business may
      decline.






Our
        business and earnings also depend on the ability of our potential customers
        to
        obtain mortgages for the purchase of our homes. The uncertainties created
        by
        recent events in the sub-prime mortgage market and their impact on the overall
        mortgage market, including the tightening of credit standards, could adversely
        affect the ability of our customers to obtain financing for a home purchase,
        thus preventing our potential customers from purchasing our homes. If our
        potential customers or the buyers of our customers’ current homes are not able
        to afford or obtain suitable financing under such circumstances, our sales
        and
        revenues could decline. Similar risks apply to those buyers who are in our
        backlog of homes to be delivered. If our customers cannot obtain suitable
        financing in order to purchase our homes, our sales and profitability could
        be
        materially affected.





We
      are a small company and have a correspondingly small financial and accounting
      organization. Being a public company may strain our resources, divert
      management’s attention and affect our ability to attract and retain qualified
      directors.





We
        are a
        small company  with a finance and accounting organization that we believe
        is of appropriate  size to support our current operations; however, the
        rigorous demands of being  a public reporting company may lead to a
        determination that our finance and  accounting group is undersized. In
        addition, our President and Chief Executive Officer is our majority shareholder
        and controls the company. He also has significant control over our daily
        operations and we are required to implement proper and effective controls
        and
        procedures due to the extent of his control over the company. As a public
        company, we are subject to the  reporting requirements of the Securities
        Exchange Act of 1934 and the  Sarbanes-Oxley Act of 2002 and in fiscal 2008
        we will be required to comply  with the Section 404 of the Sarbanes-Oxley
        Act which will require us and our  independent public accounting firm to
        report on the effectiveness of our  internal controls over financial
        reporting. The requirements of these laws and  the rules and regulations
        promulgated there under entail significant  accounting, legal and financial
        compliance costs, and have made, and will  continue to make, some
        activities more difficult, time consuming or costly and  may place
        significant strain on our personnel, systems and  resources. We may be
        required to increase the size  of our finance and accounting group or to
        retain consultants to assist us with  our Sarbanes-Oxley Section 404
        compliance which may be a significant expense and we will incur additional
        fees
        with our independent public accounting firm.
  The
        Securities Exchange Act requires, among other things, that  we maintain
        effective disclosure controls and procedures and internal control  over
        financial reporting. In order to maintain and improve the effectiveness  of
        our disclosure controls and procedures and internal control over financial
         reporting, and in order to comply with the burden of Section 404 of the
 Sarbanes-Oxley Act, significant resources and management oversight are
 required. As a result, management’s attention may be diverted from other
 business concerns, which could have a material adverse effect on our
        business,  financial condition and results of operations.
  These
        rules and  regulations also have made it more difficult and more expensive
        for us to  maintain director and officer liability insurance, and in the
        future we may be  required to accept reduced coverage or incur
        substantially higher costs to  maintain such coverage. If we are unable to
        maintain adequate director and  officer insurance, our ability to recruit
        and retain qualified officers and  directors, especially those directors
        who may be deemed independent, will be  significantly
        curtailed.





We
      depend on our key personnel to manage our business effectively.





We
      believe our future success will depend in large part upon our ability to attract
      and retain highly skilled managerial and sales and marketing personnel. In
      particular, due to the relatively early stage of our business, we believe that
      our future success is dependent on Clark N. Wilson, our Chief Executive Officer
      and the founder of WFC, to provide the necessary leadership to execute our
      growth plans. Although we intend to acquire a key-man life insurance policy
      for
      Mr. Wilson, the loss of the services of Mr. Wilson or the inability to attract
      or retain qualified personnel in the future or delays in hiring required
      personnel will impede our ability to become profitable.




15




We
        have borrowed money at floating interest rates and if interest rates were
        to
        significantly increase, our financial results could suffer.
 
 As
        of
        September 30, 2007 we have borrowed approximately $6.2 million at interest
        rates
        of prime plus 0.50%
        to
        2.00% that adjust in relation to the prime rate. If the prime rate were to
        significantly increase, we will be required to pay additional amounts in
        interest under these notes and line of credit and our financial results could
        suffer.


Land
      and
      homes under construction comprise the majority of our assets. These assets
      could
      suffer devaluation if the housing and real estate market suffers a significant
      downturn, due to interest rate increases or other reasons. Our debt might then
      be called, requiring liquidation of assets to satisfy our debt obligations
      or
      the use of our cash. A significant downturn could also make it more difficult
      for us to liquidate assets, to raise cash and to pay off debts, which could
      have
      a material adverse effect.




Our
      growth strategy to expand into new geographic areas poses risks.





We
      may
      expand our business into new geographic areas outside of the central Texas
      region. We will face additional risks if we expand our operations in geographic
      areas or climates in which we do not have experience, including:





·
            adjusting
                our land development methods to different geographies and climates;





·
            obtaining
                necessary entitlements and permits under unfamiliar regulatory regimes;





·
            attracting
                potential customers in a market in which we do not have significant
                experience; and





·
            the
                cost of hiring new employees and increased infrastructure costs.





We
      may
      not be able to successfully manage the risks of such an expansion, which could
      have a material adverse effect on our revenues, earnings, cash flows and
      financial condition.





If
      we are unable to generate sufficient cash from operations or secure additional
      borrowings, we may find it necessary to curtail our development
      activities.





Our
      performance continues to be substantially dependent on future cash flows from
      real estate financing and sales and there can be no assurance that we will
      generate sufficient cash flow or otherwise obtain sufficient funds to meet
      the
      expected development plans for our current and future properties. If we are
      unsuccessful in obtaining adequate loans or in generating positive cash flows,
      we could be forced to abandon some of our development activities, including
      the
      development of sub-divisions and entitling of land for development; forfeit
      option fees and deposits; default on loans; violate covenants with our current
      lenders and convertible note holders thereby putting us in default; and possibly
      be forced to liquidate a substantial portion of our asset holdings at
      unfavorable prices.





Regulatory
      Risks





Our
      operations are subject to an intensive regulatory approval process, including
      governmental and environmental regulation, which may delay, increase the cost
      of, prohibit or severely restrict our development projects and reduce our
      revenues and cash flows.





We
      are
      subject to extensive and complex laws and regulations that affect the land
      development process. Before we can develop a property, we must obtain a variety
      of approvals from local, state and federal governmental agencies with respect
      to
      such matters as zoning, density, parking, subdivision, site planning and
      environmental issues. Certain of these approvals are discretionary by nature.
      Because certain government agencies and special interest groups have in the
      past
      expressed concerns about development plans in or near the central Texas region,
      our ability to develop these properties and realize future income from them
      could be delayed, reduced, made more expensive or prevented
      altogether.





Real
      estate development is subject to state and federal regulations as well as
      possible interruption or termination because of environmental considerations,
      including, without limitation, air and water quality and the protection of
      endangered species and their habitats. We are making and will continue to make
      expenditures and other accommodations with respect to our real estate
      development for the protection of the environment. Emphasis on environmental
      matters may result in additional costs to us in the future or a reduction in
      the
      amount of acreage that we can use for development or sales
      activities.


16





We
      are subject to risks related to environmental damages.





We
      may be
      required to undertake expensive and time-consuming clean-up or remediation
      efforts in the event that we encounter environmental hazards on the lots we
      own,
      even if we were not originally responsible for or aware of such hazards. In
      the
      event we are required to undertake any such remediation activities, our business
      could suffer.





Federal
      laws and regulations that adversely affect liquidity in the secondary mortgage
      market could hurt our business.




Recent
      federal laws and regulations could have the effect of curtailing the activities
      of the Federal National Mortgage Association (Fannie Mae) and the Federal Home
      Loan Mortgage Corporation (Freddie Mac). These organizations provide significant
      liquidity to the secondary mortgage market. Any curtailment of their activities
      could increase mortgage interest rates and increase the effective cost of our
      homes, which could reduce demand for our homes and adversely affect our results
      of operations.




The
      federal financial institution agencies recently issued their final Interagency
      Guidance on Nontraditional Mortgage Products (“Guidance”). This Guidance applies
      to credit unions, banks and savings associations and their subsidiaries, and
      bank and savings association holding companies and their subsidiaries. Although
      the Guidance does not apply to independent mortgage companies, it likely will
      affect the origination operations of many mortgage companies that broker or
      sell
      nontraditional mortgage loan products to such entities. This Guidance could
      reduce the number of potential customers who could qualify for loans to purchase
      homes from us and others.




Compliance
      with federal, state and local regulations related to our business could create
      substantial costs both in time and money, and some regulations could prohibit
      or
      restrict some homebuilding ventures.




We
      are
      subject to extensive and complex laws and regulations that affect the land
      development and homebuilding process, including laws and regulations related
      to
      zoning, permitted land uses, levels of density, building design, elevation
      of
      properties, water and waste disposal and use of open spaces. In addition, we
      are
      subject to laws and regulations related to workers’ health and safety. We also
      are subject to a variety of local, state and federal laws and regulations
      concerning the protection of health and the environment. We may be required
      to
      pay environmental impact fees, use energy-saving construction materials and
      give
      commitments to municipalities to provide certain infrastructure such as roads
      and sewage systems. We generally are required to obtain permits, entitlements
      and approvals from local authorities to commence and carry out residential
      development or home construction. Such permits, entitlements and approvals
      may,
      from time-to-time, be opposed or challenged by local governments, neighboring
      property owners or other interested parties, adding delays, costs and risks
      of
      non-approval to the process. Our obligation to comply with the laws and
      regulations under which we operate, and our obligation to ensure that our
      employees, subcontractors and other agents comply with these laws and
      regulations, could result in delays in construction and land development, cause
      us to incur substantial costs and prohibit or restrict land development and
      homebuilding activity in certain areas in which we operate.




Tax
      law changes could make home ownership more expensive or less
      attractive.




Significant
      expenses of owning a home, including mortgage interest expense and real estate
      taxes, generally are deductible expenses for the purpose of calculating an
      individual’s federal, and in some cases state, taxable income, subject to
      various limitations under current tax law and policy. If the federal government
      or a state government changes income tax laws, as has been discussed recently,
      to eliminate or substantially reduce these income tax deductions, then the
      after-tax cost of owning a new home would increase substantially. This could
      adversely impact demand for, and/or sales prices of, new homes.




Risks
      Related to Investment in Our Securities





Our
      company is a holding company, and the obligations of our company are subordinate
      to those of our operating subsidiary.





Our
      company is a holding company with no material assets other than our equity
      interest in our wholly owned subsidiary, Wilson Family Communities, or WFC.
      WFC
      conducts substantially all of our operations and directly owns substantially
      all
      of our assets. WFC also has entered into a credit facility to finance the
      purchase of some
      of
      our land holdings and this credit facility is secured by the assets of
      WFC.  The holding company structure places any obligations of Wilson
      Holdings subordinate to those of our operating subsidiary, WFC. Therefore,
      in
      the event of a liquidation, creditors of WFC would be repaid prior to any
      distribution to the stockholders of Wilson Holdings. After the repayment of
      all
      obligations incurred by WFC and the repayment of all obligations of Wilson
      Holdings, any remaining assets could then be distributed to Wilson Holdings
      as
      the holder of all shares of common stock of WFC and subsequently would be
      distributed among the holders of our common stock.


17





Our
      largest stockholder, who is also our President and Chief Executive Officer,
      will
      continue to control our company.





Clark
      N.
      Wilson, our President and Chief Executive Officer, owns or controls
      approximately 59% of our issued and outstanding common stock.  This
      ownership position will provide Mr. Wilson with the voting power to
      significantly influence the election of all members of our Board of Directors
      and, thereby, to exert substantial control over all corporate actions and
      decisions for an indefinite period.





We
      issued $16.75 million in convertible notes and if these notes are converted
      into
      shares of common stock, or if the warrants issued in conjunction with such
      notes
      are exercised, our stockholders would suffer substantial dilution.





In
      December 2005 and September 2006, we issued convertible promissory notes which
      may be converted, at the election of the holders of the notes, into shares
      of
      our common stock at a conversion price of $2.00 per share. In conjunction with
      these note financings, we also issued warrants to the purchasers which have
      vested and to the placement agent evidencing the right to purchase an aggregate
      of 1,157,187 shares of our common stock at an exercise price of $2.00 per share.
      While the holders of these notes and warrants have not indicated to us that
      they
      plan to convert their notes into, or exercise their warrants for, shares of
      our
      common stock, in the event they elect to do so we would be required to issue
      up
      to 8,375,000 additional shares of our common stock in conversion of the notes
      and 1,157,187 shares of our common stock upon exercise of the warrants, which
      would be dilutive to our existing stockholders. Each convertible note is
      convertible into shares of our common stock at the option of the holder. The
      conversion price is subject to adjustment for stock splits, reverse stock
      splits, recapitalizations and similar corporate actions. An anti-dilution
      adjustment in the conversion price, and the corresponding rate at which the
      convertible notes may be converted into shares of our common stock, also is
      triggered upon the issuance of certain equity securities or equity-linked
      securities with a conversion price, exercise price or share price of less than
      $2.00 per share, provided that the conversion price cannot be lower than $1.00
      per share.





Future
      sales or the potential for sale of a substantial number of shares of our common
      stock could cause the trading price of our common stock to decline and could
      impair our ability to raise capital through subsequent equity
      offerings.





Sales
      of
      a substantial number of shares of our common stock in the public markets, or
      the
      perception that these sales may occur, could cause the market price of our
      stock
      to decline and could materially impair our ability to raise capital through
      the
      sale of additional equity securities. For example, the grant of a large number
      of stock options or other securities under an equity incentive plan or the
      sale
      of our equity securities in private placement transactions at a discount from
      market value could adversely affect the market price of our common
      stock.





We
      have anti-takeover provisions that could discourage, delay or prevent our
      acquisition.





Provisions
      of our articles of incorporation and bylaws could have the effect of
      discouraging, delaying or preventing a merger or acquisition that a stockholder
      may consider favorable. Our authorized but unissued shares of common stock
      are
      available for our Board to issue without stockholder approval. We may use these
      additional shares for a variety of corporate purposes, including future public
      offerings to raise additional capital, corporate acquisitions and employee
      benefit plans. The existence of our authorized but unissued shares of common
      stock could render it more difficult or discourage an attempt to obtain control
      of us by means of a proxy contest, tender offer, merger or other transaction.
      In
      the future, we may elect to amend our charter to provide for authorized but
      unissued shares of preferred stock that would be issuable at the discretion
      of
      the Board of Directors. We can amend and restate our charter by action of the
      Board of Directors and the written consent of a majority of
      stockholders.





We
      may
      become subject to Nevada’s Control Share Acquisition Act (Nevada Revised
      Statutes 78.378 -78.3793), which prohibits an acquirer, under certain
      circumstances, from voting shares of a corporation’s stock after crossing
      specific threshold ownership percentages, unless the acquirer obtains the
      approval of the issuing corporation’s stockholders. The first such threshold is
      the acquisition of at least one-fifth but less that one-third of the
      outstanding voting power. Wilson Holdings may become subject to Nevada’s Control
      Share Acquisition Act if it has 200 or more stockholders of record at least
      100
      of whom are residents of the State of Nevada and does business in the State
      of
      Nevada directly or through an affiliated corporation. Currently, we do not
      conduct business in the State of Nevada directly or through an affiliated
      corporation.


18





As
      a
      Nevada corporation, we also are subject to Nevada’s Combination with Interested
      Stockholders Statute (Nevada Revised Statutes 78.411 - 78.444) which prohibits
      an “interested stockholder” from entering into a “combination” with the
      corporation, unless certain conditions are met. An “interested stockholder” is a
      person who, together with affiliates and associates, beneficially owns (or
      within the prior three years, did beneficially own) 10 percent or more of the
      corporation’s voting stock.





Clark
      N.
      Wilson, our President and Chief Executive Officer owns approximately 59% of
      our
      issued and outstanding common stock. All of these factors may decrease the
      likelihood that we would be, or the perception that we can be, acquired, which
      may depress the market price of our common stock.







Item
      2.             
Description of Property




Our
      corporate office, which we lease from a third party, contains approximately
      5,000 square feet, and is located in Austin, Texas.  We believe this
      facility is adequate to meet our requirements at our current level of business
      activity.




Item
      3.         
Legal Proceedings




We
      are
      not a party to any legal proceedings.




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




None.












19





PART
      II




Item
      5.             
Market for Common Equity and Related Stockholder
      Matters




Our
      common stock is traded on the American Stock Exchange under the symbol
“WIH.”




The
      following table represents the range of the high and low bid prices of our
      common stock as reported by the American Stock Exchange (for prices since May
      19, 2007) and the OTC Bulletin Board Historical Data Service (for prices before
      May 19, 2007). These quotations represent prices between dealers and may not
      include retail markups, markdowns, or commissions and may not necessarily
      represent actual transactions. The market prices reported prior to October
      11,
      2005 were prices reported for Cole Computer Corporation, our predecessor entity
      that was a shell corporation with no material assets or liabilities. The share
      prices reported below have been adjusted to take into account a 350-to-1 reverse
      stock split with respect to the outstanding shares of our common stock that
      was
      affected on September 22, 2005.




2007
            High
            LowJanuary
                1 to March 31
            $6.25
            $4.25April
                1 to June 30
            $5.25
            $2.65July
                1 to September 30
            $2.65
            $1.70October
                1 to December 27
            $2.00
            $0.902006
            High
            LowJanuary
                1 to March 31
            $7.50
            $2.90April
                1 to June 30
            $5.25
            $3.00July
                1 to September 30
            $4.95
            $2.00October
                1 to December 31
            $6.00
            $2.502005
            High
            LowJanuary
                1 to March 31
            $10.49
            $3.85April
                1 to June 30
            $13.46
            $3.85July
                1 to September 30
            $13.99
            $3.85October
                1 to December 31
            $13.00
            $4.00




The
      last
      reported sale price of our common stock on the American Stock Exchange on
      December 26, 2007 was $1.10 per share. According to the records of our transfer
      agent, there were approximately 334 record holders of our common stock as of
      December 26, 2007.




Dividends




We
      have
      not declared or paid any dividends, and do not intend to pay any dividends
      in
      the foreseeable future, with respect to our common stock. We intend to retain
      any future earnings for use in the operation and expansion of our business.
      Any
      future decision to pay dividends on our common stock will be at the discretion
      of our Board of Directors and will depend upon our financial condition, results
      of operations, capital requirements and other factors our Board of Directors
      may
      deem relevant.




Recent
      Sales of Unregistered
      Securities




We
      did
      not sell any unregistered securities in the period covered by this
      report.




Issuer
      Repurchases of Equity
      Securities




We
      did
      not repurchase any shares of our common stock during the third quarter of ended
      September 30, 2007.




The
      following table provides information as of September 30, 2007 with respect
      to
      compensation plans under which our equity securities are authorized for
      issuance.




20




Equity
                  Compensation Plan
                  InformaitonPlan
                  Category
              
              Number
                  of securities to be issued
                  upon exercise of outstanding warrants
              
              
              Weighted
                  average exercise price of
                  outstanding options
              
              
              Number
                  of securities remaining
                  available for future issuance under equity compensation
                  plansEquity
                  compensation plans approved
                  by security holders
              
              
              1,835,000
              
              
              $
              2.24
              
              
              
              665,000Equity
                  compensation plans not
                  approved by security holders
              
              
              -
              
              
              
              -
              
              
              
              -Total
              
              
              1,835,000
              
              
              $
              2.24
              
              
              
              665,000




21




Item
      6.          
Management’s Discussion and Analysis or Plan of Operation.




This
      discussion contains forward-looking statements reflecting our current
      expectations that involve risks and uncertainties. When used herein, the words
      “believes,” “plans,” “expects,” “anticipates,” “intends,” “continue,” “may,”
“will,” “could,” “should,” “future,” “potential,” “estimate,” or the negative of
      such terms and similar expressions as they relate to us or our management are
      intended to identify forward-looking statements.  Actual results and
      the timing of events may differ materially from those contained in these
      forward-looking statements due to a number of factors, including those discussed
      herein.  These risks and uncertainties are beyond our control and, in
      many cases, we cannot predict the risks and uncertainties that could cause
      our
      actual results to differ materially from those indicated by the forward-looking
      statements.  Historical results and percentage relationships among any
      amounts in our consolidated financial statements are not necessarily indicative
      of trends in operating results for any future periods.




The
      following discussion and analysis of our financial condition and results of
      operations should be read in conjunction with “Selected Consolidated Financial
      Information” and our financial statements and accompanying notes included
      elsewhere in this document.




Overview




Our
      business plan focuses on the acquisition of undeveloped land that we believe,
      based on our understanding of population growth patterns and infrastructure
      development, is strategically located. This portion of our business focus has
      required, and is expected to continue to require, the majority of our financial
      resources. We have funded these acquisitions primarily with bank debt. In tandem
      with our land acquisition efforts, and based upon our strategic market analysis,
      we also prepare land for homebuilding. We believe that as the central Texas
      economy expands, the strategic land purchases, land development activities
      and
      homebuilding activities that we have recently commenced will enable us to
      capitalize on the new growth centers we expect will be created.




We
      commenced our homebuilding operations in June 2007 with the purchase of Green
      Builders. We are in the process of developing the Green Builders brand and
      developing our homebuilding strategy. Our strategy is to build homes that are
      environmentally responsible, resource efficient and consistent with local style.
      We will build homes on the majority of the lots that we currently have under
      development. We may build on lots that we purchase from other land builders
      or
      developers. We plan on continuing to acquire and develop land and sell some
      of
      those lots to homebuilders. Our home designs will be selected and prepared
      for
      each of our markets based on local community tastes and the preferences of
      homebuyers. Substantially all of our construction work will be performed by
      subcontractors. Subcontractors will be retained for specific subdivisions
      pursuant to contracts entered in 2007.




A
      primary
      focus of our business has been the sale of developed lots to homebuilders,
      including national homebuilders. During the second quarter of 2007, demand
      for
      finished lots from national homebuilders was reduced and orders placed for
      some
      of our finished lots were cancelled. We believe that retaining these lots for
      use by our new homebuilding business is the most efficient use of our finished
      lots and will allow us to generate homebuilding revenue to replace revenue
      from
      the loss of sales of these finished lots. National homebuilders have been trying
      to reduce their real estate holdings for the past several months and we believe
      this will continue. Demand for real estate has been reduced in all parts of
      the
      country, including areas which have been less affected from the recent slowdown
      in housing starts, such as central Texas. We believe that the national slowdown
      will impact central Texas as national homebuilders continue to sell their real
      estate holdings.




We
      terminated our relationship with our last remaining homebuilder client on August
      2, 2007 subsequent to the sale of all the homes for which we had guaranteed
      the
      loans. As a result of the termination of the relationship, we recorded
      approximately a $260,000 increase to stockholders equity.




22




Comparison
      of
      Nine Months Ended September 2007 and 2006


Nine
                  Months Ended September
                  30,2007
              
              
              2006
              
              
              Change
              
              
              %
                  Change(in
                  thousands)Homebuilding
                  and related services
                  revenues
              
              $
              1,295
              
              
              $
              4,185
              
              
              $
              (2,889
              )
              
              
              -69
              %Land
                  revenues
              
              $
              3,149
              
              
              $
              1,080
              
              
              $
              2,069
              
              
              
              192
              %Homebuilding
                  and related services
                  gross profit
              
              $
              270
              
              
              $
              705
              
              
              $
              (435
              )
              
              
              -62
              %Land
                  gross
                  profit
              
              $
              (646
              )
              
              $
              455
              
              
              $
              (1,101
              )
              
              
              -242
              %Operating
                  expenses
              
              $
              4,244
              
              
              $
              4,010
              
              
              $
              234
              
              
              
              6
              %Operating
                  loss
              
              $
              (4,620
              )
              
              $
              (2,850
              )
              
              $
              (1,770
              )
              
              
              62
              %Net
                  loss
              
              $
              (6,556
              )
              
              $
              (7,626
              )
              
              $
              1,070
              
              
              
              -14
              %






Results
      of
      Operations




Homebuilding
      and Related Services Revenues




Background
      -Homebuilding and
      related services consists of home sales and homebuilder services.  All
      of the home sales have been generated by our clients utilizing our homebuilder
      services.  We consolidate these clients into our operating results
      based on accounting requirements according to FIN 46(R) and refer to these
      clients as Variable Interest Entities, or VIEs.




Revenues
      - During the nine
      months ended September 30, 2007, home sales accounted for approximately 29%
      of
      revenues at a gross profit margin of approximately 21%.  All of the
      homebuilding revenues were generated by one VIE consolidated into our operating
      results.  During the nine months ended September 30, 2007, home sales
      declined approximately 69% from the same periods in 2006, primarily due to
      the
      reduced home sales from our VIEs.




In
      June
      2007 we acquired Green Builders and have commenced our homebuilding activities
      under the name “Green Builders, Inc.”   Our strategy is to build
      homes that are environmentally responsible, resource efficient and built
      consistently with local styles and standards.   We plan to sell
      homes in central Texas, initially in the Austin, Texas area for prices ranging
      from $200,000 to $700,000. We have derived our historical revenue from the
      sale
      of real estate and residential lots, and from services provided to homebuilder
      clients. We ceased providing services to homebuilder clients in August 2007.
      Prior to August 2007, we exercised significant influence over, but held no
      controlling interest in, homebuilder clients, but in some cases we retained
      the
      majority of the risk of loss. At September 30, 2007 and December 31, 2006,
      we
      determined that we were the primary beneficiary in certain homebuilder
      agreements, as defined under FASB Interpretation No. 46(R), or FIN 46(R),
      entitled “Consolidation of Variable Interest Entities”, where we have a
      significant, but less than controlling, interest in our clients. In accordance
      with FIN 46(R), the results of these clients have been consolidated into our
      financial statements.






Land
      and Land Development




Background–
Land
      sales
      revenue consists of revenues from the sale of undeveloped land and developed
      lots.  Developing finished lots from land takes approximately one to
      three years. We may sell our lots to national, regional and local homebuilders
      that may purchase anywhere from five to one hundred or more lots at a time,
      although the delivery of these lots would likely be scheduled over periods
      of
      several months or years. We may use our developed lots for our own homebuilding
      operations.




Revenues–
During
      the nine
      months ended September 30, 2007, land sales accounted for approximately 71%
      of
      our total revenues at a gross loss of approximately 21% due to the write-off
      of
      approximate $1.3 million of development expenses incurred on the Bohls tract
      that we elected not to exercise described below. For the nine months ended
      September 30, 2007, approximately $800,000 of our land sale revenue came from
      the sale of undeveloped acreage tracts of land, approximately $2.3 million
      of
      the revenue from the sale of developed finished lots.  Revenues from
      land and lot sales increased approximately 119% for the nine months ended
      September 30, 2007 from the same periods in 2006, primarily due to the
      completion and sale of residential lots. Excluding the write-off
      of  the Bohls tract, gross profit declined as a percentage of total
      land revenues over the same period in the prior year due to the low volume
      and
      mix of land sold. Land sales during the same periods of 2006 consisted of a
      land
      purchase option and undeveloped acreage tracts with lower cost of sales, whereas
      the current year land sales were primarily single family
      lots.




23




Costs
      and
      Expenses




Cost
      of Sales




In
      May 2007 we elected not to exercise a land purchase option to purchase the
      Bohls
      tract of approximately 428 acres for approximately $7.2 million.  Due
      to the market conditions in the homebuilding industry, our revenue projections
      for the sale of residential lots to other homebuilders have substantially
      declined. We concluded that we currently have adequate single-family lots,
      excluding the Bohls tract. We recorded a loss provision of approximately $1.3
      million relating to development expenses incurred on the tract and expenses
      expected to be incurred due to the expiration of the option period.






General
      and Administrative Expenses






Nine
                  Months Ended September
                  30,Breakdown
                  of G&A
                  Expenses
              
              2007
              
              
              2006
              
              
              Change
              
              
              %
                  ChangeSalaries,
                  benefits, taxes and
                  related employee expenses
              
              $
              1,197,000
              
              
              $
              1,300,000
              
              
              
              (103,000
              )
              
              
              -8
              %Stock
                  compensation
              
              
              541,000
              
              
              
              350,000
              
              
              
              191,000
              
              
              
              55
              %Legal,
                  accounting, and
                  audit
              
              
              666,000
              
              
              
              664,000
              
              
              
              2,000
              
              
              
              0
              %Warranty
                  expense, architecture
                  fees, and consulting services
              
              
              288,000
              
              
              
              535,000
              
              
              
              (247,000
              )
              
              
              -46
              %General
                  overhead, including rent,
                  office expenses and insurance
              
              
              662,000
              
              
              
              320,000
              
              
              
              342,000
              
              
              
              107
              %Depreciation
                  expense
              
              
              22,000
              
              
              
              44,000
              
              
              
              (22,000
              )
              
              
              -50
              %Amortization
                  of subordinated debt
                  issuance costs
              
              
              320,000
              
              
              
              157,000
              
              
              
              163,000
              
              
              
              104
              %Loss
                  on homebuilder services
                  clients
              
              
              176,000
              
              
              
              -
              
              
              
              176,000
              
              
              
              n/aTotal
                  G&A
              
              $
              3,872,000
              
              
              $
              3,370,000
              
              
              
              502,000
              
              
              
              15
              %




General
      and administrative expenses are composed primarily of salaries of general and
      administrative personnel and related employee benefits and taxes, accounting
      and
      legal and general office expenses and insurance. During the nine months ended
      September 30, 2007 and 2006, salaries, benefits, taxes and related employee
      expenses totaled approximately $1.2 million and $1.3 million, respectively,
      and
      represented approximately 31% and 39%, respectively, of total general and
      administrative expenses for the periods.  While there was an overall
      increase in both employees and salaries in 2007 as compared to 2006, it was
      offset by a 2006 accrual of $200,000 for severance, thus resulting in the 2007
      decrease of approximately $100,000.




Stock
      compensation expense was approximately $541,000 and $350,000 for the nine months
      ended September 30, 2007 and 2006, respectively.   The increase
      in stock compensation expense was due primarily to an increase in acceleration
      of stock options vesting for our CFO in connection with the terms of his new
      consulting agreement.




Legal,
      accounting, audit and transaction expense, which includes the expense of filing
      our registration statements and other SEC filings, totaled $666,000 and $664,000
      for the nine months ended September 30, 2007 and 2006,
      respectively.  In 2007, we saw an increase in these expenses due to an
      increase in overall filings for the Company in 2007, offset by a reduction
      in
      expenses relating to the 2007 offering that were a reduction in net proceeds
      versus expenses in the same periods the prior year.




Warranty
      expense, architecture fees and consulting services were approximately $288,000
      and $535,000 for the nine months ended September 30, 2007 and 2006,
      respectively.  These expenses declined predominately due to a decrease
      in consulting services in 2007.




24


There
      was
      approximately $662,000 and $320,000 for general overhead, including rent, office
      expenses and insurance, respectively, for the nine months ended September 30,
      2007 and 2006.  This increase is due to approximately a $204,000
      increase for directors and officers insurance and general liability
      insurance.  This increase was to due to an increase in directors and
      officers insurance for the public offering and the general liability insurance
      increase due to an increase in land development activities.  The
      additional increase for general overhead expenses is due to the ramping up
      of our homebuilding activities in 2007.




Depreciation
      expense was approximately $22,000 and $44,000 for the nine months ended
      September 30, 2007 and 2006, respectively.  This expense decreased
      primarily due to the disposal of model furnishing assets in August 2006 which
      eliminated the associated depreciation expense.




Amortization
      of subordinated convertible debt issuance costs was approximately $320,000
      and
      $157,000 for the nine months ended September 30, 2007 and 2006,
      respectively.  This expense increased due to the issuance of $6.75
      million of subrogated convertible debt in September 2006, thus increasing the
      associated amortization of the issuance costs for 2007.




There
      was
      a loss of  $176,000 for homebuilder services for the nine months ended
      September 30, 2007 due to indirect operating losses of variable interest
      entities that we incurred in 2007.




We
      expect
      total general and administrative expenses to increase over the next year as
      we
      continue to ramp up the homebuilding business.




Sales
      and Marketing Expenses




Sales
      and
      marketing expenses include salaries and related taxes and benefits, marketing
      activities including website, brochures, catalogs, signage, and billboards,
      and
      market research that benefit our corporate presence and are not included as
      homebuilding cost of sales.




We
      expect
      sales and marketing expenses to increase substantially as we continue to ramp
      up
      our homebuilding business and develop our green building strategy and corporate
      branding.




Interest
      Expense and Income




Interest
      expense for the nine months ended September 30, 2007 and 2006 increased by
      $584,000, which was related to the increased subordinated convertible debt
      issued in September 2006 and the increase in interest expensed instead of
      capitalized for property temporarily not under development. Included in the
      interest expense was amortization of subordinated convertible debt. For the
      nine
      months ended September 30, 2007 and 2006, the amortization expense of the
      subordinated debt discount was approximately $536,000 for each period. To the
      extent we purchase additional land that we hold for future development, our
      interest expenses will increase.




Interest
      and other income increased for the nine months ended September 30, 2007 over
      the
      same period in 2006 due to the increase in cash from our public offering in
      May
      2007 and consisted of interest earned on our cash and cash equivalents and
      immaterial amounts of miscellaneous other income.




25




Comparison
      of
      Fiscal Years 2006 and 2005


Year
                  Ended December
                  31,2006
              
              
              2005
              
              
              Change
              
              
              %
                  Change(in
                  thousands)Homebuilding
                  and related services
                  revenues
              
              $
              5,218
              
              
              $
              -
              
              
              $
              5,218
              
              
              
              n/aLand
                  revenues
              
              $
              1,517
              
              
              $
              255
              
              
              $
              1,262
              
              
              
              495
              %Homebuilding
                  and related services
                  gross profit
              
              $
              871
              
              
              $
              -
              
              
              $
              871
              
              
              
              n/aLand
                  gross
                  profit
              
              $
              446
              
              
              $
              140
              
              
              $
              306
              
              
              
              218
              %Operating
                  expenses
              
              $
              5,171
              
              
              $
              1,425
              
              
              $
              3,746
              
              
              
              263
              %Operating
                  loss
              
              $
              (3,853
              )
              
              $
              (1,284
              )
              
              $
              (2,569
              )
              
              
              200
              %Net
                  loss
              
              $
              (14,393
              )
              
              $
              (1,714
              )
              
              $
              (12,679
              )
              
              
              740
              %




Results
      of
      Operations




Homebuilding
      and Related Services Revenues




Revenues-
      During the year
      ended December 31, 2006, home sales accounted for approximately 77% of revenues
      at a gross profit margin of approximately 17%.  All of the
      homebuilding revenues were generated by our two VIEs consolidated into our
      operating results.  Revenues from each homebuilder client were
      approximately $1.8 and $3.4 million, respectively.  The client that
      generated $1.8 million of revenues has not commenced any new homes or utilized
      our homebuilding services since June 30, 2006.




We
      had no
      homebuilding revenues during the year ended December 31, 2005 as no homes were
      built.




Land
      Sales




Revenues
      - Land sales
      accounted for approximately 23% of our total revenues, totaling approximately
      $1.5 million for the year ended December 31, 2006, at a gross profit margin
      of
      approximately 29%.  For the year ended December 31, 2006,
      approximately $616,000 of our land sale revenue came from the sale of
      undeveloped acreage tracts of land, approximately $851,000 of the revenue from
      the sale of developed finished lots and $50,000 from land option
      revenue.  During the year ended December 31, 2005, we were in the
      process of acquiring and developing land and generated revenues of approximately
      $255,000 through the sale of undeveloped acreage lots at a gross profit of
      approximately $140,000.




Costs
      and
      Expenses






General
      and Administrative Expenses




Year
                  Ended December
                  31,Breakdown
                  of G&A
                  Expenses
              
              2006
              
              
              2005
              
              
              Change
              
              
              %
                  ChangeSalaries,
                  benefits, taxes and
                  related employee expenses
              
              $
              1,540,000
              
              
              $
              386,000
              
              
              
              1,154,000
              
              
              
              299
              %Stock
                  compensation
                  expense
              
              
              545,000
              
              
              
              -
              
              
              
              545,000
              
              
              
              n/aLegal,
                  accounting, and
                  audit
              
              
              776,000
              
              
              
              292,000
              
              
              
              484,000
              
              
              
              166
              %Transaction
                  cost
                  amortization
              
              
              367,000
              
              
              
              -
              
              
              
              367,000
              
              
              
              n/aWarranty
                  expense, architecture
                  fees, and consulting services
              
              
              482,000
              
              
              
              283,000
              
              
              
              199,000
              
              
              
              70
              %General
                  overhead, including rent,
                  office expenses and insurance
              
              
              643,000
              
              
              
              239,000
              
              
              
              404,000
              
              
              
              169
              %Total
                  G&A
              
              $
              4,353,000
              
              
              $
              1,200,000
              
              
              
              3,153,000
              
              
              
              263
              %




During
      the year ended December 31, 2006, salaries, benefits, taxes and related employee
      expenses totaled approximately $1.5 million and represented approximately 35%
      of
      total general and administrative costs for the period.  Also included
      is an accrual of approximately $180,000 for severance payments that were paid
      to
      our former Chief Financial Officer over a ten month period.  Stock
      compensation expense totaled approximately $545,000, which is 13% of total
      general and administrative expenses.  Legal, accounting, and audit
      expense which includes the expense of filing our registration statements and
      other SEC filings, totaled approximately $776,000.  Transaction cost
      amortization and other transaction costs totaled approximately
      $367,000.  Warranty expense, architecture fees, and consulting
      services were approximately $482,000.  Miscellaneous expenses were
      approximately $643,000 for general
      overhead, including rent, office expenses and insurance.  Depreciation
      expense included in general and administrative expenses was approximately
      $56,000 for the year ended December 31, 2006.  General and
      administrative expenses included from the consolidation of our VIEs were less
      than 5% of the total general and administrative expenses for the year ended
      December 31, 2006.


26




Prior
      to
      our merger with Athena in May 2005, we had minimal business
      activity.  From June 2005 until December 2005, we spent money on
      developing our business strategy, hiring staff, acquiring a 752 acre land tract
      and merging with a public company, issuing $10 million of convertible debt
      and
      preparing all the documents and filings related to the merger
      activities.  At December 31, 2005, we had nine employees as compared
      to three at June 30, 2005.  The majority of expenses were for salaries
      and related employee expenses of $386,000, legal fees of $203,000, consulting
      relating to the preparation of home plans and designs of $283,000, accounting
      and auditing fees of $89,000 and office rent, software, equipment and general
      expenses of $156,000.  Legal and accounting expenses related primarily
      to the mergers of WFC with Athena, and Wilson Holdings and Cole.  64%
      of our general and administrative expenses were incurred in the fourth quarter
      of 2005.




Sales
      and Marketing Expenses




Sales
      and
      marketing expenses for the year ended December 31, 2006 were approximately
      $243,000 and represented approximately 30% of our total marketing costs for
      the
      period.  Expenses for advertising, brochures and catalogs, signage,
      public relations and other selling expenses for the year ended December 31,
      2006
      were approximately $378,000 and represented approximately 46% of total sales
      and
      marketing costs for the period.  The remaining expenses for the year
      ended December 31, 2006, were for other incidental items and
      services.  Approximately 17% of the sales and marketing expenses in
      the period resulted from the consolidation of the VIEs.




Sales
      and
      marketing expenses for the year ended 2005 were for salaries and related
      expenses which included $129,000 and $73,000 of website expenses, signage,
      advertising and marketing.  Sales and marketing expenses for the year
      ended December 31, 2005 reflect our limited operations prior to June
      2005.




Interest
      Expense and Income




Interest
      expense for the year ended December 31, 2006 of approximately $2.4 million
      is
      related to debt on properties purchased, convertible debt interest costs and
      amortization of the convertible debt discounts.  The convertible debt
      discount amortization was approximately $917,000 for the year ended December
      31,
      2006.  Interest on the convertible debt was approximately $586,000 for
      the year ended December 31, 2006.




Interest
      expense for the year ended December 31, 2005 of approximately $358,000 was
      for
      interest costs on land acquired and held for sale or development, a line of
      credit, bridge loans and convertible debt.




We
      experienced a loss on the fair value of derivatives during the years ended
      December 31, 2006 and 2005 of approximately $8.5 million and $173,000,
      respectively, due to the increases in the fair value of the derivative
      liabilities related to the convertible notes and contingent
      warrants.  These increases were primarily the result of the increase
      in value of our common stock and warrants.




Interest
      income of approximately $291,000, $290,000 and $100,000 for the years ended
      September 30, 2007, December 31, 2006 and December 31, 2005 respectively,
      consisted of interest earned on our cash and cash equivalents and immaterial
      amounts of other income.




Financial
      Condition and
      Capital Resources




Liquidity




At
      September 30, 2007 we had approximately $13.1 million in cash and cash
      equivalents. We completed a successful public offering of the Company’s common
      stock in May 2007, netting approximately $14 million of cash.




On
      June
      29, 2007, WFC entered into a three-year $55 million revolving credit facility
      (the “Credit Facility”) with a syndicate of banks led by RBC Centura Bank, as
      administrative agent.  We have guaranteed all of the obligations of
      WFC under the Credit Facility. The obligations of WFC under the Credit Facility
      will be secured by the assets of each subdivision to be developed with the
      proceeds of loans available under the Credit Facility. We currently have
      approximately $2.7 million borrowings outstanding under the Credit
      Facility.




27


The
      Credit Facility allows WFC to obtain revolving credit loans and provides for
      the
      issuance of letters of credit. The amount available at any time under the Credit
      Facility for revolving credit loans or the issuance of letters of credit is
      determined by a borrowing base. The borrowing base is calculated as the sum
      of
      the values for homes and lots in the subdivision to be developed as agreed
      to by
      the WFC and the agent.




Outstanding
      borrowings under the Credit Facility will bear interest at the prime rate plus
      0.25%. WFC is charged a letter of credit fee equal to 1.10% of each letter
      of
      credit issued under the Credit Facility. WFC may elect to prepay the Credit
      Facility at any time without premium or penalty.




The
      Credit Facility contains customary covenants limiting our ability to take
      certain actions, including covenants that




·
            affect
                how we can develop WFC’s properties;




·
            limit
                WFC’s ability to pay dividends and other restricted payments;




·
            limit
                WFC’s ability to place liens on its property;




·
            limit
                WFC’s ability to engage in mergers and acquisitions and dispositions
                of
                assets;




·
            require
                WFC to maintain a minimum net worth of $20,000,000, including subordinated
                debt (although the minimum net worth may be $17,000,000 for one quarter);




·
            prohibit
                WFC’s ratio of debt(excluding convertible debt) to equity(including
                convertible debt) from exceeding (A) 1.75 to 1.0 prior to September
                30,
                2007, (B) 1.85 to 1.0 from September 30, 2007 until March 30, 2008
                and (C)
                2.0 to 1.0 thereafter; and




·
            require
                WFC to maintain working capital of at least $15,000,000.




An
      event
      of default will occur under the Credit Facility if certain events occur,
      including the following:




·
            a
                failure to pay principal or interest on any loan under the Credit
                Facility;




·
            the
                inaccuracy of a representation or warranty when made;




·
            the
                failure to observe or perform covenants or agreements;




·
            an
                event of default beyond any applicable grace period with respect
                to any
                other indebtedness;




·
            the
                commencement of proceedings under federal, state or foreign bankruptcy,
                insolvency, receivership or similar laws;




·
            any
                loan document, or any lien created thereunder, ceases to be in full
                force
                and effect;




·
            the
                entry of a judgment greater than $1,000,000 that remains undischarged;
                or




·
            a
                change of control.




If
      an
      event of default occurs under the Credit Facility, then the lenders may: (1)
      terminate their commitments under the Credit Facility; (2) declare any
      outstanding indebtedness under the Credit Facility to be immediately due and
      payable; and (3) foreclose on the collateral securing the
      obligations.  We are currently in compliance with our covenants as of
      September 30, 2007.


Our
        growth will require substantial amounts of cash for earnest money deposits,
        land
        purchases, development costs, interest payments and homebuilding costs. Until
        we
        begin to sell an adequate number of lots and homes to cover monthly operating
        expenses, sales, marketing, general and administrative costs will deplete
        cash.
  To
        maintain our liquidity, we have financed the majority of our land and
        development activities with debt and believe we can continue to do so in
        the
        future through a combination of conventional and subordinated convertible
        debt,
        joint venture financing, sales of selected lot positions, sales of land and
        lot
        options, and by raising additional equity.


28




During
      2007 we elected not to exercise a land purchase option to purchase the Bohls
      tract of approximately 428 acres for approximately $7.2 million. Our decision
      not to exercise the option was based on the following factors:




·
            Due
                to the current market conditions in the homebuilding industry, revenue
                projections for sales of residential lots to other homebuilders have
                substantially declined. We concluded that we currently have adequate
                single-family lots for our needs, excluding the Bohls tract. While
                these
                discussions are ongoing the option expired in June 2007. We recorded
                a
                loss provision of approximately $1.3 million relating to development
                costs
                incurred on the tract and expenses expected to be incurred due to
                the
                expiration of the option period; and




·
            We
                commenced homebuilding under Green Builders in June 2007 and plan
                to build
                and sell homes in the central Texas area, initially in the Austin,
                Texas
                area, for prices ranging from $200,000 to $700,000.






Capital
      Resources




We
      have
      raised approximately $16.8 million of subordinated convertible debt, and
      approximately $14 million in a public offering of the Company’s common stock
      completed in May 2007.   WFC also entered into a three-year $55
      million revolving credit facility with a syndicate of banks mentioned
      previously. The Credit Facility may be increased to $100 million with the
      consent of the lenders.




Due
      to
      market conditions stated above and longer than expected ramp up of homebuilding
      operations our financial projections have changed.  We expect to incur
      significant losses during fiscal 2008.




We
      believe that the capital we raised in May 2007, the closing of the revolving
      credit facility and future land and home sales and financing will provide
      adequate capital resources for the next twelve months, but we may be required
      to
      raise additional capital in fiscal 2008 if market opportunities for land
      development and homebuilding growth arise.




Land
      and
      homes under construction comprise the majority of our assets. These assets
      could
      suffer devaluation if the housing and real estate market suffers a significant
      downturn, due to interest rate increases or other reasons. Our debt secured
      by
      our real estate holdings might then be called which may require us to liquidate
      assets to satisfy our debt obligations.  A significant downturn could
      also make it more difficult for us to liquidate assets, to raise cash and to
      pay
      off debts, which could have a material adverse effect.




In
      October 2007 we amended our four seller-financed notes payable for New Sweden,
      the 534 acre project in Travis County described above.  The notes
      payable maturity date has been extended to October 12, 2011.  The
      terms of the notes payable now call for quarterly interest payments commencing
      October 12, 2007 and principal payments of $1.4 million in October 2010 and
      $1.0
      million due in October 2011.




In
      October 2007 we refinanced our land obligation on a land loan for approximately
      120 acres in Georgetown Village Section 9 of approximately $1.1 million and
      obtained a new loan of approximately $4.3 million to finance development for
      Georgetown Village Section 9.  The interest rate is 12.5% annually and
      requires monthly interest payments, with a maturity of two years.




Off-Balance
        Sheet Arrangements
  As
        of
        September 30, 2007, we had no off-balance sheet arrangements.
  Critical
        Accounting Policies and Estimates
  The
        SEC
        defines “critical accounting policies” as those that require application of
        management’s most difficult, subjective or complex judgments, often as a result
        of the need to make estimates about the effect of matters that are inherently
        uncertain and may change in subsequent periods.  Our accounting
        policies are more fully described in the notes to our consolidated financial
        statements.


29




As
      discussed in the notes to the consolidated financial statements, the preparation
      of financial statements in conformity with accounting principles generally
      accepted in the United States of America requires management to make estimates
      and assumptions about future events that affect the amounts reported in our
      consolidated financial statements and accompanying notes. Future events and
      their effects cannot be determined with absolute certainty. Therefore, the
      determination of estimates requires the exercise of judgment. Actual results
      could differ from those estimates, and such differences may be material to
      our
      consolidated financial statements. Listed below are those policies and estimates
      that we believe are critical and require the use of significant judgment in
      their application.




Consolidation
      of Variable Interest Entities




We
      offer
      certain homebuilder clients surety for their interim construction loans and
      cash
      advances to facilitate sales of our residential lots. We may be considered
      the
      primary beneficiary as defined under FASB Interpretation No. 46(R) (“FIN
      46(R)”), “Consolidation of Variable Interest Entities” (VIE), and the Company
      may have a significant, but less than controlling, interest in the entities.
      We
      account for each of these entities in accordance with FIN 46(R). Management
      uses
      its judgment when determining if we are the primary beneficiary of, or have
      a
      controlling interest in, any of these entities. Factors considered in
      determining whether we have significant influence or has control include risk
      and reward sharing, experience and financial condition of the other partners,
      voting rights, involvement in day-to-day capital and operating decisions and
      continuing involvement.




Inventory




Inventory
      is stated at cost unless it is determined to be impaired, in which case the
      impaired inventory would be written down to the fair market
      value.  Inventory costs include land, land development costs, deposits
      on land purchase contracts, model home construction costs, advances to builders
      and  real estate taxes incurred during development and construction
      phases.




Revenue
      Recognition




Revenues
      from property sales are recognized in accordance with SFAS No. 66, “Accounting
      for Sales of Real Estate.” Revenues from land development services to builders
      are recognized when the properties associated with the services are sold, when
      the risks and rewards of ownership are transferred to the buyer and when the
      consideration has been received, or the title company has processed payment.
      For
      projects that are consolidated, homebuilding revenues and services will be
      categorized as homebuilding revenues and revenues from property sales or options
      will be categorized as land sales.




Use
      of Estimates




We
      have
      estimated and accrued liabilities for real estate property taxes on our
      purchased land in anticipation of development, and other liabilities including
      the beneficial conversion liability and the fair value of warrants and
      options.  To the extent that the estimates are different than the
      actual amounts, it could have a material effect on the financial
      statements.




Municipal
      Utility and Water District Receivables




We
      currently have the community of Villages of New Sweden planned that is within
      the boundaries of New Sweden Municipal Utility District No. 1 and the community
      of Rutherford West planned in Greenhawe Water Control and Improvement District
      No. 2.  We incur development costs for the initial creation and
      operating costs of these
      Districts and continuing costs for the water, sewer and drainage infrastructure
      for these Districts.  At this time, we estimate that we will recover
      approximately 50 to 100% of eligible initial creation and operating costs spent
      through September, 2007 at such time as each District issues its first bond
      issue.  Usually, a District issues its first bond issue only after
      completion of construction of approximately 200 houses.  Since
      developer-funded infrastructure costs have been minimal to date in each
      District, we have no estimate of the percentage of those costs which will be
      recovered from each District or the time when they will be
      recovered.  To the extent that the estimates are dramatically
      different to the actual facts, it could have a material effect on the financial
      statements.




30




Concentrations




Our
      current activities are currently in the geographical area of central Texas,
      which we define as encompassing the Austin Metropolitan Statistical Area and
      the
      San Antonio Metropolitan Statistical Area. This geographic concentration makes
      our operations more vulnerable to local economic downturns than those of larger,
      more diversified companies.




We
      are
      also dependent upon a limited number of homebuilder services customers which
      are
      subject to numerous uncertainties related to homebuilding including weather
      delays and damage, labor and material shortages, insufficient capital, materials
      theft or poor workmanship. Revenues from one homebuilder customer accounted
      for
      100% of our total homebuilding revenue for the three months and nine months
      ended September 30, 2007.




Convertible
      Debt




The
      subordinated convertible debt and the related warrants have been accounted
      for
      in accordance with Emerging Issues Task Force (EITF) No. 98-5, “Accounting for
      Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios”, EITF No. 00-19, “Accounting for Derivative
      Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
      Stock,” EITF 00-27, “Application of issue 98-5 to Certain Convertible
      Instruments”, EITF 05-02 “Meaning of ‘Conventional Convertible Debt Instrument’
in Issue No. 00-19”, and EITF 05-04 “The Effect of a Liquidated Damages Clause
      on a Freestanding Financial Instrument Subject to Issue No. 00-19” updated with
      FSP EITF 00-19-2”, Accounting for Registration Payment
      Arrangements.




Recent
      Accounting Pronouncements




In
      January 2007, the Company adopted FASB Staff Position (FSP) No. EITF 00-19-2
      (“FSP EITF 00-19-2”), Accounting for Registration Payment Arrangements. This
      addresses an issuer’s accounting for registration payment arrangements and
      specifies that the contingent obligation to make future payments or otherwise
      transfer consideration under a registration payment arrangement, whether issued
      as a separate agreement or included as a provision of a financial instrument
      or
      other agreement, should be separately recognized and measured in accordance
      with
      FASB Statement No. 5, Accounting for Contingencies. The guidance in FSP EITF
      00-19-2 amends FASB Statements No. 133, Accounting for Derivative Instruments
      and Hedging Activities, and No. 150, Accounting for Certain Financial
      Instruments with Characteristics of both Liabilities and Equity, and FASB
      Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for
      Guarantees, Including Indirect Guarantees of Indebtedness of Others, to include
      scope exceptions for registration payment arrangements. The FSP EITF 00-19-2
      further clarifies that a financial instrument subject to a registration payment
      arrangement should be accounted for in accordance with other applicable
      generally accepted accounting principles (GAAP) without regard to the contingent
      obligation to transfer consideration pursuant to the registration payment
      arrangement. This pronouncement shall be effective immediately for registration
      payment arrangements and the financial instruments subject to those arrangements
      that are entered into or modified subsequent to the date of issuance of this
      pronouncement, or for financial statements issued for fiscal years beginning
      after December 15, 2006, and interim periods within those fiscal
      years.




The
      cumulative effect of the re-characterization of the derivative liabilities
      is
      shown in the table below:




As
                filed
              December
                31, 2006
            
            
            Cumulative
              effect
                of re-
              characterization
              of
                derivative
              liabilities
            
            
            Net
                effect of re-characterizationLIABILITY
                ACCOUNTSSubordinated
                convertible debt, net of discount, respectively
            
            $
            8,395,876
            
            
            
            4,572,674
            
            
            
            12,968,550Derivative
                liability, convertible note compound embedded derivative
            
            
            7,462,659
            
            
            
            (7,462,659
            )
            
            
            -Derivative
                liability, contingent warrants issued to subordinated convertible
                debt
                holders
            
            
            1,883,252
            
            
            
            (1,883,252
            )
            
            
            -Total
                debt, net of discount and derivative liabilities
            
            
            17,741,787
            
            
            
            (4,773,237
            )
            
            
            12,968,550STOCKHOLDERS'
                EQUITY ACCOUNTSCommon
                stock
            
            
            18,056
            
            
            
            -
            
            
            
            18,056Additional
                paid in capital
            
            
            16,809,885
            
            
            
            (4,577,938
            )
            
            
            12,231,947Retained
                deficit
            
            
            (16,053,143
            )
            
            
            9,351,175
            
            
            
            (6,701,968
            )Total
                stockholders' equity
            
            $
            774,798
            
            
            
            4,773,237
            
            
            
            5,548,035




31




In
      July
      2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty
      in
      Income Taxes - An Interpretation of FASB Statement 109" ("FIN 48") which
      prescribes a recognition threshold and measurement attribute for the financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return.  FIN 48, effective for fiscal years beginning
      after December 15, 2006, requires that the tax benefit from an uncertain tax
      position may be recognized only if it is more likely than not that the tax
      position will be sustained on examination by the taxing authorities, based
      on
      the technical merits of the position.  The amount of tax benefits
      recognized from such a position are measured based on the largest benefit that
      has a greater than fifty percent likelihood of being realized upon ultimate
      resolution.  The Company has completed the process of evaluating the
      effect of FIN 48 on its consolidated financial statements.  The
      company has analyzed its tax positions and concluded that there is no cumulative
      or current effect from the adoption of the provisions of FIN 48.  The
      Company's income tax returns are not currently under examination by the Internal
      Revenue Service or other tax authorities.  The Company does not
      foresee any recognition of any unrecognized tax benefits during the next twelve
      months.




In
      September 2006, the FASB issued
      SFAS No. 157, “Fair Value Measurements” (“SFAS 157”).
      SFAS 157 provides guidance for using fair value to measure assets and
      liabilities. The standard also responds to investors’ request for expanded
      information about the extent to which a company measures assets and liabilities
      at fair value, the information used to measure fair value, and the effect of
      fair value measurements on earnings. SFAS 157 will be effective for the
      Company’s fiscal year beginning October 1, 2008. The Company is currently
      reviewing the effect SFAS 157 will have on its financial
      statements.




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
      for Financial Assets and Financial Liabilities — Including an amendment of
      FASB Statement No. 115.” The statement permits entities to choose to
      measure certain financial assets and liabilities at fair value. Unrealized
      gains
      and losses on items for which the fair value option has been elected are
      reported in earnings. SFAS No. 159 is effective as of the beginning of
      an entity’s fiscal year that begins after November 15, 2007. The Company is
      currently evaluating the impact of the adoption of SFAS No. 159;
      however, it is not expected to have a material impact on the Company’s
      consolidated financial position, results of operations or cash
      flows.




In
      December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" (FAS
      141(R)), which establishes accounting principles and disclosure requirements
      for
      all transactions in which a company obtains control over another
      business.  The Company is currently evaluating the impact of the
      adoption of SFAS No. 141; however, it is not expected to have a
      material impact on the Company’s consolidated financial position, results of
      operations or cash flows.




In
      December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
      Consolidated Financial Statements" (FAS 160), which prescribes the accounting
      by
      a parent company for minority interests held by other parties in a subsidiary
      of
      the parent company.  The Company is currently evaluating the impact of
      the adoption of SFAS No. 160; however, it is not expected to have a
      material impact on the Company’s consolidated financial position, results of
      operations or cash flows.






Item
      7.        
Financial Statements




The
      Financial Statements required by this item are included in Part III, Item 13
      and
      are presented beginning on Page F-1.




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




None.




Item
8A.Controls
      and
      Procedures.




Evaluation
      of Effectiveness of Disclosure Controls and Procedures




Our
        management, including our Chief Executive Officer and our Principal Financial
        Officer, have evaluated our disclosure controls and procedures (as defined
        in
        Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as
        amended), as of the period ended September 30, 2007, the period covered by
        this
        Annual Report on Form 10-KSB. Based upon that evaluation, our principal
        executive officer and principal financial officer have concluded that our
        disclosure controls and procedures were effective as of September 30, 2007
        to
        ensure the timely collection, evaluation and disclosure of information relating
        to our company that would potentially be subject to disclosure under the
        Securities Exchange Act of 1934, as amended, and the rules and regulations
        promulgated thereunder is recorded, processed, summarized and reported within
        the time periods specified in Securities and Exchange Commission rules and
        forms.
  32




Changes
      in Internal Control Over Financial Reporting




There
      have been no changes in our internal controls over financial reporting during
      our most recent fiscal quarter that have materially affected, or are reasonably
      likely to materially affect, our internal controls over financial
      reporting.




Management’s
      Annual Report on Internal Control Over Financial Reporting




Our
        management is responsible for establishing and maintaining adequate internal
        control over financial reporting, as such term is defined in Rule 13a-15(f)
        under the Securities Exchange Act of 1934. Internal control over financial
        reporting is a process to provide reasonable assurance regarding the reliability
        of our financial reporting and the preparation of financial statements for
        external purposes in accordance with U.S. generally accepted accounting
        principles. Because of its inherent limitations, internal control over financial
        reporting is not intended to provide absolute assurance that a misstatement
        of
        our financial statements would be prevented or detected. Also, projections
        of
        any evaluation of internal control effectiveness to future periods are subject
        to the risk that controls may become inadequate because of changes in
        conditions, or that the degree of compliance with internal control policies
        or
        procedures may deteriorate. Management
        conducted an evaluation of the effectiveness of our internal control over
        financial reporting. Based on our evaluation, management concluded that the
        Company’s internal control over financial reporting was effective as of
        September 30, 2007.




We
        will
        be required to be in compliance with Sarbanes Oxley Section 404 certification
        requirements relating to internal controls for the fiscal year ended September
        30, 2008.  We have recently commenced our homebuilding
        operations.  We have also recently implemented a new enterprise wide
        information technology system.  In addition, following the filing of
        this report, our principal financial officer will leave his position with
        us and
        become a consultant to the company.  We will need to replace him with
        a new principal financial officer.  We are continuing to work with our
        Audit Committee to implement internal controls due to the above noted
        activities.  Any failure to develop adequate these internal controls
        or in the retention of a qualified principal financial officer may result
        in a
        material weakness in our internal control.




Item
      8B.Other Information.




None.




33


PART
      III




Items
      9
      through 12 and Item 14 will be included in our proxy statement for our 2008
      Annual Meeting of Shareholders, and are incorporated herein by
      reference.





Item
      9.           
Directors, Executive Officers, Promoters and
      Control Persons and Corporate
      Governance; Compliance with Section 16(a) of the Exchange Act




The
      information required by this Item will be included under the section captioned
      “Election of Directors ” in our Proxy Statement for the 2008 Annual Meeting of
      Shareholders, which information is incorporated into this Annual Report by
      reference.




Item
      10.           
Executive Compensation




The
      information required by this Item will be included under the sections captioned
      “Executive Compensation” and “Certain Relationships and Related Transactions” in
      our Proxy Statement for the 2008 Annual Meeting of Shareholders, which
      information is incorporated into this Annual Report by reference.





Item
      11.          
Security Ownership of Certain Beneficial Owners
      and Management and Related
      Stockholder Matters




The
      information required by this Item will be included under the section captioned
      “Security Ownership of Certain Beneficial Owners and Management” in our Proxy
      Statement for the 2008 Annual Meeting of Shareholders, which information is
      incorporated into this Annual Report by reference.




Item
      12.             
Certain Relationships and Related Transactions,
      and Director
      Independence




The
      information required by this Item will be included under the section captioned
      “Certain Relationships and Related Transactions” in our Proxy Statement for the
      2008 Annual Meeting of Shareholders, which information is incorporated into
      this
      Annual Report by reference.




Item
      13.              
Exhibits




The
      Exhibit Index set forth below is incorporated herein by reference.




Item
      14.          
Principal Accountant Fees and Services




Information
      required by this Item will be included under the section captioned “Ratification
      of the Appointment of the Independent Auditors” in our Proxy Statement for the
      2008 Annual Meeting of Shareholders, which information is incorporated into
      this
      Annual Report by reference.




34


SIGNATURES




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.








WILSON
              HOLDINGS,
              INC.By:
            /s/
              ClarkN.
              WilsonClarkN.
                WilsonDate:
              December 31,
              2007
            
            President
                and Chief Executive Officer








Power
      of Attorney




KNOW
      ALL
      PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby
      severally constitutes and appoints, Clark Wilson and Arun Khurana , and each
      or
      any of them, his true and lawful attorney-in-fact and agent, each with the
      power
      of substitution and resubstitution, for him in any and all capacities, to sign
      any and all amendments to this Annual Report on Form 10-KSB and to file the
      same, with exhibits thereto and other documents in connection therewith, with
      the Securities and Exchange Commission, hereby ratifying and confirming all
      that
      each said attorney-in-fact and agent, or his substitute or substitutes, may
      lawfully do or cause to be done by virtue hereof.  Pursuant to the
      requirements of the Securities Exchange Act of 1934, this report has been signed
      below by the following persons on behalf of the registrant and in the capacities
      indicated on December 31, 2007.






Name
            
            Title/s/
Clark
              N.WilsonClark
                N.Wilson
            
            President,
                Chief Executive Officer and Director(Principal
                Executive Officer)/s/
Arun
              Khurana
            
            Principal
                Financial OfficerArun
                Khurana/s/
              Victor
              Ayad
            
            DirectorVictor
                Ayad/s/
Jay
              Gouline
            
            DirectorJay
                Gouline/s/
Sidney
              Christopher Ney
            
            DirectorSidney
                Christopher Ney/s/
Barry
              A. Williamson
            
            DirectorBarry
                A. Williamson





EXHIBIT
      INDEX


LIST
      OF EXHIBITS




Exhibit
                    No.
              Description1.1
              Underwriting
                  Agreement, dated May 14, 2007, by and between Wilson Holdings,
                  Inc. and
                  Capital Growth Financial, LLC (filed as Exhibit 1.1 to the Registrant’s
                  Current Report on Form 8-K dated May 15, 2007 and incorporated
                  herein by
                  reference)3.1
              Amended
                  and Restated Bylaws of Registrant (filed as Exhibit 3.1 to Registrant’s
                  Current Report on Form 8-K dated July 19, 2006 and incorporated
                  herein by
                  reference)3.2
              Amended
                  and Restated Articles of Incorporation of Registrant (filed as
                  Exhibit 3.2
                  to the Registrant’s Current Report on Form 8-K dated May 15, 2007 and
                  incorporated herein by reference)4.1
              Amended
                  and restated Articles of Incorporation of Registrant (filed as
                  Exhibit 3.6
                  to the Registrant’s Registration Statement on Form SB-2 (File No.
                  333-131486) and incorporated herein by reference)4.2
              Underwriter
                  Warrant issued by Registrant to Capital Growth Financial, LLC (filed
                  as
                  Exhibit 4.2 to the Registrant’s Registration Statement on Form S-1 (File
                  No. 333-140747) (the “2007 S-1”) and incorporated herein by
                  reference)10.1
              Lease
                  Agreement dated September 14, 2006 by and between Registrant and
                  TI
                  Building Partnership, Ltd. (filed as Exhibit 10.4 to Registrant’s
                  Quarterly Report on Form 10-QSB for the quarter ended September
                  30, 2006
                  and incorporated herein by reference)10.2+
              Wilson
                  Family Communities, Inc. 2005 Stock Option/Stock Issuance Plan
                  (filed as
                  Exhibit 10.3 to Registrant’s Current Report on Form 8-K dated October 11,
                  2005 and incorporated herein by reference)10.3+
              Amendment
                  No. 1 to Wilson Holdings, Inc. 2005 Stock Option/Stock Issuance
                  Plan
                  (filed as Exhibit 10.2 to the 2007 S-1 and incorporated herein
                  by
                  reference)10.4
              Master
                  Construction Loan Agreement dated September 28, 2005 by and among
                  Registrant and Plains Capital Bank (filed as Exhibit 10.4 to Registrant’s
                  Current Report on Form 8-K dated October 11, 2005 and incorporated
                  herein
                  by reference)10.5
              Promissory
                  Note dated September 28, 2005 issued by Registrant to Plains Capital
                  Bank
                  (filed as Exhibit 10.5 to Registrant’s Current Report on Form 8-K dated
                  October 11, 2005 and incorporated herein by reference)10.6
              Registration
                  Rights Agreement by and among the Registrant and the purchasers
                  of
                  Registrant’s Convertible Notes issued December 19, 2005 (filed as Exhibit
                  10.2 to Registrant’s Current Report on Form 8-K dated December 19, 2005
                  and incorporated herein by reference)10.7
              Form
                  of Warrant issued to Purchasers of Convertible Notes dated December
                  19,
                  2005 (filed as Exhibit 10.3 to Registrant’s Current Report on Form 8-K
                  dated December 19, 2005 and incorporated herein by
                  reference)10.8
              Registration
                  Rights Agreement dated September 29, 2006 by and among the Registrant
                  and
                  the purchasers of the Registrant’s Convertible Notes issued September 29,
                  2006 (filed as Exhibit 10.2 to Registrants Current Report on Form
                  8-K
                  dated October 4, 2006 and incorporated herein by
                  reference)10.9
              Form
                  of Warrant issued to Purchasers of Convertible Notes dated September
                  29,
                  2006 (filed as Exhibit 10.3 to Registrants Current Report on Form
                  8-K
                  dated October 4, 2006 and incorporated herein by
                  reference)10.10+
              Letter
                  Agreement dated December 14, 2006 by and between Registrant and
                  Capital
                  Growth Financial  (filed as Exhibit 10.12 to the 2007 S-1 and
                  incorporated herein by reference)10.11+
              Amendment
                  No. 1 to Letter Agreement by and between Registrant and Capital
                  Growth
                  Financial (filed as Exhibit 10.13 to the 2007 S-1 and incorporated
                  herein
                  by reference)10.12+
              Employment
                  Letter Agreement dated February 14, 2007 by and between Registrant
                  and
                  Clark Wilson (filed as Exhibit 10.10 to Registrant’s Annual Report on Form
                  10-KSB for the year ended December 31, 2006 and incorporated herein
                  by
                  reference)10.13+
              Employment
                  Letter Agreement dated February 14, 2007 by and between Registrant
                  and
                  Arun Khurana (filed as Exhibit 10.11 to Registrant’s Annual Report on Form
                  10-KSB for the year ended December 31, 2006 and incorporated herein
                  by
                  reference)10.14
              Borrowing
                  Base Loan Agreement by and between Wilson Family Communities, Inc
                  and RBC
                  Centura Bank, with Franklin Bank SSB and International Bank of
                  Commerce as
                  co-lenders dated June, 30, 2007 (filed as Exhibit 10.1 to the Registrant’s
                  Quarterly Report on Form 10-KQSB for the quarter ended June 30,
                  2007 and
                  incorporated herein by reference)10.15+
              Consulting
                  Agreement dated September 18, 2007 by and between Registrant and
                  Arun
                  Khurana (filed as Exhibit 10.1 to the Registrant’s Current Report on Form
                  8-K dated September 20, 2007 and incorporated herein by
                  reference)21*
              Subsidiaries
                  of Registrant24*
              Power
                  of Attorney (included in signature page).31.1*
              Certification
                  of Principal Executive Officer31.2*
              Certification
                  of Principal Financial Officer32*
              Certification
                  of Principal Executive Officer and Principal Financial
                  Officer
 * Filed herewith


+ Indicates a management contract or compensatory plan or
      arrangement.





Report
      of Independent Registered Public Accounting Firm




To
      the
      Board of Directors and Stockholders




Wilson
      Holdings, Inc.




We
      have
      audited the accompanying consolidated balance sheets of Wilson Holdings, Inc.
      as
      of September 30, 2007 and December 31, 2006 and 2005, and the related
      consolidated statements of operations, partners’ equity and stockholders’
equity, and cash flows for the nine months ended September 30, 2007 and for
      the
      years ended December 31, 2006 and 2005.  These financial
      statements are the responsibility of the Company’s management.  Our
      responsibility is to express an opinion on these 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 the Company as of September
      30, 2007 and December 31, 2006 and 2005 and the consolidated results of
      their operations and their cash flows for the nine months ended September 30,
      2007 and the years ended December 31, 2006 and 2005in
      conformity with generally accepted accounting principles in the United States
      of
      America.














PMB
      HELIN DONOVAN, LLP









/s/
      PMB
      Helin Donovan, LLP




Austin,
      Texas




December 31,
      2007




F-1




WILSON
                  HOLDINGS,
                  INC.Consolidated
                  Balance
                  SheetsSeptember
                  30, 2007 and December
                  31, 2006 and 2005September
                  30,
              
              
              December
                  31,2007
              
              
              2006
              
              
              2005ASSETSCash
                  and cash
                  equivalents
              
              $
              13,073,214
              
              
              $
              2,673,056
              
              
              $
              10,019,816Restricted
                  cash
              
              
              -
              
              
              
              2,192,226InventoryLand
                  and land
                  development
              
              
              32,463,411
              
              
              
              29,908,325
              
              
              
              12,299,872Homebuilding
                  inventories
              
              
              2,843,704
              
              
              
              847,653
              
              
              
              655,145Total
                  inventory
              
              
              35,307,115
              
              
              
              30,755,978
              
              
              
              12,955,017Other
                  assets
              
              
              729,471
              
              
              
              196,195
              
              
              
              48,056Debt
                  issuance costs, net of
                  amortization
              
              
              1,265,218
              
              
              
              1,458,050
              
              
              
              1,420,669Equipment
                  and software, net of
                  accumulated depreciation and amortization of
                $32,294
                  and $46,358,
                  respectively
              
              
              232,357
              
              
              
              97,956
              
              
              
              70,875Total
                  assets
              
              $
              50,607,375
              
              
              $
              37,373,461
              
              
              $
              24,514,433LIABILITIES
                  AND STOCKHOLDERS'
                  EQUITYAccounts
                  payable
              
              $
              1,404,151
              
              
              $
              1,376,117
              
              
              $
              111,275Accrued
                  real estate taxes
                  payable
              
              
              405,060
              
              
              
              454,764
              
              
              
              148,862Accrued
                  liabilities and
                  expenses
              
              
              215,372
              
              
              
              529,090
              
              
              
              135,168Accrued
                  interest
              
              
              464,809
              
              
              
              302,555
              
              
              
              237,592Deferred
                  revenue
              
              
              159,381
              
              
              
              11,223
              
              
              
              11,223Lines
                  of
                  credit
              
              
              472,365
              
              
              
              6,436,706
              
              
              
              253,945Notes
                  payable
              
              
              20,165,993
              
              
              
              9,466,621
              
              
              
              7,108,579Notes
                  payable, related
                  party
              
              
              -
              
              
              
              279,800
              
              
              
              279,800Subordinated
                  convertible debt, net
                  of $3,384,807, $5,224,502, and $5,002,500 discount,
                  respectively
              
              
              13,254,780
              
              
              
              8,395,876
              
              
              
              4,997,500Derivative
                  liability, convertible
                  note compound embedded derivative
              
              
              -
              
              
              
              7,462,659
              
              
              
              4,500,000Derivative
                  liability, contingent
                  warrants issued to subordinated convertible debt
                  holders
              
              
              -
              
              
              
              1,883,252
              
              
              
              675,000Total
                  liabilities
              
              
              36,541,911
              
              
              
              36,598,663
              
              
              
              18,458,944STOCKHOLDERS'
                  EQUITYCommon
                  stock, $0.001 par value,
                  100,000,000, 80,000,000, and 80,000,000 shares
                authorized,
                  respectively,
                  23,135,538, 18,055,538, and 17,706,625 shares issued
                and
                  outstanding at September 30,
                  2007, December 31, 2006 and 2005, respectively
              
              
              23,136
              
              
              
              18,056
              
              
              
              17,707Additional
                  paid in
                  capital
              
              
              27,040,304
              
              
              
              16,809,885
              
              
              
              7,697,868Retained
                  deficit
              
              
              (12,997,976
              )
              
              
              (16,053,143
              )
              
              
              (1,660,086
              )Total
                  stockholders'
                  equity
              
              
              14,065,464
              
              
              
              774,798
              
              
              
              6,055,489Commitments
                  and
                  contingencies
              
              
              -
              
              
              
              -
              
              
              
              -Total
                  liabilities and
                  stockholders' equity
              
              $
              50,607,375
              
              
              $
              37,373,461
              
              
              $
              24,514,433




See
      accompanying notes to the consolidated financial statements.




F-2




WILSON
                HOLDINGS, INC.Consolidated
                Statements of OperationsFor
                the Nine Months Ended September 30, 2007 and 2006And
                for the Years Ended December 31, 2006 and 2005Nine
                Months Ended Sept 30,
            
            
            Year
                Ended December 31,2007
            
            
            2006
            
            
            2006
            
            
            2005(Unaudited)Revenues:Homebuilding
                and related services
            
            $
            1,295,406
            
            
            $
            4,184,905
            
            
            $
            5,217,564
            
            
            $
            -Land
                sales
            
            
            3,149,093
            
            
            
            1,079,811
            
            
            
            1,516,952
            
            
            
            255,000Total
                revenues
            
            
            4,444,499
            
            
            
            5,264,716
            
            
            
            6,734,516
            
            
            
            255,000Cost
                of revenues:Homebuilding
                and related services
            
            
            1,025,514
            
            
            
            3,480,403
            
            
            
            4,346,186
            
            
            
            -Land
                sales
            
            
            3,794,712
            
            
            
            624,487
            
            
            
            1,070,856
            
            
            
            114,587Total
                cost of revenues
            
            
            4,820,226
            
            
            
            4,104,890
            
            
            
            5,417,042
            
            
            
            114,587Gross
                profit:Homebuilding
                and related services
            
            
            269,892
            
            
            
            704,502
            
            
            
            871,378
            
            
            
            -Land
                sales
            
            
            (645,619
            )
            
            
            455,324
            
            
            
            446,096
            
            
            
            140,413Total
                gross profit
            
            
            (375,727
            )
            
            
            1,159,826
            
            
            
            1,317,474
            
            
            
            140,413Costs
                and expenses:Corporate
                general and administration
            
            
            3,871,587
            
            
            
            3,369,843
            
            
            
            4,352,999
            
            
            
            1,199,578Sales
                and marketing
            
            
            372,820
            
            
            
            640,421
            
            
            
            817,595
            
            
            
            224,936Total
                costs and expenses
            
            
            4,244,407
            
            
            
            4,010,264
            
            
            
            5,170,594
            
            
            
            1,424,514Operating
                loss
            
            
            (4,620,134
            )
            
            
            (2,850,438
            )
            
            
            (3,853,120
            )
            
            
            (1,284,101
            )Other
                income (expense):Loss
                on fair value of derivatives
            
            
            -
            
            
            
            (3,392,500
            )
            
            
            (8,469,457
            )
            
            
            (172,500
            )Interest
                and other income
            
            
            291,478
            
            
            
            260,199
            
            
            
            290,335
            
            
            
            100,346Interest
                expense
            
            
            (2,227,233
            )
            
            
            (1,643,086
            )
            
            
            (2,360,815
            )
            
            
            (358,188
            )Total
                other expense
            
            
            (1,935,755
            )
            
            
            (4,775,387
            )
            
            
            (10,539,937
            )
            
            
            (430,342
            )Net
                loss
            
            $
            (6,555,889
            )
            
            $
            (7,625,825
            )
            
            $
            (14,393,057
            )
            
            $
            (1,714,443
            )Basic
                and diluted loss per share
            
            $
            (0.32
            )
            
            $
            (0.43
            )
            
            $
            (0.81
            )
            
            $
            (0.22
            )Basic
                and diluted weighted average common shares outstanding
            
            
            20,586,649
            
            
            
            17,706,625
            
            
            
            17,711,405
            
            
            
            7,755,646




See
      accompanying notes to the consolidated financial statements.




F-3




WILSON
                  HOLDINGS,
                  INC.Statements
                  of Partners’ Equity and
                  Stockholders' EquityFor
                  the Nine Months Ended
                  September 30, 2007And
                  for the Years Ended December
                  31, 2006, and 2005Series
                  A Preferred
                  Stock
              
              
              Common
                  StockPartners’
                  Equity
              
              
              Shares
              
              
              Amount
              
              
              Additional
                  Paid In
                  Capital
              
              
              Shares
              
              
              Amount
              
              
              Additional
                  Paid In
                  Capital
              
              
              Accumulated
                  Deficit
              
              
              TotalBalances
                  at December 31,
                  2004
              
              
              72,643
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              72,643Net
                  loss through May31,
                  2005
              
              
              (54,357
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (54,357
              )Common
                  Stock issued in exchange
                  Cash and Partnership interests
              
              
              (18,286
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              9,000,000
              
              
              
              9,000
              
              
              
              9,286
              
              
              
              -
              
              
              
              -Sale
                  of Common
                  Stock
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,000,000
              
              
              
              1,000
              
              
              
              59,000
              
              
              
              -
              
              
              
              60,000Sales
                  of  Series A
                  Convertible Preferred Stock
              
              
              -
              
              
              
              4,400,000
              
              
              
              4,400
              
              
              
              4,395,600
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4,400,000Series
                  A Preferred Stock exchanged
                  for land
              
              
              -
              
              
              
              2,404,789
              
              
              
              2,405
              
              
              
              2,402,384
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,404,789Preferred
                  Stock exchanged for
                  Common Stock
              
              
              -
              
              
              
              (6,804,789
              )
              
              
              (6,805
              )
              
              
              (6,797,984
              )
              
              
              6,804,789
              
              
              
              6,805
              
              
              
              6,797,984
              
              
              
              -
              
              
              
              -Shares
                  Issued in
                  Merger
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              901,836
              
              
              
              902
              
              
              
              (902
              )
              
              
              -
              
              
              
              -Warrants
                  issued for transaction
                  costs for convertible debt
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              832,500
              
              
              
              -
              
              
              
              832,500Net
                  loss from June 1 through
                  December 31, 2005
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,660,086
              )
              
              
              (1,660,086
              )Balances
                  December 31,
                  2005
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              17,706,625
              
              
              
              17,707
              
              
              
              7,697,868
              
              
              
              (1,660,086
              )
              
              
              6,055,489Stock-based
                  compensation
                  expense
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              544,866
              
              
              
              -
              
              
              
              544,866Warrants
                  issued at fair
                  value
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,117,500
              
              
              
              -
              
              
              
              1,117,500Benificial
                  conversion feature at
                  fair value
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              7,450,000
              
              
              
              -
              
              
              
              7,450,000Cashless
                  exercise of
                  warrants
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              348,913
              
              
              
              349
              
              
              
              (349
              )
              
              
              -
              
              
              
              -Net
                  loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (14,393,057
              )
              
              
              (14,393,057
              )Balances
                  at December 31,
                  2006
              
              $
              -
              
              
              
              -
              
              
              $
              -
              
              
              $
              -
              
              
              
              18,055,538
              
              
              $
              18,056
              
              
              $
              16,809,885
              
              
              $
              (16,053,143
              )
              
              $
              774,798Cumulative
                  adjustment for
                  restatement per FSP 00-19-2
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              (4,577,938
              )
              
              
              9,351,175
              
              
              
              4,773,237Stock-based
                  compensation
                  expense
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              540,900
              
              
              
              -
              
              
              
              540,900Sale
                  of common stock, net of
                  transaction costs
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              5,000,000
              
              
              
              5,000
              
              
              
              14,031,377
              
              
              
              -
              
              
              
              14,036,377Issuance
                  of common stock for
                  purchase of Green Builders, Inc., net of transaction
                  costs
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              80,000
              
              
              
              80
              
              
              
              216,080
              
              
              
              -
              
              
              
              216,160Services
                  provided without
                  compensation by principal shareholder
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              20,000
              
              
              
              -
              
              
              
              20,000Effect
                  of deconsolidation of
                  variable interest entity
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              259,880
              
              
              
              259,880Net
                  loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (6,555,889
              )
              
              
              (6,555,889
              )Balances
                  at September 30,
                  2007
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              
              23,135,538
              
              
              $
              23,136
              
              
              $
              27,040,304
              
              
              $
              (12,997,977
              )
              
              $
              14,065,463


F-4




WILSON
                  HOLDINGS,
                  INC.Consolidated
                  Statements of Cash
                  FlowsFor
                  the Nine Months Ended
                  September 30, 2007And
                  for the Years Ended December
                  31, 2006 and 2005Nine
                  Months Ended Sept
                  30,
              
              
              Year
                  Ended December
                  31,2007
              
              
              2006
              
              
              2006
              
              
              2005(Unaudited)Cash
                  flows from operating
                  activities:Net
                  loss
              
              $
              (6,555,889
              )
              
              $
              (7,625,825
              )
              
              $
              (14,393,057
              )
              
              $
              (1,714,443
              )Non
                  cash
                  adjustments:Loss
                  on fair value of
                  derivatives
              
              
              -
              
              
              
              3,392,500
              
              
              
              8,469,457
              
              
              
              172,500Amortization
                  of convertible debt
                  discount
              
              
              536,230
              
              
              
              535,983
              
              
              
              917,330
              
              
              
              -Amortization
                  of debt issuance
                  costs
              
              
              192,832
              
              
              
              157,927
              
              
              
              216,037
              
              
              
              -Stock-based
                  compensation
                  expense
              
              
              540,900
              
              
              
              349,507
              
              
              
              544,866
              
              
              
              -Services
                  provided without
                  compensation by principal shareholders
              
              
              20,000
              
              
              
              -
              
              
              
              -
              
              
              
              -Depreciation
                  and
                  amortization
              
              
              55,309
              
              
              
              44,940
              
              
              
              55,577
              
              
              
              4,961Loss
                  on land option
                  purchase
              
              
              1,254,968
              
              
              
              -
              
              
              
              -
              
              
              
              -Effect
                  of deconsolidation of
                  variable interest entity
              
              
              259,880
              
              
              
              -
              
              
              
              -
              
              
              
              -Adjustments
                  to reconcile net loss
                  to net cash used in operating activities:Increase
                  in total
                  inventory
              
              
              (5,806,105
              )
              
              
              (7,620,582
              )
              
              
              (10,946,924
              )
              
              
              (3,283,886
              )Increase
                  in other
                  assets
              
              
              (272,341
              )
              
              
              (67,763
              )
              
              
              (148,139
              )
              
              
              (48,056
              )Increase
                  in accounts
                  payable
              
              
              28,034
              
              
              
              435,198
              
              
              
              1,264,842
              
              
              
              111,276(Decrease)
                  in real estate taxes
                  payable
              
              
              (49,704
              )
              
              
              -
              
              
              
              305,902
              
              
              
              148,862(Decrease)
                  increase in accrued
                  expenses
              
              
              (313,718
              )
              
              
              684,179
              
              
              
              393,922
              
              
              
              135,108Increase
                  in deferred
                  revenue
              
              
              148,158
              
              
              
              -
              
              
              
              -
              
              
              
              5,641(Decrease)
                  increase in accrued
                  interest
              
              
              162,254
              
              
              
              (37,194
              )
              
              
              64,963
              
              
              
              232,380Net
                  cash used in operating
                  activities
              
              
              (9,799,193
              )
              
              
              (9,751,130
              )
              
              
              (13,255,224
              )
              
              
              (4,235,657
              )Cash
                  flows from investing
                  activities:Purchase
                  of fixed
                  assets
              
              
              (201,565
              )
              
              
              (68,479
              )
              
              
              (82,658
              )
              
              
              (75,836
              )Cash
                  paid for Green Builders,
                  Inc.
              
              
              (32,919
              )
              
              
              -
              
              
              
              -
              
              
              
              -Net
                  cash used in investing
                  activities
              
              
              (234,484
              )
              
              
              (68,479
              )
              
              
              (82,658
              )
              
              
              (75,836
              )Cash
                  flows from financing
                  activities:Decrease
                  in restricted
                  cash
              
              
              2,192,226
              
              
              
              -
              
              
              
              (2,192,226
              )
              
              
              -Repayments
                  to related parties,
                  net
              
              
              (279,800
              )
              
              
              -
              
              
              
              -
              
              
              
              (21,000
              )Issuances
                  (repayments) of notes
                  payable, net
              
              
              10,699,372
              
              
              
              (897,579
              )
              
              
              (908,579
              )
              
              
              217,591(Repayments)
                  advances on lines of
                  credit, net
              
              
              (5,964,341
              )
              
              
              3,213,395
              
              
              
              2,595,345
              
              
              
              253,945Proceeds
                  from issuance of
                  convertible debt
              
              
              -
              
              
              
              6,500,000
              
              
              
              6,750,000
              
              
              
              10,000,000Cash
                  paid for debt issuance
                  costs
              
              
              -
              
              
              
              (212,246
              )
              
              
              (253,418
              )
              
              
              (588,170
              )Proceeds
                  from issunace of Series A
                  convertible preferred stock
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4,400,000Partnership
                  contributions
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
                  stock sales, net of
                  transaction costs
              
              
              13,786,377
              
              
              
              -
              
              
              
              -
              
              
              
              60,000Net
                  cash provided by financing
                  activities
              
              
              20,433,834
              
              
              
              8,603,570
              
              
              
              5,991,122
              
              
              
              14,322,366Net
                  increase (decrease) in cash
                  and cash equivalents
              
              
              10,400,158
              
              
              
              (1,216,039
              )
              
              
              (7,346,760
              )
              
              
              10,010,873Cash
                  and cash equivalents at
                  beginning of period
              
              
              2,673,056
              
              
              
              10,019,816
              
              
              
              10,019,816
              
              
              
              8,943Cash
                  and cash equivalents at end
                  of period
              
              $
              13,073,214
              
              
              $
              8,803,777
              
              
              $
              2,673,056
              
              
              $
              10,019,816Cash
                  paid for
                  interest
              
              $
              1,872,716
              
              
              $
              1,064,421
              
              
              $
              1,519,168
              
              
              $
              96,168Cash
                  paid for income
                  taxes
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Non
                  cash in financing
                  activities:Assets
                  and Liabilities acquired
                  from Green Builders, Inc.Accounts
                  Receivable
              
              $
              2,900
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Accounts
                  Payable
              
              $
              6,190
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Issuance
                  of common stock for notes
                  payable, cancellation of notes payable in exchange for
                cancellation
                  of subordinated
                  debt
              
              $
              250,000
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -




See
      accompanying notes to the consolidated financial statements.




F-5


WILSON
        HOLDINGS, INC.
 Notes
        to Consolidated Financial Statements
  (1)         
        Organization and Business Activity




Wilson
      Holdings, Inc., (the “Company”) is a Nevada corporation formerly known as Cole
      Computer Corporation, a Nevada corporation. Effective October 11, 2005
      pursuant to an Agreement and Plan of Reorganization dated as of
      September 2, 2005 by and among Wilson Holdings, Inc., a Delaware
      corporation, and a majority of its stockholders, Wilson Acquisition Corp.,
      a
      Delaware corporation and now a subsidiary of the Company, and Wilson Family
      Communities, Inc., a Delaware corporation (“WFC”), Wilson Acquisition Corp. and
      WFC merged and WFC became a wholly-owned subsidiary of the Company.




In
      September 2007, the Company changed the fiscal year end from December 31 to
      September 30 in order to align the Company’s fiscal year more closely with its
      business cycle.




The
      Company is currently focused on building and selling homes and making strategic
      land acquisitions and developing residential communities.




·
            Homebuilding
                and Related Services: The Company commenced its homebuilding operations
                in
                June 2007 with the purchase of Green Builders, Inc. The Company’s strategy
                is to build homes that are environmentally responsible, resource
                efficient
                and consistent with local style.  The Company will build homes
                on the majority of the lots that it currently has under
                development.  Its home designs will be selected and prepared for
                each of its markets based on local community tastes and preferences
                of
                homebuyers. Substantially all of the Company’s construction work will be
                performed by subcontractors.




·
            Land
                Acquisition and Development: The Company’s land development business plan
                is to secure land strategically, based on its understanding of population
                growth patterns and infrastructure development.  In tandem with
                its land acquisition efforts and based upon its strategic market
                analysis,
                the Company plans to subcontract for the preparation of land for
                development. They seek to add value to the land through the process
                of
                development, which may include permitting and constructing water
                and
                wastewater infrastructure, master-planning of the community, and
                the
                construction of roads and community amenities. The Company also plans
                to
                sell entitled land to others for development.




(2)         
      Summary of Significant Accounting Policies




(a)           
      Basis of Accounting




These
      financial statements are presented on the accrual basis of accounting in
      accordance with U.S. generally accepted accounting principles whereby revenues
      are recognized in the period earned and expenses when incurred.




(b)           
      Cash and Cash Equivalents




For
      purposes of the statements of cash flows, the Company considers all short term,
      highly liquid investments with an original maturity of three months or less
      to
      be cash and cash equivalents.




(c)           
      Consolidation of Variable Interest Entities




The
      Company offers certain homebuilder clients surety for their interim construction
      loans and cash advances to facilitate sales of the Company’s residential lots.
      The Company may be considered the primary beneficiary as defined under FASB
      Interpretation No. 46(R) (“FIN 46(R)”), “Consolidation of Variable Interest
      Entities” (VIE), and the Company may have a significant, but less than
      controlling, interest in the entities. The Company accounts for each of these
      entities in accordance with FIN 46(R). Management uses its judgment when
      determining if the Company is the primary beneficiary of, or has a controlling
      interest in, any of these entities. Factors considered in determining whether
      the Company has significant influence or has control include risk and reward
      sharing, experience and financial condition of the other partners, voting
      rights, involvement in day-to-day capital and operating decisions and continuing
      involvement.




The
      Company terminated its relationship with its homebuilder clients in
      2007.




F-6
 WILSON
          HOLDINGS, INC.
 Notes
          to Consolidated Financial Statements
  (d)           Inventory




Inventory
      is stated at cost unless it is determined to be impaired, in which case the
      impaired inventory would be written down to the fair market
      value.  Inventory costs include land, land development costs, deposits
      on land purchase contracts, model home construction costs, capitalized interest,
      real estate taxes incurred during development and construction phases, and
      homebuilding costs.  No significant impairments of inventory were
      recorded in 2007, 2006 or 2005.




(e)           Land
      Held Under Option Agreements, Not Owned




In
      order
      to ensure the future availability of land for development, the Company enters
      into lot option purchase agreements with unaffiliated third parties. Under
      the
      agreements, the Company pays a stated deposit in consideration for the right
      to
      purchase land at a future time, usually at predetermined prices or percentage
      of
      proceeds as homes are sold. These options generally do not contain performance
      requirements from the Company nor obligate the Company to purchase the land.
      Lot
      option payments are initially capitalized as inventory costs.  If the
      lot option is exercised the option cost is included in the cost of the land
      acquired.  At the earlier of the time that it is determined that the
      lot option will not be exercised or, at the date the lot option expires, the
      cost of the lot option will be expensed.  Earnest money deposits for
      land costs and development costs on land under option, not owned, totaled
      approximately $525,000, $625,000 and $525,000 at September 30, 2007 and December
      31, 2006 and 2005 respectively, of which approximately $520,000, $625,000,
      and
      $420,000 is non-refundable if the Company does not exercise the option and
      purchase the land.




(f)           Interest
      and Real Estate Taxes




Interest
      and real estate taxes attributable to land and homes are capitalized as
      inventory while they are being actively developed.   As of
      September 30, 2007 and December 31, 2006 and 2005, there were approximately
      $405,000, $460,000, and $151,000 of estimated real estate taxes.  As
      of September 30, 2007 and December 31, 2006 there was approximately $816,000
      and
      $241,000 of interest in inventory.




(g)           Revenue
      Recognition




Revenues
      from property sales are recognized in accordance with SFAS No. 66, “Accounting
      for Sales of Real Estate.”  Revenues from land development services to
      builders are recognized when the properties associated with the services are
      sold, when the risks and rewards of ownership are transferred to the buyer
      and
      when the consideration has been received, or the title company has processed
      payment.  For projects that are consolidated, homebuilding revenues
      and services will be categorized as homebuilding revenues and revenues from
      property sales or options will be categorized as land sales.




(h)           Income
      Taxes




Prior
      to
      the merger of Athena with WFC at May 31, 2005, Athena was a partnership and
      therefore did not have income taxes as the income and losses passed through
      to
      the partners. Also, the VIEs are pass through entities. Since the merger, income
      taxes are accounted for in accordance with SFAS No. 109, “Accounting for Income
      Taxes,” deferred tax assets and liabilities are determined based on temporary
      differences between financial reporting carrying amounts of existing assets
      and
      liabilities and their respective tax bases and net operating loss and credit
      carry-forwards. 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 will be recognized
      in the period that includes the enactment date.  A valuation allowance
      is recorded for the entire deferred tax assets due to the uncertainty of the
      net
      realizable value of the asset.




(i)           
      Advertising and Selling Costs




The
      Company has incurred advertising, marketing, selling, and promotion costs as
      part of the sales efforts to market the real estate for sale and services
      offered. These costs, including the cost of developing and printing various
      brochures and mail out documents, are expensed as incurred. For the nine months
      ended September 30, 2007 and 2006 the Company incurred approximately $370,000
      and $640,000 of advertising and selling costs, respectively.  For the
      years ended December 31, 2006, and 2005, the Company incurred $820,000 and
      $230,000 of advertising and selling costs, respectively.


F-7
 WILSON
          HOLDINGS, INC.
 Notes
          to Consolidated Financial Statements
  (j)           Property
          and Equipment




Property
      and equipment is carried at cost less accumulated depreciation. Depreciation
      and
      amortization is recorded using the straight-line method over the estimated
      useful life of the asset. Depreciation and amortization for equipment and
      computer software typically ranges from 2 to 5 years. Leasehold improvements
      are
      depreciated over the shorter of the life of the respective leases or the assets.
      Repairs and maintenance are expensed as incurred. Costs and accumulated
      depreciation applicable to assets retired or sold are eliminated from the
      accounts and any resulting gains or losses are recognized at such
      time.




(k)           Use
      of Estimates




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period.  Accordingly, actual results could differ
      from those estimates.




The
      Company has estimated and accrued liabilities for real estate property taxes
      on
      its purchased land in anticipation of development, and other liabilities
      including the beneficial conversion liability, the fair value of warrants and
      options.  To the extent that the estimates are dramatically different
      to the actual amounts, it could have a material effect on the financial
      statements.




(l)           
      Municipal Utility and Water District Receivables




The
      Company has one of its properties in a Municipal Utility District (MUD) and
      one
      property in a Water Control and Improvement District (WCID). The Company incurs
      development costs for water, sewage lines and associated treatment plants and
      other development costs and fees for these properties. Under the agreement
      with
      the districts, the Company expects to be reimbursed partially for the above
      developments costs. The Districts will issue bonds to repay the Company, once
      there is enough assessed value on the property for the District taxes to repay
      the bonds. As homes are sold within the District, the assessed value increases.
      It can take several years before there is enough assessed value to recapture
      the
      costs.  The Company has estimated that it will recover approximately
      50% to 100% of eligible costs spent through September 30, 2007.  In
      some circumstances, the Districts will pay for property set aside for the
      preservation of endangered species, greenbelts and similar uses.  To
      the extent that the estimates are dramatically different to the actual amounts,
      it could have a material effect on the financial statements.




(l)           
      Impairment of Long-Lived Assets




The
      Company reviews its long-lived assets, which consist primarily of trademarks,
      equipment and software, and real estate inventory for impairment according
      to
      whenever events or changes in


F-8
 WILSON
          HOLDINGS, INC.
 Notes
          to Consolidated Financial Statements
  (2)         
          Summary of Significant Accounting Policies (continued)




(m)          Impairment
      of Long-Lived Assets (continued)




circumstances
      indicate.  Inventory is stated at the lower of cost (including direct
      construction costs, capitalized interest and real estate taxes) or fair value
      less cost to sell. Equipment and software is carried at cost less accumulated
      depreciation. The Company assesses these assets for recoverability in accordance
      with the provisions of statement of Financial Accounting Standards No. 144,
      “Accounting for the Impairment or Disposal of Long-Lived Assets,” or SFAS No.
      144. SFAS No. 144 requires that long-lived assets be reviewed for impairment
      whenever events or changes in circumstances indicate that the carrying amount
      of
      an asset may not be recoverable. Recoverability of assets is measured by
      comparing the carrying amount of an asset to future undiscounted net cash flows
      expected to be generated by the asset. These evaluations for impairment are
      significantly impacted by estimates of revenues, costs and expenses and other
      factors. If long-lived assets are considered to be impaired, the impairment
      to
      be recognized is measured by the amount by which the carrying amount of the
      assets exceeds the fair value of the assets.  No significant
      impairments of long-lived assets were recorded in 2007, 2006 or
      2005.




(n)           Loss
      per Common Share




Earnings
      per share is accounted for in accordance with SFAS No. 128, “Earnings per
      Share,” which require a dual presentation of basic and diluted earnings per
      share on the face of the statements of earnings.  Basic loss per share
      is based on the weighted effect of common shares issued and outstanding, and
      is
      calculated by dividing net loss by the weighted average shares outstanding
      during the period. Diluted loss per share is calculated by dividing net loss
      by
      the weighted average number of common shares used in the basic loss per share
      calculation plus the number of common shares that would be issued assuming
      exercise or conversion of all potentially dilutive common shares
      outstanding.




The
      Company has issued stock options, warrants convertible into shares of common
      stock. These shares and warrants have been excluded from loss per share at
      September 30, 2007 and 2006, and December 31, 2006 and 2005 because the
      effect would be anti-dilutive as summarized in the table below:






September
              
              
              December2007
              
              
              2006
              
              
              2006
              
              
              2005(Unaudited)Stock
                  options
              
              
              1,835,000
              
              
              
              1,145,000
              
              
              
              925,000
              
              
              
              780,000Common
                  stock
                  warrants
              
              
              1,143,125
              
              
              
              1,312,500
              
              
              
              1,283,750
              
              
              
              1,500,000Subordinated
                  convertible debt
                  warrants
              
              
              8,250,000
              
              
              
              8,375,000
              
              
              
              8,375,000
              
              
              
              5,000,000Total
              
              
              11,228,125
              
              
              
              10,832,500
              
              
              
              10,583,750
              
              
              
              7,280,000




(o)          Financial
      Instruments and Credit Risk




Financial
      instruments that potentially subject the Company to credit risk include cash
      and
      cash equivalents.  Cash is deposited in demand accounts in federally
      insured domestic institutions to minimize risk.  Although the balances
      in these accounts exceeded the federally insured limit by $12.9 million at
      September 30, 2007, the Company has not incurred losses related to these
      deposits. Cash equivalents consist of money market accounts and are typically
      held in accounts with investment brokers or banks which are secured with high
      quality short maturity investment securities.




The
      amounts reported for cash and cash equivalents, notes payable, accounts payable,
      accrued liabilities, and line of credit are considered to approximate their
      market values based on comparable market information available at the respective
      balance sheet dates and their short-term nature.


F-9
 WILSON
          HOLDINGS, INC.
 Notes
          to Consolidated Financial Statements
  (2)         
          Summary of Significant Accounting Policies (continued)




(p)           
      Concentrations




Our
      current activities are currently in the geographical area of central Texas,
      which we define as encompassing the Austin Metropolitan Statistical Area and
      the
      San Antonio Metropolitan Statistical Area. This geographic concentration makes
      our operations more vulnerable to local economic downturns than those of larger,
      more diversified companies.




In
      prior
      periods we have been dependent upon a limited number of homebuilder services
      customers which are subject to numerous uncertainties related to homebuilding
      including weather delays and damage, labor and material shortages, insufficient
      capital, materials theft or poor workmanship. Revenues from one homebuilder
      customer accounted for 100% of our total homebuilding revenue for the nine
      months ended September 30, 2007.   At September 30, 2007 we no
      longer have homebuilder services customers.




(q)           Subordinated
      Convertible Debt




The
      subordinated convertible debt and the related warrants have been accounted
      for
      in accordance with Emerging Issues Task Force (EITF) No. 98-5, “Accounting for
      Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios”, EITF No. 00-19, “Accounting for Derivative
      Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
      Stock,” EITF 00-27, “Application of issue 98-5 to Certain Convertible
      Instruments”, EITF 05-02 “Meaning of ‘Conventional Convertible Debt Instrument’
in Issue No. 00-19”, and EITF 05-04 “The Effect of a Liquidated Damages Clause
      on a Freestanding Financial Instrument Subject to Issue No. 00-19” updated with
      FSP EITF 00-19-2”, Accounting for Registration Payment
      Arrangements.




(r)           
      Derivative Financial Instruments




Wilson
      Holdings accounts for all derivative financial instruments in accordance with
      SFAS No. 133. Derivative financial instruments are recorded as liabilities
      in
      the consolidated balance sheet, measured at fair value. When available, quoted
      market prices are used in determining fair value.


F-10
 WILSON
          HOLDINGS, INC.
 Notes
          to Consolidated Financial Statements
  (2)         
          Summary of Significant Accounting Policies (continued)




(r)           
      Derivative Financial Instruments (continued)




However,
      if quoted market prices are not available, Wilson Holdings estimates fair value
      using either quoted market prices of financial instruments with similar
      characteristics or other valuation techniques.




The
      value
      of the derivative liabilities relating to the convertible note in the
      consolidated financial statements are subject to the changes in the trading
      value of Wilson Holdings common stock and other assumptions. As a result, our
      quarterly financial statements may fluctuate from quarter to quarter based
      on
      factors, such as the trading value of Wilson Holdings common stock, the amount
      of shares converted by subordinated convertible debt holders in connection
      with
      the subordinated convertible notes and exercised in connection with the
      subordinated convertible debt holders’ penalty warrants. Consequently, the
      consolidated financial position and results of operations may vary from quarter
      to quarter based on conditions other than Wilson Holdings operating revenues
      and
      expenses. See Note 10 regarding valuation methods used for derivative
      liabilities.




Derivative
      financial instruments that are not designated as hedges or that do not meet
      the
      criteria for hedge accounting under SFAS No. 133 are recorded at fair value,
      with gains or losses reported currently in earnings. All derivative financial
      instruments held by the Company as of September 30, 2007 and December 31,
      2006 and 2005, were not designated as hedges.




(s)           
      Stock-Based Compensation




Effective
      January 1, 2006, the Company adopted the provisions of SFAS No. 123
      (revised 2004), Share-Based Payment, (“SFAS 123R”) using the
      prospective-transition method. Under this transition method, compensation
      expense recognized during the year ended December 31, 2006 included: (a)
      compensation expense for all share-based awards granted prior to, but not yet
      vested as of December 31, 2005, based on the grant date fair value
      estimated in accordance with the original provisions of SFAS 123, and (b)
      compensation expense for all share-based awards granted subsequent to
      January 1, 2006, based on the grant date fair value estimated in accordance
      with the provisions of SFAS 123R. In accordance with the
      modified-prospective-transition method, results for prior periods have not
      been
      restated.  Before January 1, 2006, the Company accounted for its
      stock options using the intrinsic value method under “Accounting Principles
      Board Opinion No. 25.”




If
      the
      Company had elected to recognize compensation expense for options granted based
      on their fair values at the grant dates, consistent with SFAS No. 123, net
      income and earnings per share for the year ended December 31, 2005 would
      have changed to the pro forma amounts indicated below:




2005Net
                loss as reported
            
            $
            (1,714,443
            )Deduct:
                Total stock based employee compensation expense determined under
              the
                fair value based method for all awards, net of the related tax
                effects
            
            
            (123,479
            )Pro
                forma net loss
            
            $
            (1,837,922
            )Net
                loss per shareBasic
                and diluted - as
                reported
            
            $
            (0.22
            )Basic
                and diluted - pro forma
            
            $
            (0.23
            )




The
      fair
      value of the options was calculated at the date of grant using the Black-Scholes
      pricing model with the following weighted-average assumptions for the year
      ended
      2005.  For the year ended 2005, the following assumptions were used:
      risk free interest rate of 4.25%, dividend yield of 0%, weighted-average life
      of
      options of 5 years, and a 60% volatility factor.




(t)           Adoption
      of New Accounting Pronouncements




In
      January 2007, the Company adopted FASB Staff Position (FSP) No. EITF 00-19-2
      (“FSP EITF 00-19-2”), Accounting for Registration Payment Arrangements. This
      addresses an issuer’s accounting for registration payment arrangements and
      specifies that the contingent obligation to make future payments or otherwise
      transfer consideration under a registration payment arrangement, whether issued
      as a separate agreement
      or included as a provision of a financial instrument or other agreement, should
      be separately recognized and measured in accordance with FASB Statement No.
      5,
      Accounting for Contingencies. The guidance in FSP EITF 00-19-2 amends FASB
      Statements No. 133, Accounting for Derivative Instruments and Hedging
      Activities, and No. 150, Accounting for Certain Financial Instruments with
      Characteristics of both Liabilities and Equity, and FASB Interpretation No.
      45,
      Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including
      Indirect Guarantees of Indebtedness of Others, to include scope exceptions
      for
      registration payment arrangements. The FSP EITF 00-19-2 further clarifies that
      a
      financial instrument subject to a registration payment arrangement should be
      accounted for in accordance with other applicable generally accepted accounting
      principles (GAAP) without regard to the contingent obligation to transfer
      consideration pursuant to the registration payment arrangement. This
      pronouncement shall be effective immediately for registration payment
      arrangements and the financial instruments subject to those arrangements that
      are entered into or modified subsequent to the date of issuance of this
      pronouncement, or for financial statements issued for fiscal years beginning
      after December 15, 2006, and interim periods within those fiscal
      years.




F-11
 WILSON
          HOLDINGS, INC.
 Notes
          to Consolidated Financial Statements


The
      cumulative effect of the re-characterization of the derivative liabilities
      is
      shown in the table below:




As
                filed
              December
                31, 2006
            
            
            Cumulative
                effect of re-characterization of derivative
                liabilities
            
            
            Net
                effect of re-characterizationLIABILITY
                ACCOUNTSSubordinated
                convertible debt, net of discount, respectively
            
            $
            8,395,876
            
            
            
            4,572,674
            
            
            
            12,968,550Derivative
                liability, convertible note compound embedded derivative
            
            
            7,462,659
            
            
            
            (7,462,659
            )
            
            
            -Derivative
                liability, contingent warrants issued to subordinated convertible
              debt
                holders
            
            
            1,883,252
            
            
            
            (1,883,252
            )
            
            
            -Total
                debt, net of discount and derivative liabilities
            
            
            17,741,787
            
            
            
            (4,773,237
            )
            
            
            12,968,550STOCKHOLDERS'
                EQUITY ACCOUNTSCommon
                stock
            
            
            18,056
            
            
            
            -
            
            
            
            18,056Additional
                paid in capital
            
            
            16,809,885
            
            
            
            (4,577,938
            )
            
            
            12,231,947Retained
                deficit
            
            
            (16,053,143
            )
            
            
            9,351,175
            
            
            
            (6,701,968
            )Total
                stockholders' equity
            
            $
            774,798
            
            
            
            4,773,237
            
            
            
            5,548,035




In
      July
      2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty
      in
      Income Taxes -- An Interpretation of FASB Statement 109" ("FIN 48") which
      prescribes a recognition threshold and measurement attribute for the financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return.  FIN 48, effective for fiscal years beginning
      after December 15, 2006, requires that the tax benefit from an uncertain tax
      position may be recognized only if it is more likely than not that the tax
      position will be sustained on examination by the taxing authorities, based
      on
      the technical merits of the position.  The amount of tax benefits
      recognized from such a position are measured based on the largest benefit that
      has a greater than fifty percent likelihood of being realized upon ultimate
      resolution.  The Company has completed the process of evaluating the
      effect of FIN 48 on its consolidated financial statements.  The
      company has analyzed its tax positions and concluded that there is no cumulative
      or current effect from the adoption of the provisions of FIN 48.  The
      Company's income tax returns are not currently under examination by the Internal
      Revenue Service or other tax authorities.  The Company does not
      foresee recognition of unrecognized tax benefits during the next twelve
      months.




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value
      Measurements” (“SFAS 157”). SFAS 157 provides guidance for using fair
      value to measure assets and liabilities. The standard also responds to
      investors’ request for expanded information about the extent to which a company
      measures assets and liabilities at fair value, the information used to measure
      fair value, and the effect of fair value measurements on earnings. SFAS 157
      will be effective for the Company’s fiscal year beginning October 1, 2008. The
      Company is currently reviewing the effect SFAS 157 will have on its
      financial statements.




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
      for Financial Assets and Financial Liabilities — Including an amendment of
      FASB Statement No. 115.” The statement permits entities
      to choose to measure certain financial assets and liabilities at fair value.
      Unrealized gains and losses on items for which the fair value option has been
      elected are reported in earnings. SFAS No. 159 is effective as of the
      beginning of an entity’s fiscal year that begins after November 15, 2007.
      The Company is currently evaluating the impact of the adoption of
      SFAS No. 159; however, it is not expected to have a material impact on
      the Company’s consolidated financial position, results of operations or cash
      flows.


F-12
 WILSON
          HOLDINGS, INC.
 Notes
          to Consolidated Financial Statements


In
      December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" (FAS
      141(R)), which establishes accounting principles and disclosure requirements
      for
      all transactions in which a company obtains control over another
      business.  The Company is currently evaluating the impact of the
      adoption of SFAS No. 141; however, it is not expected to have a
      material impact on the Company’s consolidated financial position, results of
      operations or cash flows.




In
      December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
      Consolidated Financial Statements" (FAS 160), which prescribes the accounting
      by
      a parent company for minority interests held by other parties in a subsidiary
      of
      the parent company.  The Company is currently evaluating the impact of
      the adoption of SFAS No. 160; however, it is not expected to have a
      material impact on the Company’s consolidated financial position, results of
      operations or cash flows.









(u)           
      Reclassification




Certain
      prior period amounts have been reclassified to conform to current period
      presentation.




(3)







The
      Company’s land inventory includes real estate held for sale or under development
      and earnest money on land purchase options. Construction in progress includes
      development costs, prepaid development costs, and development costs on land
      under option but not owned. Homebuilding inventory represents speculative homes
      under construction.  The Company expects the homebuilding inventory to
      increase as it begins to build in additional communities.




Earnest
      money deposits for land costs and development costs on land under option, not
      owned, totaled approximately $525,000, $625,000 and $525,000 at September 30,
      2007 and December 31, 2006 and 2005 respectively, of which approximately
      $520,000, $625,000, and $420,000 is non-refundable if the Company does not
      exercise the option and purchase the land.




As
      of
      September 30, 2007 it had approximately 738 acres under development and
      construction in Hays County, Travis County and Williamson County,
      Texas.  The Company completed Phase 1 in Rutherford West in 2007 and
      Phase 6 in Georgetown Village in 2006.  During 2007, the Company
      elected not to exercise the option on Bohl’s tract.  The Company
      recorded approximately $1.3 million of cost of sales during the nine months
      ended September 30, 2007 to reflect the development costs which accumulated
      on
      this property.




In
      April
      2007 10 acres of Highway 183 was condemned by the State.  In July 2007
      the Company received final judgment from the State and received proceeds of
      approximately $410,000 for the condemned land.  The Company currently
      has an option agreement from an outside buyer for the remaining 5
      acres.




Effective
      July 2007, the Company put a hold on development of phases 2 through 5 of
      Rutherford West.  From that date, all interest costs related to
      holding this property has been recorded as an expense.


F-13
 WILSON
          HOLDINGS, INC.
 Notes
          to Consolidated Financial Statements
  Below
          is
          a summary of the property completed, owned or under contract by the Company
          at
          September 30, 2007:




Property
            
            Finished
              Lots/Homes
            
            
            Approximate
              Owned
                Acreage
            
            
            Approximate
              Acreage
                Under
              Option
            
            
            Land
                and Project Costs
              at
                Sept. 30, 2007
              In
                thousands
            
            
            Approximate
              Acreage
                under Development
            
            Texas
              CountyRutherford
                West
            
            
            54
            
            
            
            521
            
            
            
            n/a
            
            
            $
            12,369
            
            
            
            521
            
            HaysHighway
                183
            
            
            -
            
            
            
            5
            
            
            
            n/a
            
            
            
            113
            
            
            
            -
            
            TravisGeorgetown
                Village
            
            
            50
            
            
            
            149
            
            
            
            419
            
            
            
            6,199
            
            
            
            42
            
            WilliamsonVillages
                of New Sweden
            
            
            -
            
            
            
            521
            
            
            
            -
            
            
            
            10,716
            
            
            
            -
            
            TravisElm
                Grove
            
            
            -
            
            
            
            30
            
            
            
            61
            
            
            
            3,011
            
            
            
            30
            
            HaysOther
                land projects
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            55
            
            
            
            -Sub-total
                land
            
            
            104
            
            
            
            1,266
            
            
            
            480
            
            
            $
            32,463
            
            
            
            593Homebuilding
                inventory
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,844
            
            
            
            -Total
                inventory
            
            
            104
            
            
            
            1,266
            
            
            
            480
            
            
            $
            35,307
            
            
            
            593




Below
      is
      a summary of the property completed, owned or under contract by the Company
      at
      December 31, 2006:




Property
            
            Finished
              Lots/Homes
            
            
            Approximate
              Owned
              Acreage
            
            
            Approximate
              Acreage
                Under
              Option
            
            
            Land
                and Project Costs
              at
                December 31, 2006
              In
                thousands
            
            
            Approximate
              Acreage
                under Development
            
            Texas
              CountyRutherford
                West
            
            
            -
            
            
            
            697
            
            
            
            n/a
            
            
            $
            11,251
            
            
            
            697
            
            HaysHighway
                183
            
            
            -
            
            
            
            15
            
            
            
            n/a
            
            
            
            377
            
            
            
            -
            
            TravisGeorgetown
                Village
            
            
            102
            
            
            
            52
            
            
            
            613
            
            
            
            5,342
            
            
            
            52
            
            WilliamsonVillages
                of New Sweden
            
            
            -
            
            
            
            521
            
            
            
            -
            
            
            
            10,120
            
            
            
            -
            
            TravisElm
                Grove
            
            
            -
            
            
            
            30
            
            
            
            61
            
            
            
            1,755
            
            
            
            -
            
            HaysBohls
                Ranch
            
            
            -
            
            
            
            -
            
            
            
            428
            
            
            
            1,011
            
            
            
            -
            
            TravisOther
                land projects
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            52Sub-total
                land
            
            
            102
            
            
            
            1,315
            
            
            
            1,102
            
            
            
            29,908
            
            
            
            749Homebuilding
                inventory
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            848
            
            
            
            -Total
                inventory
            
            
            102
            
            
            
            1,315
            
            
            
            1,102
            
            
            $
            30,756
            
            
            
            749





Below
      is a summary of the property completed, owned or under contract by the Company
      at December 31, 2005:




Property
            
            Finished
              Lots/Homes
            
            
            Approximate
              Owned
              Acreage
            
            
            Approximate
              Acreage
                Under
              Option
            
            
            Land
                and Project Costs
              at
                December 31, 2005
              In
                thousands
            
            
            Approximate
              Acreage
                under Development
            
            Texas
              CountyRutherford
                West
            
            
            -
            
            
            
            732
            
            
            
            n/a
            
            
            $
            9,592
            
            
            
            -
            
            HaysHighway
                183
            
            
            -
            
            
            
            15
            
            
            
            n/a
            
            
            
            388
            
            
            
            -
            
            TravisGeorgetown
                Village
            
            
            -
            
            
            
            52
            
            
            
            613
            
            
            
            1,614
            
            
            
            52
            
            WilliamsonVillages
                of New Sweden
            
            
            -
            
            
            
            -
            
            
            
            534
            
            
            
            270
            
            
            
            -
            
            TravisElm
                Grove
            
            
            -
            
            
            
            -
            
            
            
            91
            
            
            
            50
            
            
            
            -
            
            HaysOther
                projects
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,041Total
                inventory
            
            
            -
            
            
            
            799
            
            
            
            1,238
            
            
            
            12,955
            
            
            
            52




(4)         
      Consolidation of Variable Interest Entities




The
      Company exercises significant influence over, but holds no controlling interest
      in, our homebuilder client. It bears the majority of the rewards and risk of
      loss. At December 31, 2006, the Company determined it was the primary
      beneficiary in certain homebuilder agreements as defined under FASB
      Interpretation No. 46(R) (“FIN 46(R)”), “Consolidation of Variable Interest
      Entities” (VIEs), that it has a significant, but less than controlling, interest
      in the entity. The results of this client have been consolidated into its
      financial statements.




Below
      is
      a summary of the effect of the consolidation of these entities for the nine
      months ended September 30, 2007 and 2006 and the year ended December 31,
      2006:


F-14
 WILSON
          HOLDINGS, INC.
 Notes
          to Consolidated Financial Statements


Nine
                Months Ended September 30, 2007WFC
            
            
            VIEs
            
            
            
            Consolidating
                entries
            
            
            ConsolidatedRevenues
            
            
            3,233,233
            
            
            
            1,295,406
            
            (a)
            
            
            (84,139
            )
            
            
            4,444,500ExpensesCost
                of Revenues
            
            
            3,794,712
            
            
            
            1,109,653
            
            (a)
            
            
            (84,139
            )
            
            
            4,820,227General,
                administrative, sales and marketing
            
            
            4,078,820
            
            
            
            165,587
            
            
            
            
            
            
            
            
            4,244,407Costs
                and expenses before interest
            
            
            7,873,532
            
            
            
            1,275,240
            
            
            
            
            (84,139
            )
            
            
            9,064,634Operating
                income/(loss)
            
            
            (4,640,300
            )
            
            
            20,166
            
            
            
            
            -
            
            
            
            (4,620,134
            )






Nine
                Months Ended September 30, 2006(unaudited)WFC
            
            
            VIEs
            
            
            
            Consolidating
                entries
            
            
            ConsolidatedRevenues
            
            
            1,887,579
            
            
            
            4,196,905
            
            (a)
            
            
            (819,768
            )
            
            
            5,264,716ExpensesCost
                of revenues
            
            
            1,114,829
            
            
            
            3,802,341
            
            (a)
            
            
            (812,280
            )
            
            
            4,104,890General,
                administrative, sales and marketing
            
            
            3,534,899
            
            
            
            287,654
            
            (b)
            
            
            187,711
            
            
            
            4,010,264Costs
                and expenses before interest
            
            
            4,649,728
            
            
            
            4,089,995
            
            
            
            
            (624,569
            )
            
            
            8,115,154Operating
                income/(loss)
            
            
            (2,762,149
            )
            
            
            106,910
            
            
            
            
            (195,199
            )
            
            
            (2,850,438
            )






Year Ended
                December 31, 2006WFC
            
            
            VIEs
            
            
            
            Consolidating
                entries
            
            
            ConsolidatedRevenues
            
            
            2,592,878
            
            
            
            5,229,564
            
            (a)
            
            
            (1,087,926
            )
            
            
            6,734,516ExpensesCost
                of revenues
            
            
            1,654,436
            
            
            
            4,850,532
            
            (a)
            
            
            (1,087,926
            )
            
            
            5,417,042General,
                administrative, sales and marketing
            
            
            4,674,060
            
            
            
            342,467
            
            (b)
            
            
            154,067
            
            
            
            5,170,594Costs
                and expenses before interest
            
            
            6,328,496
            
            
            
            5,192,999
            
            
            
            
            (933,859
            )
            
            
            10,587,636Operating
                income/(loss)
            
            
            (3,735,618
            )
            
            
            36,565
            
            
            
            
            (154,067
            )
            
            
            (3,853,120
            )





(a)
      Eliminates WFC revenues in VIE expenses, eliminates VIE expenses in
      WFC.


(b)
      Loss
      of VIE.




On
      June
      19, 2007, the Company purchased one of its variable interest entities, Green
      Builders, Inc, now a wholly owned subsidiary of Wilson Holdings.




The
      Company terminated its relationship with its final homebuilder client on August
      2, 2007 subsequent to the sale of all the homes for which the Company had
      guaranteed the loans.  As a result of the termination of the
      relationship, the Company recorded approximately a $260,000 increase in
      stockholders equity.






(5)         
      Operating and Reporting Segments




The
      Company has two reporting segments: homebuilding and related services, and
      land
      sales. The Company’s reporting segments are strategic business units that offer
      different products and services. The homebuilding and related services segment
      includes home sales and services provided to homebuilders. The Company is
      required to consolidate its homebuilder services clients per FIN 46(R). The
      Company identifies the clients it consolidates as “VIEs”. Land sales consist of
      land in various stages of development sold, including finished lots. The Company
      eliminates land sales to its homebuilder clients. The Company charges
      identifiable direct expenses and interest to each segment and allocates
      corporate expenses and interest based on an estimate of each segment’s relative
      use of those expenses. Depreciation expense is included in selling, general
      and
      administrative and is immaterial.




The
      following table presents segment operating results before taxes for the nine
      months ended September 30, 2007 and 2006:


F-15
 WILSON
          HOLDINGS, INC.
 Notes
          to Consolidated Financial Statements


2007
            
            
            2006Homebuilding
                and Related Services
            
            
            Land
                Sales
            
            
            Total
            
            
            Homebuilding
                and Related Services
            
            
            Land
                Sales
            
            
            TotalRevenues
                from external customers
            
            $
            1,295,407
            
            
            
            3,149,093
            
            
            
            4,444,500
            
            
            
            4,184,905
            
            
            
            1,079,811
            
            
            
            5,264,716Costs
                and expenses:Cost
                of revenues
            
            
            1,025,514
            
            
            
            3,794,712
            
            
            
            4,820,227
            
            
            
            3,480,403
            
            
            
            624,487
            
            
            
            4,104,890Selling,
                general and administrative
            
            
            2,646,613
            
            
            
            1,597,794
            
            
            
            4,244,407
            
            
            
            2,651,143
            
            
            
            1,359,121
            
            
            
            4,010,264Loss
                on fair value of derivatives
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            3,392,500
            
            
            
            3,392,500Interest
                & other income
            
            
            (151,239
            )
            
            
            (140,240
            )
            
            
            (291,478
            )
            
            
            (143,751
            )
            
            
            (116,448
            )
            
            
            (260,199
            )Interest
                expense
            
            
            1,585,634
            
            
            
            641,599
            
            
            
            2,227,233
            
            
            
            650,716
            
            
            
            992,370
            
            
            
            1,643,086Total
                costs and expenses
            
            
            5,106,523
            
            
            
            5,893,865
            
            
            
            11,000,389
            
            
            
            6,638,511
            
            
            
            6,252,030
            
            
            
            12,890,541Loss
                before taxes
            
            $
            (3,811,116
            )
            
            
            (2,744,772
            )
            
            
            (6,555,889
            )
            
            
            (2,453,606
            )
            
            
            (5,172,219
            )
            
            
            (7,625,825
            )Segment
                Assets
            
            $
            11,236,511
            
            
            
            39,370,864
            
            
            
            50,607,374
            
            
            
            3,048,126
            
            
            
            28,016,470
            
            
            
            31,064,596Capital
                expenditures
            
            $
            181,409
            
            
            
            20,157
            
            
            
            201,565
            
            
            
            -
            
            
            
            68,479
            
            
            
            68,479




The
      following table presents segment operating results before taxes for the years
      ended December 31, 2006 and 2005:




2006
            
            
            2005Homebuilding
                and Related Services
            
            
            Land
                Sales
            
            
            Total
            
            
            Homebuilding
                and Related Services
            
            
            Land
                Sales
            
            
            TotalRevenues
                from external customers
            
            $
            5,217,564
            
            
            
            1,516,952
            
            
            
            6,734,516
            
            
            
            -
            
            
            
            255,000
            
            
            
            255,000Costs
                and expenses:Cost
                of revenues
            
            
            4,346,186
            
            
            
            1,070,856
            
            
            
            5,417,042
            
            
            
            -
            
            
            
            114,587
            
            
            
            114,587Selling,
                general and administrative
            
            
            3,342,924
            
            
            
            1,827,670
            
            
            
            5,170,594
            
            
            
            63,477
            
            
            
            483,200
            
            
            
            546,677Loss
                of fair value of derivatives
            
            
            -
            
            
            
            8,469,457
            
            
            
            8,469,457
            
            
            
            -
            
            
            
            -
            
            
            
            -Interest
                & other income
            
            
            (129,840
            )
            
            
            (160,495
            )
            
            
            (290,335
            )
            
            
            -
            
            
            
            (44,122
            )
            
            
            (44,122
            )Interest
                expense
            
            
            1,453,099
            
            
            
            907,716
            
            
            
            2,360,815
            
            
            
            -
            
            
            
            144,710
            
            
            
            144,710Total
                costs and expenses
            
            
            9,012,369
            
            
            
            12,115,204
            
            
            
            21,127,573
            
            
            
            63,477
            
            
            
            698,375
            
            
            
            761,852Loss
                before taxes
            
            $
            (3,794,805
            )
            
            
            (10,598,252
            )
            
            
            (14,393,057
            )
            
            
            (63,477
            )
            
            
            (443,375
            )
            
            
            (506,852
            )Segment
                Assets
            
            $
            4,293,166
            
            
            
            33,080,295
            
            
            
            37,373,461
            
            
            
            -
            
            
            
            14,092,338
            
            
            
            14,092,338Capital
                expenditures
            
            $
            81,229
            
            
            
            1,429
            
            
            
            82,658
            
            
            
            46,406
            
            
            
            29,430
            
            
            
            75,836





(6)         
      Related Party Transactions




Notes
      Payable




In
      March
      of 2005, some of the trusts belonging to the Wilson family purchased a note
      for
      approximately $280,000 from a third party that is secured by approximately
      15
      acres of land. At the time of purchase, the terms of the note payable to the
      trusts belonging to family members of Clark Wilson remained the same at 8%
      per
      annum but the maturity date was changed from October 7, 2005 to
      April 4, 2006 when the entire principal and interest would be due and
      payable.  On March 29, 2006 the note was extended till April 4,
      2008.  In August 2007 all outstanding principal and interest was
      paid.




In
      June
      2005, Clark N. Wilson, President and CEO of the Company and another investor
      purchased 2,200,000 and 2,000,000 shares, respectively, of Series A Convertible
      Preferred Stock from WFC for $1.00 per share.




In
      August
      2005, WFC repaid $121,000 that Mr. Wilson had advanced to WFC before the merger
      with Athena for working capital. In October 2005, WFC repaid the remaining
      $140,000 advanced by Mr. Wilson to WFC.




In
      2005,
      WFC obtained a line of credit of $2 million that was personally guaranteed
      by
      Mr. Wilson. The personal guarantee was released during May 2006.




During
      the twelve months ended December 31, 2006, Mr. Wilson’s brother provided
      services to the Company for which
      he
      was paid approximately $20,000. These services were primarily related to the
      development of information systems for the Company. Management believes that
      these services were provided at fair market value.


F-16
 WILSON
          HOLDINGS, INC.
 Notes
          to Consolidated Financial Statements


Real
      Property Purchase




SGL
      Development, Ltd. and SGL Investments, Ltd., (collectively, “SGL”) were owners
      of approximately 736 acres of undivided land in Hays County, Texas. Clark N.
      Wilson directly and beneficially (through Steamboat Joint Venture) owned 13.59%
      (the “Wilson Beneficial Interest”) of the property and John O. Gorman indirectly
      owned 12.33% (the “Gorman Beneficial Interest”) of the property. In June 2005,
      SGL distributed to Mr. Wilson and Mr. Gorman their beneficial ownership in
      the
      property which they sold to WFC in exchange for 1,260,826 and 1,143,963,
      respectively, of the 2,404,789 preferred shares issued by WFC in the
      transaction. SGL then sold the remaining property, approximately 74.08%, to
      WFC
      in exchange for notes payable of approximately $6.9 million. The Company
      believes that WFC purchased the property at fair market value due to the price
      paid for the preferred stock paid by the other parties involved in the
      transaction. The notes payable issued had principal and interest due at maturity
      on June 30, 2006, with interest at the prime rate as reported in the Wall Street
      Journal adjusted for changes, (“Prime Rate”) for the first six months, Prime
      Rate plus 2.00% for the second six months and Prime Rate plus 2.25% with an
      exercise of an extension period of 90 days on the notes if the notes are not
      in
      default. The interest rate on the notes increased to 9.75% as of March 31,
      2006.
      The notes were secured by the entire property acquired. There is a provision
      for
      partial releases of the land, lots, and tracts, with assignments ranging from
      100% to 140% of the par value per acre as a condition of the
      releases.




During
      June 2006, the Company refinanced the loan balance of $6.2 million with a
      financial institution (Note 10).




Issuance
      of Convertible Debt




As
      part
      of the December 2005 subordinated convertible debt issuance discussed in
      Note 10, an existing common stock investor purchased $800,000 of the $10 million
      of subordinated convertible debt that was issued. As part of the subordinated
      convertible debt in 2006 discussed in Note 10, existing common stock investors
      purchased $1.0 million of the $6.75 million subordinated convertible debt that
      was issued.




In
      connection with the placement of an additional $6.75 million of the Company’s
      convertible promissory notes in September 2006, it entered into an additional
      agreement with Tejas Securities Group, Inc. pursuant to which Tejas Securities
      Group, Inc. served as the Company’s Placement Agent in connection with the
      offering. Pursuant to this agreement, the Company paid Tejas Securities Group,
      Inc. commissions of $70,000, issued 750,000 warrants, and reimbursed the
      Placement Agent for its expenses. John J. Gorman is the Chairman of the Board
      of
      the Placement Agent and of Tejas Incorporated, the parent company of the
      Placement Agent. Mr. Gorman is the beneficial owner of 4,088,963 shares of
      our common stock. Clark N. Wilson, who serves as our President and Chief
      Executive Officer and is a director of the Company, has served on the board
      of
      directors of Tejas Incorporated since October 1999, and is compensated for
      such
      service.  Mr. Wilson owns 1,000 shares of Tejas Incorporated
      common stock and options to purchase an additional 60,000 shares of common
      stock.  Our largest stockholder, who is also our President and Chief
      Executive Officer, will continue to control our company.




Barry A.
      Williamson is a member of our board of directors and is a member of the board
      of
      directors of Tejas Incorporated, the parent company of our Placement Agent
      for
      the sale of our convertible notes. Mr. Williamson was re-elected to the
      board of directors of Tejas Incorporated in November 2006.




In
      September 2006, the Company entered into an agreement to lease approximately
      5,000 square feet for its corporate offices, which it began occupying on
      October 1, 2006. The lease requires monthly payments of approximately
      $10,000 per month for 36 months. The lease is with a subsidiary of Tejas
      Incorporated. The Company believes that the lease is at fair market value for
      similar space in the Austin, Texas commercial real estate market.




In
      September 2006, the Company’s Chairman and Chief Executive Officer purchased
      $250,000 of subordinated convertible debt under the same terms and conditions
      as
      the others participating in the issuance.




In
      December 2006, Tejas Securities Group, Inc. exercised 535,000 warrants,
      exercisable at $2.00 per share, in a cashless exercise netting the warrant
      holder 348,913 shares of common stock.


F-17
 WILSON
          HOLDINGS, INC.
 Notes
          to Consolidated Financial Statements


Consulting
      Arrangement with Audrey Wilson




In
      February 2007 the Company entered into a consulting agreement with Audrey
      Wilson, the wife of Clark N. Wilson, our President and Chief Executive Officer.
      Pursuant to the consulting agreement, the Company has agreed to pay Ms. Wilson
      $10,000 per month for a maximum of 6 months.  Ms. Wilson agreed to
      devote at least twenty-five hours per week assisting the Company with the
      following activities: (i) the establishment of “back-office” processes for
      homebuilding activities, including procurement, sales and marketing and other
      related activities, and (ii) developing our marketing strategy for marketing
      and
      sale of land to homebuilders.  Subsequent to the completion of the six
      month period in July 2007, Ms. Wilson continues to provide consulting services
      to the Company at no cost to the Company.  In accordance with Staff
      Accounting Bulletin 5A, the Company has recorded $20,000 as compensation expense
      and credited equity for two months of services recorded at fair market
      value.







(7)
            Liquidity
                and Capital Resources




Liquidity




At
      September 30, 2007, the Company had approximately $13.1 million in cash and
      cash
      equivalents. The Company completed a successful public offering of the Company’s
      common stock in May 2007, netting the Company approximately $14 million of
      cash.




On
      June
      29, 2007, WFC entered into a three-year $55 million revolving credit facility
      with a syndicate of banks led by RBC Centura Bank, as administrative
      agent.  The Company has guaranteed all of WFC’s obligations under the
      Credit Facility.  The obligations of WFC under the Credit Facility
      will be secured by assets of each subdivision to be developed with the proceeds
      of loans available under the Credit Facility.  WFC currently has
      approximately $2.7 million in borrowings under the Credit Facility.




The
      Company’s growth will require substantial amounts of cash for earnest money
      deposits, land purchases, development costs, interest payments and homebuilding
      costs. Until it begins to sell an adequate number of lots and homes to cover
      monthly operating expenses, sales, marketing, general and administrative costs
      will deplete cash.




To
      maintain its liquidity, the Company has financed the majority of its land and
      development activities with debt, and believes it can continue to do so in
      the
      future through a combination of conventional and subordinated convertible debt,
      joint venture financing, sales of selected lot positions, sales of land and
      lot
      options, and by raising additional equity.




In
      May
      2007 the Company elected not to exercise a land purchase option to purchase
      the
      Bohls tract of approximately 428 acres for approximately $7.2 million. The
      Company’s decision not to exercise the option was based on the following
      factors:




·
            Due
                to the current market conditions in the homebuilding industry, revenue
                projections for sale of residential lots to other homebuilders have
                substantially declined. The Company concluded that it currently has
                adequate single-family lots, excluding the Bohls tract. Therefore,
                the
                Company entered into negotiations with sellers of the Bohls tract
                to
                renegotiate the purchase price and other significant terms of the
                contract
                to purchase the property. The discussions are ongoing; however, the
                option
                expired in June 2007. The Company recorded a loss provision of
                approximately $1.3 million relating to development costs incurred
                on the
                tract and expenses expected to be incurred due to the expiration
                of the
                option period.





·
            The
                Company commenced homebuilding through its wholly owned subsidiary
                Green
                Builders, Inc. effective June 20, 2007 and plans to build and sell
                homes
                in the Central Texas area, initially in Austin, Texas, for prices
                ranging
                from $200,000 to $700,000.






Capital
      Resources




The
      Company has raised approximately $16.8 million of subordinated convertible
      debt,
      and approximately $14 million in a public offering of the Company’s common stock
      completed in May 2007. The Company also entered into a three-year $55 million
      revolving credit facility with a syndicate of banks mentioned previously. The
      Credit Facility may be increased to $100 million with the consent of the
      lenders.


F-18
 WILSON
          HOLDINGS, INC.
 Notes
          to Consolidated Financial Statements


Due
      to
      market conditions discussed above, weather related delays and longer than
      expected ramp up of homebuilding operations, the Company’s financial projections
      have changed. The Company expects to incur significant losses for its first
      and
      second quarters of fiscal 2008.




The
      Company believes that capital raised, the closing of the revolving credit
      facility and future land and home sales and financing will provide adequate
      capital resources for the next twelve months, but the Company may be required
      to
      raise additional capital in fiscal 2008 as additional market opportunities
      arise
      for homebuilding and land development.




Land
      and
      homes under construction comprises the majority of the Company’s assets, which
      could suffer devaluation if the housing and real estate market suffers a
      significant downturn due to interest rate increases or other reasons. The
      Company’s debt might then be called, requiring liquidation of assets to satisfy
      its debt obligations or the use of its cash. A significant downturn could also
      make it more difficult for the Company to liquidate assets, to raise cash and
      to
      pay off debts, which could have a material adverse effect.




In
      October 2007 the Company amended its four notes payable, seller financed, that
      serve as part of the purchase of 534 acres in Travis County described
      above.  The notes payable maturity date has been extended to
      October 12, 2011.  The terms of the notes payable now call for
      quarterly interest payments commencing October 12, 2007 and principal payments
      of $1.4 million in October 2010 and $1.0 million in October 2011.




In
      October 2007 the Company refinanced its land obligation on a land loan for
      approximately 120 acres in Georgetown Village Section 9 of approximately $1.1
      million and obtained a new loan of approximately $4.3 million to finance
      development for Georgetown Village Section 9.   The interest rate
      is 12.5% annually and requires monthly interest payments, with a maturity of
      two
      years.






(8)         
      Commitments and Contingencies




Options
      Purchase Agreements




In
      order
      to ensure the future availability of land for development and homebuilding,
      the
      Company plans to enter into lot-option purchase agreements with unaffiliated
      third parties. Under the proposed option agreements, the Company pays a stated
      deposit in consideration for the right to purchase land at a future time,
      usually at predetermined prices or a percentage of proceeds as homes are sold.
      These options generally do not contain performance requirements from the Company
      nor obligate the Company to purchase the land. In order for the Company to
      start
      or continue the development process on optioned land, it may incur development
      costs on land it does not own before it exercises its option
      agreement.




Lease
      Obligations




In
      September 2006, the Company entered into an agreement to lease approximately
      5,000 square feet for its corporate offices, which it began occupying on
      October 1, 2006. The lease requires monthly payments of approximately
      $10,000 per month for 36 months. The Company also has office equipment leases.
      The Company’s future minimum lease payments for future fiscal years are as
      follows:




2008
            
            
            2009
            
            
            2010
            
            
            2011
            
            
            2012Lease
                obligations
            
            $
            139,484
            
            
            
            113,208
            
            
            
            3,966
            
            
            
            240
            
            
            
            240





Employment
      Agreements with Executive Officers




On
      February 14, 2007, the Company entered into an employment agreement with Clark
      N. Wilson, its President and Chief Executive Officer. In the event of the
      involuntary termination of Mr. Wilson’s service with the Company, the agreement
      provides for monthly payments equal to Mr. Wilson’s monthly salary payments
      to continue for 12 months. The agreement contains a provision whereby
      Mr. Wilson is not permitted to be employed in any position in which his
      duties and responsibilities comprise residential land development and
      homebuilding in Texas or in areas within 200 miles of any city in which the
      Company is conducting land development or homebuilding operations at the time
      of
      such termination of employment for a period of one year from the termination
      of
      his employment, if such termination is voluntary or for cause, or involuntary
      and in connection with a corporate transaction.


F-19
 WILSON
          HOLDINGS, INC.
 Notes
          to Consolidated Financial Statements


Consulting
      Arrangement with Arun Khurana




On
      September 18, 2007, Wilson Holdings, Inc. entered into a consulting agreement
      with Arun Khurana, its Vice President and Chief Financial Officer, pursuant
      to
      which Mr. Khurana will transition from his position as an executive officer
      of
      the Company into a consulting role, beginning on the later to occur of October
      31, 2007 or the date the Company files its Annual Report on Form 10-KSB for
      the
      transition period ending September 30, 2007 and ending on October 31, 2008
      (the
      Consulting Term).  Mr. Khurana will remain as the Company’s Vice
      President and Chief Financial Officer, and principal financial officer, until
      the beginning of the Consulting Term. Mr. Khurana intends to transition into
      a
      consulting role as a part of the Company’s efforts to reduce its expenditures
      through fiscal 2008 as the Company has decided to focus its efforts on
      commencing its homebuilding operations, as described in detail in its Quarterly
      Report on Form 10-QSB for the fiscal quarter ended June 30, 2007.  The
      Company anticipates naming a replacement principal financial officer
      beginning in early 2008.




Pursuant
      to the consulting agreement, during the consulting term Mr. Khurana will (i)
      review and provide comments on the Company’s periodic filings with the
      Securities and Exchange Commission, (ii) advise the Company on its
      Sarbanes-Oxley Act compliance and implementation efforts, (iii) advise the
      Company regarding financing and joint venture matters, and (iv) transition
      his
      responsibilities to the Chief Accounting Officer of the
      Company.  During the consulting term, Mr. Khurana will receive a
      consulting fee of $11,500 per month and all unvested options to purchase the
      Company’s common stock will vest in full.   Mr. Khurana will have
      90 days following October 31, 2008 to exercise any vested stock
      options.




(9)         
      Income Taxes




The
      Company's provision for income taxes for the tax year ended September 30, 2007
      consists of approximately $11,400 of Texas gross margin tax.  A
      reconciliation of expected income tax benefit (computed by applying a statutory
      income tax rate of 34% to income before income tax expense) to total tax expense
      (benefit) in the accompanying consolidated statements of operations
      follows:






September
            
            
            December
                31,2007
            
            
            2006
            
            
            2005Tax
                benefit at Statutory Rate (34%)
            
            $
            2,229,002
            
            
            $
            4,893,639
            
            
            $
            505,779State
                income tax benefit
            
            
            -
            
            
            
            379,977
            
            
            
            59,503Texas
                tax
            
            
            113
            
            
            
            -
            
            
            
            -Loss
                on fair value of derivatives
            
            
            -
            
            
            
            (3,218,394
            )
            
            
            -Other
            
            
            6,733
            
            
            
            194,615
            
            
            
            -Impact
                on change in Texas tax law
            
            
            (379,977
            )
            
            
            -Net
                increase in valuation allowance
            
            $
            (1,844,495
            )
            
            $
            (2,249,837
            )
            
            $
            (565,282
            )Provision
                for income taxes
            
            
            11,376
            
            
            
            -
            
            
            
            -




The
      effect of the change in Texas tax law represents a decrease in the state rate
      applied to the temporary differences, and the exclusion of the deferred tax
      assets related to Texas loss carryforwards.  The state rate applied to
      the temporary difference has been reduced as the temporary differences do not
      affect the Company's Texas gross margin tax and thus, do not represent a future
      tax benefit or liability for the Texas tax.


F-20
 WILSON
            HOLDINGS, INC.
 Notes
            to Consolidated Financial Statements


The
      tax
      effects of temporary differences that give rise to significant portions of
      the
      deferred tax assets and liabilities at September 30, 2007 and December 31,
      2006
      and 2005 are as follows:




September
            
            
            December 31,2007
            
            
            2006
            
            
            2005Deferred
                tax assets (liabilities)Stock
                compensation
            
            $
            369,160
            
            
            $
            207,049
            
            
            $
            -Accrued
                expenses
            
            
            34,000
            
            
            
            38,000
            
            
            
            -Other
                temporary differences
            
            
            12,966
            
            
            
            (4,107
            )
            
            
            -Net
                operating loss carryforwards
            
            
            4,243,488
            
            
            
            2,574,177
            
            
            
            565,282Valuation
                allowance
            
            
            (4,659,614
            )
            
            
            (2,815,119
            )
            
            
            (565,282
            )Net
                deferred tax asset (liability)
            
            $
            -
            
            
            $
            -
            
            
            $
            -




In
      assessing the realizability of deferred tax assets, management considers whether
      it is more likely than not that some portion or all of the deferred tax assets
      will not be realized. The ultimate realization of deferred tax assets is
      dependent upon the generation of future taxable income during the periods in
      which those temporary differences become deductible. Management considers the
      scheduled reversal of deferred tax liabilities, projected future taxable income,
      and tax planning strategies in making this assessment. Based upon the lack
      of
      historical taxable income and projections for future taxable income over the
      periods which the deferred tax assets are deductible, management believes it
      is
      more likely than not the Company will not realize the benefits of these
      deductible differences. The Company has provided a 100% valuation allowance
      on
      its deferred tax assets.




For
      the
      nine months ended September 30, 2007, the Company had net operating loss
      carryforwards of approximately $12.5 million which begin to expire in 2025
      if
      not utilized. The Internal Revenue Code Section 382 limits net operating loss
      carryforwards when an ownership change of more than fifty percent of the value
      of the stock in a loss corporation occurs within a three-year period.
      Accordingly, the ability to utilize net operating loss carryforwards may be
      significantly restricted.




(10)        Indebtedness




The
      following schedule lists the Company’s notes payable and lines of credit
      balances at September 30, 2007 and December 31, 2006 and 2005:




In
                Thousands
            
            
            
            
            Rate
            
            
            Maturity
                Date
            
            
            2007
            
            
            2006
            
            
            2005Line
                of Credit, $3 million, development
            
            
            a
            
            
            Prime+.50%
            
            
            Mar-1-08
            
            
            $
            472
            
            
            
            2,250
            
            
            
            -Line
                of Credit, $15.5 million, purchase and development
            
            
            b
            
            
            Prime+2.00%
            
            
            Oct-1-08
            
            
            
            -
            
            
            
            3,587
            
            
            
            -Line
                of Credit, $2 million, land and construction
            
            
            c
            
            
            
            7.25%
            
            
            April-1-07
            
            
            
            -
            
            
            
            -
            
            
            
            254Notes
                payable, land
            
            
            d
            
            
            
            12.50%
            
            
            Mar-1-09
            
            
            
            4,700
            
            
            
            -
            
            
            
            -Notes
                payable, seller financed
            
            
            e
            
            
            
            7.00%
            
            
            Oct.
                2009/10
            
            
            
            2,475
            
            
            
            2,474
            
            
            
            -Line
                of Credit, $5 million / $10 million, land and construction
            
            
            f
            
            
            Prime+.50%
            
            
            Feb-6-08
            
            
            
            -
            
            
            
            600
            
            
            
            -Notes
                payable, land
            
            
            g
            
            
            Prime+.75%
            
            
            Jun-1-08
            
            
            
            -
            
            
            
            6,200
            
            
            
            6,683Notes
                payable, land
            
            
            h
            
            
            
            12.50%
            
            
            Mar-1-09
            
            
            
            7,300
            
            
            
            -
            
            
            
            -Notes
                payable, development
            
            
            i
            
            
            Prime+.50%
            
            
            Feb-1-10
            
            
            
            1,502
            
            
            
            -
            
            
            
            -Notes
                payable, family trust
            
            
            j
            
            
            
            8.00%
            
            
            Apr-1-08
            
            
            
            -
            
            
            
            280
            
            
            
            280Notes
                payable, land, due
            
            
            k
            
            
            Prime+.75%
            
            
            Dec-1-09
            
            
            
            -
            
            
            
            792
            
            
            
            -Notes
                payable, land and development
            
            
            l
            
            
            Prime+3.00%
            
            
            Feb-1-09
            
            
            
            1440
            
            
            
            -
            
            
            
            -Line
                of Credit, $55 million facility, land, land development, and
                homebuilding
            
            
            m
            
            
            Prime+.25%
            
            
            June-29-08
            
            
            
            2749
            
            
            
            -
            
            
            
            -Notes
                payable, land
            
            
            n
            
            
            
            6.5%
            
            
            2-15-08
            
            
            
            -
            
            
            
            -
            
            
            
            4252005
                $10 million, Subordinated convertible notes, net of discount of $459
                thousand and $4,288 thousand, respectively
            
            
            
            
            
            
            5.00%
            
            
            Dec-1-12
            
            
            
            9,541
            
            
            
            5,712
            
            
            
            4,9982006
                $6.50 million as of June 30, 2007, $6.75 million, Subordinated convertible
                notes, net of discount of $2,786 and $4,066 thousand
                respectively
            
            
            
            
            
            
            5.00%
            
            
            Sep-1-13
            
            
            
            3,714
            
            
            
            2,684
            
            
            
            -Total
            
            
            
            
            
            $
            33,893
            
            
            
            24,579
            
            
            
            12,640


F-21
 WILSON
            HOLDINGS, INC.
 Notes
            to Consolidated Financial Statements


(a)              
      In March 2006, the Company secured a $3.0 million line of credit development
      loan, maturing on March 30, 2008, at prime plus 0.50% with a minimum floor
      of 7.00%, and interest payable monthly. The loan is secured by property being
      developed into single-family home lots, totaling approximately 32.6 acres
      located in Williamson County, Texas. Each of the lots will be released upon
      payment to the bank of either 125% of the loan basis or 90% of the net sales
      proceeds for each lot to be released. The Company must make cumulative principal
      reductions in the aggregate amount of approximately $494 thousand every three
      months in the calendar year beginning at the end of the first calendar month
      in
      which the completion date occurs, which was during July 2006.




(b)              
      During October 2006, the Company secured a $15.5 million line of credit for
      the
      purchase and development of approximately 534 acres located in eastern Travis
      County and subsequently closed on the purchase of the property. The first phase
      of the loan is $10.2 million and covers the purchase, a portion of the first
      two
      phases of construction, offsite utilities and provides letters of credit
      totaling $4.3 million, required for the development of municipal utility
      facilities, at the bank’s prime rate plus 0.50%, and is secured by the
      underlying property. Loan origination fees were 1% of the $10.2 million. The
      debt has financial covenants which (1) require the Company to keep a debt to
      equity ratio of 2:1, and (2) keep liquid assets in excess of $7 million, except
      for 2006 and first and second quarters of 2007 in which it is required to
      maintain $4 million in liquid assets, which includes $2.2 million of restricted
      cash, in the financial institution. During February 2007, the Company obtained
      a
      release from the bank whereby its restricted cash was released, except for
      $315,000, and financial covenants for the third quarter of 2007 were modified
      requiring the Company to keep liquid assets of only $4 million. Interest is
      payable quarterly, commencing January 2007. Principal is payable in quarterly
      installments commencing 90 days after completion of construction which is
      projected to be during 2007. The required pay down amount under the loan is
      equal to 75% of gross sales price as set forth in the Company’s contracts for
      sales of lots. Its current projects require pay down amounts of approximately
      $600,000 per quarter. The purchase price of the property was approximately
      $8.5
      million, with $2.5 million of owner financing, $3.6 million from the bank loan
      and cash from us of approximately $2.4 million. The Company has invested an
      additional amount for development of the property of approximately $1.9 million.
      This note was refinanced and paid off in March 2007 (d).




(c)              
      In September 2005, the Company secured a $2 million one year of credit master
      construction loan that provides for draws and repayments for construction and
      lots. Interest is payable monthly and each draw must be repaid within one year.
      The Company had drawn approximately $254,000 against the loan at December 31,
      2005. The note was paid completely in 2006.




(d)              
      In March 2007, the Company replaced the $15.5 million line of credit (b) with
      a
      $4.7 million term loan maturing March 2009. The interest rate on the loan is
      12.5%, with interest payable monthly. The loan has no financial covenants and
      is
      secured by the underlying property described above.




(e)              
      As part of the purchase of 534 acres in Travis County described above, the
      Company entered into four notes payable, seller financed, due 2009 and 2010,
      with a cumulative balance of approximately $2.5 million. The notes payable
      have
      a maturity date of October 12, 2010. Three of the notes payable with a
      cumulative balance of $1.9 million are at an interest rate of 7.0% and the
      fourth note payable issued for approximately $600,000 is at an interest rate
      of
      the Wall Street Journal’s prime rate plus 2.0%. The terms of the notes payable
      call for annual principal repayments of $1.1 million in 2007, $0.3 million
      in
      2008, $500,000 in 2009 and $500,000 in 2010, payable on October 12. The
      notes can be prepaid at anytime without penalty and are secured by the real
      estate purchased.




(f)              
      The Company had a $5 million master construction line of credit that matured
      on
      January 11, 2007, used by one of its homebuilding clients. Under the
      agreement, the Company, as Guarantor, is subject to certain covenants. Among
      others, the Company must maintain a minimum tangible net worth of $2.5 million,
      its debt to equity ratio shall not exceed 7.5 to 1 as of the end of any calendar
      quarter, and Mr. Clark Wilson must remain active in the day to day business
      management affairs of the Company. The Company complied with the above loan
      covenants. During February 2007, the line of credit was replaced by a $10
      million line of credit for land and home construction under the same terms
      with
      a maturity date of February 6, 2008.


F-22
 WILSON
            HOLDINGS, INC.
 Notes
            to Consolidated Financial Statements


(g)              
      In June 2005, the Company issued notes payable of approximately $6.9 million
      with a maturity date of June 30, 2006 at an escalating interest rate for
      approximately 74% of 736 acres of land. These notes had a total balance of
      approximately $6.7 million at December 31, 2005. The Company reduced the
      principal balance through sales of acreage tracts to approximately $6.2 million
      and during June 2006, it refinanced the notes payable, land, with a new lender.
      The terms of the new loan include a $6.2 million principal balance, an interest
      rate indexed to the New York prime rate plus 0.75% per annum with a floor of
      7.0%, a term not to exceed 24 months or June 2008, and required principal
      reductions of $800,000 per quarter beginning June 12, 2007. Principal
      reductions from sales of the real estate are credited towards the $800,000
      per
      quarter requirement. This loan was refinanced in February 2007 (h).




(h)              
      On February 13, 2007 the Company refinanced its land obligation on a land
      loan of approximately $6.2 million and obtained a new loan of approximately
      $7.2
      million to finance approximately 538 acres. The interest rate is 12.5% annually
      and requires monthly interest payments, with a maturity of two years and is
      renewable for an additional year for a 1% loan fee. The loan is secured by
      the
      underlying land.




(i)              
      On February 9, 2007, the Company obtained a development loan of approximately
      $4.6 million. The loan matures on February 1, 2010 and requires quarterly
      interest payments and principal pay downs as lots are sold. The loan is secured
      by the property being developed at an interest rate of prime plus
      0.50%.




(j)              
      In October 2003, a predecessor entity of the Company exchanged notes payable
      of
      approximately $280,000 and approximately $95 thousand in cash for approximately
      15 acres of land in Travis County, Texas. Interest on the note was 8% per annum,
      payable quarterly with a maturity date of October 7, 2008. In March of
      2005, the note was purchased by trusts belonging to some members of Clark
      Wilson’s family. The interest rate remained the same at 8% per annum but the
      maturity date changed to April 4, 2006. In March 2006, the Company
      renegotiated an extension on the notes payable, family trust, 8%, due April
      2008.  This note was paid completely in August 2007.




(k)              
      In December of 2006, the Company paid cash and issued notes payable, land,
      due 2009, a long-term note payable of $792 thousand with a maturity date of
      December 21, 2007 at an interest rate of the bank’s prime rate plus 0.5%
      for the purchase of approximately 30 acres of land. The terms of the note
      payable called for interest only payable quarterly, and the balance of the
      principal and accrued interest due and payable upon maturity. It is secured
      by
      the real estate purchased. This note was replaced in February 2007.




(l)              
      This property was refinanced in February 2007 with a land purchase and
      development loan of approximately $3.1 million. The loan matures in February
      2009, with two nine-month extensions, at an interest rate of prime plus 3.00%,
      with interest payable monthly.




(m)              In
      June 2007, the Company established a $55 million credit facility with a
      syndicate of banks.  The Company currently has approximately $2.7
      million in borrowing for land and home construction.




(n)              
      In November 2005, the Company paid cash and issued a long term note payable
      of
      $424,700 with a maturity date of February 15, 2008 at an interest rate of 6.5%
      for the purchase of approximately 31 acres of land. The Company paid the note
      in
      March 2006.






Subordinated
      Convertible Debt






Derivatives
      Associated with Subordinated Convertible Debt




Prior
      to
      2007, derivative financial instruments were recorded as liabilities in the
      consolidated balance sheet and measured at fair value. The Company accounted
      for
      the various embedded derivative features as being bundled together as a single,
      compound embedded derivative instrument that was bifurcated from the debt host
      contract, referred to as the “single compound embedded
      derivatives.”  The single compound embedded derivative features
      include the conversion feature within the convertible note, the early redemption
      option and the fixed price conversion adjustment.
      The initial value of the single compound embedded derivative liability was
      bifurcated from the debt host contract and recorded as a derivative liability,
      which resulted in a reduction of the initial carrying amount (as unamortized
      discount) of the convertible notes. The unamortized discount was amortized
      using
      the straight-line method over the life of the convertible note, or 7 years.
      The
      penalty warrants were valued based on the fair value of the Company’s common
      stock on the issuance date using a Black-Scholes valuation model and the
      unamortized discount was to be amortized as interest expense over the 7-year
      life of the notes using the straight-line method.


F-23
 WILSON
            HOLDINGS, INC.
 Notes
            to Consolidated Financial Statements


In
      January 2007, the Company adopted “FSP EITF 00-19-2” as discussed in Note
      2.




Prior
      to
      adoption of FSP EITF 00-19-2, the uncertainty of a successful registration
      of
      the shares underlying the subordinated convertible debt required that the
      freestanding and embedded derivatives be characterized as derivative
      liabilities. FSP EITF 00-19-2 specifically addressed the accounting for a
      registration rights agreement and the requirement to classify derivative
      instruments subject to registration rights agreements as liabilities was
      withdrawn.  The Company re-evaluated its accounting for the
      subordinated debt transaction and determined that the liability for the penalty
      warrants be included in the allocation of the proceeds to the various components
      of the transaction according to paragraph 16 of APB Opinion No. 14, Accounting for Convertible
      Debt and
      Debt issued with Stock Purchase Warrants.The Company also determined the
      notes contained a beneficial conversion feature under Issues 98-5 and 00-27,
      and
      used the effective conversion price based on the proceeds allocated to the
      convertible instrument to compute the intrinsic value of the embedded conversion
      option. The Company recalculated the discount on the convertible debt at its
      intrinsic value and re-characterized the freestanding and embedded derivatives
      as equity. The previous valuation adjustments of the derivative liabilities
      were
      reversed and the amortization of the discounts was adjusted based upon the
      recalculation. Per FSP EITF 00-19-2, the Company was permitted to adjust the
      previous amounts as a cumulative accounting adjustment.




The
      net
      effect of the change increased the net carrying amount of the subordinated
      convertible debt and eliminated the derivative liabilities. There was also
      an
      increase of $4.8 million in total stockholders’ equity.   During
      the year ended December 31, 2006, the Company recognized approximately $8.5
      million of loss on fair value of derivatives related to the subordinated
      convertible debt. Under the new FSP EITF 00-19-2 the derivatives were eliminated
      and hence there will no longer be gains and losses related to the current
      subordinated convertible debt.




2005,
      $10MM, 5%, Subordinated Convertible Debt.




On
      December 19, 2005, the Company issued $10 million in aggregate principal
      amount of 5% subordinated convertible debt due December 1, 2012 to certain
      purchasers. The following are the key features of the subordinated convertible
      debt: interest accrues on the principal amount of the subordinated convertible
      debt at a rate of 5% per annum and the debt is payable semi-annually on
      May 1 and December 1 of each year, with interest payments beginning on
      June 1, 2006. The subordinated convertible debt is due on December 1,
      2012 and is convertible, at the option of the holder, into shares of our common
      stock at a conversion price of $2.00 per share. The conversion price is subject
      to adjustment for stock splits, reverse stock splits, recapitalizations and
      similar corporate actions. An adjustment in the conversion price is also
      triggered upon the issuance of certain equity or equity-linked securities with
      a
      conversion price, exercise price, or share price less than $2.00 per share.
      The
      anti-dilution provisions state the conversion price cannot be lower than $1.00
      per share.




The
      Company may redeem all or a portion of the subordinated convertible debt after
      December 1, 2008 at a redemption price that incorporates a premium that
      ranges from 3% to 10% during the period beginning December 1, 2008 and
      ending on the due date. In addition, the redemption price will include any
      accrued but unpaid interest on the subordinated convertible debt. Upon a change
      in control event, each holder of the subordinated convertible debt may require
      us to repurchase some or all of its subordinated convertible debt at a purchase
      price equal to 100% of the principal amount of the subordinated convertible
      debt
      plus accrued and unpaid interest. The due date may accelerate in the event
      the
      Company commences any case relating to bankruptcy or insolvency, or related
      events of default. The Company’s assets will be available to pay obligations on
      the subordinated convertible debt only after all senior indebtedness has been
      paid.




The
      subordinated convertible debt has a registration rights agreement whereby the
      Company must use its best efforts to have its associated registration statement
      effective not later than 120 days after the closing (December 19, 2005).
      Further, the Company must maintain the registration statement in an effective
      status until the earlier to occur of (i) the date after which all the
      registrable shares registered thereunder shall have been sold and (ii) the
      second anniversary of the later to occur of (a) the closing date, and (b) the
      date on which each warrant has been exercised in full and after which
      by
      the terms of such Warrant there are no additional warrant shares as to which
      the
      warrant may become exercisable; provided that in either case, such date shall
      be
      extended by the amount of time of any suspension period. Thereafter the Company
      shall be entitled to withdraw the registration statement, and upon such
      withdrawal and notice to the investors, the investors shall have no further
      right to offer or sell any of the registrable shares pursuant to the
      registration statement. The registration statement filed pursuant to the
      registration rights agreement was declared effective by the SEC on
      August 1, 2006.


F-24
 WILSON
            HOLDINGS, INC.
 Notes
            to Consolidated Financial Statements


The
      Company also issued warrants to purchase an aggregate of 750,000 shares of
      common stock to the purchasers of the subordinated convertible debt, 562,500
      shares which vested and the remaining shares will never vest.  The
      warrants were exercisable only upon the occurrence of certain events and then
      only in the amount specified as follows: (i) with respect to 25% of the warrant
      shares, on February 3, 2006 if the registration statement shall not have
      been filed with the SEC by such date (the Company filed a Form SB-2 registration
      statement on February 2, 2006); (ii) with respect to an additional 25% of
      the warrant shares, on April 19, 2006 if the registration statement shall
      not have been declared effective by the SEC by such date; (iii) with respect
      to
      an additional 25% of the warrant shares, on May 19, 2006 if the
      registration statement shall not have been declared effective by the SEC by
      such
      date; and (iv) with respect to the final 25% of the warrant shares, on
      June 18, 2006 if the registration statement shall not have been declared
      effective by the SEC by such date. Management recorded the fair value of these
      warrants at the time of the subordinated convertible debt issuance due to the
      uncertainty surrounding the timeline of getting the registration statement
      effected and the high probability that these warrants would be
      issued.  The shelf registration statement relating to these warrants
      was declared effective on August 1, 2006 and 562,500 of these warrants have
      vested and the remaining 187,500 warrants will never vest.




The
      penalty warrants were valued based on the fair value of the Company’s common
      stock on the issuance date of $1.60, using a Black-Scholes approach, risk free
      interest rate of 4.25%; dividend yield of 0%; weighted-average expected life
      of
      the warrants of 10 years; and a 60% volatility factor, resulting in an allocated
      value of approximately $613 thousand. The penalty warrants are recorded as
      part
      of the debt discount and an increase in additional paid in capital, and
      amortized over the 7-year life of the notes using the straight-line rate
      method.




The
      Company also incurred closing costs of $588 thousand which included placement
      agent fees of $450,000 plus reimbursement of expenses to the placement agent
      of
      $125 thousand, plus 750,000 fully vested warrants to purchase the Company’s
      common stock at $2.00 per share with a 10 year exercise period, valued at $829
      thousand, for a total of $1.4 million, recorded as debt issuance costs, to
      be
      amortized over the 7-year life of the notes using the straight line method.
      These warrants were valued based on the fair value of the Company’s common stock
      of $1.60, using a Black-Scholes valuation model, at a $2.00 exercise price,
      risk
      free interest rate of 4.25%; dividend yield of 0%; weighted-average expected
      life of warrants of 10 years; and a 60% volatility factor.






Subordinated
      Convertible Note at September 30, 2007, December 31, 2006 and
      2005






September
                30,
            
            December
                31,2007
            
            2006
            
            2005Notional
                balance
            $
            10,000,000
            $
            10,000,000
            $
            10,000,000Unamortized
                discount
            
            (459,400)
            
            (4,287,857)
            
            (5,002,500)Subordinated
                convertible debt balance, net of unamortized discount
            $
            9,540,600
            $
            5,712,143
            $
            4,997,500




2006,
      $6.75MM, 5%, Subordinated Convertible Debt




On
      September 29, 2006, the Company raised capital of $6.75 million in
      aggregate principal amount of 5% subordinated convertible debt due
      September 1, 2013, to certain purchasers. As of December 31, 2006,
      $6.75 million had been received in cash, the remaining $250,000 was a receivable
      from an owner of land that the Company had under option to
      purchase.  During the quarter ended June 2007, the Company did not
      exercise its option to purchase the
      land
      and therefore does not expect to receive the additional
      $250,000.   In addition, during the quarter ended June 30, 2007,
      one of our convertible debt holders who is also the seller of Bohls tract
      purchased common stock with a promissory note.  Under the terms of the
      promissory note, should the Company not exercise the option to purchase the
      Bohls tract the convertible debt would be used for repayment of the promissory
      note.  As the Company did not exercise the option to purchase Bohls
      tract the promissory note was repaid from the proceeds of the convertible
      debt.  The following are the key features of the subordinated
      convertible debt: interest accrues on the principal amount of the subordinated
      convertible debt at a rate of 5% per annum, payable semi-annually on
      February 1 and September 1 of each year, with interest payments
      beginning on February 1, 2006. The subordinated convertible debt is due on
      September 1, 2013 and is convertible, at the option of the holder, into
      shares of common stock at a conversion price of $2.00 per share. The conversion
      price is subject to adjustment for stock splits, reverse stock splits,
      recapitalizations and similar corporate actions. An adjustment in the conversion
      price is also triggered upon the issuance of certain equity or equity-linked
      securities with a conversion price, exercise price, or share price less than
      $2.00 per share. The anti-dilution provisions state the conversion price cannot
      be lower than $1.00 per share.


F-25
 WILSON
            HOLDINGS, INC.
 Notes
            to Consolidated Financial Statements


The
      Company may redeem all or a portion of the subordinated convertible debt after
      September 1, 2009 at a redemption price that incorporates a premium that
      ranges from 3% to 10% during the period beginning September 1, 2009 and
      ending on the due date. In addition, the redemption price will include any
      accrued but unpaid interest on the subordinated convertible debt. Upon a change
      in control event, each holder of the subordinated convertible debt may require
      us to repurchase some or all of its subordinated convertible debt at a purchase
      price equal to 100% of the principal amount of the subordinated convertible
      debt
      plus accrued and unpaid interest. The due date may accelerate in the event
      the
      Company commences any case relating to bankruptcy or insolvency, or related
      events of default. The Company’s assets will be available to pay obligations on
      the subordinated convertible debt only after all senior indebtedness has been
      paid.




The
      subordinated convertible debt has a registration rights agreement, whereby
      the
      Company must use its best efforts to have its associated registration statement
      effective not later than 120 days after the closing (January 27, 2007).
      Further, the Company must maintain the registration statement in an effective
      status until the earlier to occur of (i) the date after which all the
      registrable shares registered thereunder shall have been sold and (ii) the
      second anniversary of the later to occur of (a) the closing date, and (b) the
      date on which each warrant has been exercised in full and after which by the
      terms of such warrant there are no additional warrant shares as to which the
      warrant may become exercisable; provided that in either case, such date shall
      be
      extended by the amount of time of any suspension period. Thereafter the Company
      shall be entitled to withdraw the registration statement, and upon such
      withdrawal and notice to the investors, the investors shall have no further
      right to offer or sell any of the registrable shares pursuant to the
      registration statement.




The
      Company also issued warrants to purchase an aggregate of 506,250 shares of
      common stock to the purchasers of the subordinated convertible debt. The
      warrants are exercisable only upon the occurrence of certain events and then
      only in the amount specified as follows: (i) with respect to 25% of the warrant
      shares, on November 13, 2006 if the registration statement shall not have
      been filed with the SEC by such date (the Company filed a Form SB-2 registration
      statement on October 16, 2006); (ii) with respect to an additional 25% of
      the warrant shares, on January 27, 2007 if the registration statement shall
      not have been declared effective by the SEC by such date; (iii) with respect
      to
      an additional 25% of the warrant shares, on February 26, 2007 if the
      registration statement shall not have been declared effective by the SEC by
      such
      date; and (iv) with respect to the final 25% of the warrant shares, on
      March 28, 2007 if the registration statement shall not have been declared
      effective by the SEC by such date. Management has recorded 75% of the fair
      value
      of these warrants since its timely filed registration statement but such
      registration statement was not declared effective prior to March 28,
      2007.




The
      Company also incurred closing costs of $140,000, including placement agent
      fees
      of approximately $70,000 plus reimbursement of expenses to the placement agent
      of $25 thousand, for a total of $95 thousand to the placement agent, recorded
      as
      debt issuance costs, to be amortized over the 7-year life of the notes using
      the
      straight-line rate method.




The
      issuance of the debt resulted in an embedded beneficial conversion feature
      valued at approximately $2.5 million, which will be recorded as part of the debt
      discount and an increase in additional paid in capital, and amortized over
      the
      7-year life of the notes using the straight-line rate method.




The
      penalty warrants were valued were based on the fair value of the Company’s
      common stock on the issuance date of $1.91, using a Black-Scholes approach,
      risk
      free interest rate of 4.64%; dividend yield of 0%; weighted-average expected
      life of the warrants of 10 years; and a 60% volatility factor. The allocated
      value of the penalty warrants totaled
      approximately $846 thousand and are recorded as part of the debt discount and
      an
      increase in additional paid in capital, and amortized over the 7-year life
      of
      the notes using the straight-line rate method.


F-26
 WILSON
            HOLDINGS, INC.
 Notes
            to Consolidated Financial Statements




Convertible
      Note at September 30, 2007 and December 31, 2006:




September
                30,
            
            December
                31,2007
            
            2006Notional
                balance
            $
            6,500,000
            $
            6,750,000Unamortized
                discount
            
            (2,785,820)
            
            (4,066,267)Subordinated
                convertible debt balance, net of unamortized discount
            $
            3,714,180
            $
            2,683,733




(11)         Common
      Stock




The
      Company is authorized to issue 100,000,000 shares of common stock. Each common
      stockholder is entitled to one vote per share of common stock
      owned.  The Company has 23,135,538 shares outstanding and has reserved
      for 11,228,125 options and warrants.




The
      Company sold 5,000,000 shares of common stock in a public offering at $3.25
      per
      share that closed on May 19, 2007 and concurrently began trading on the American
      Stock Exchange under the symbol “WIH”. Related to the financing, the Company
      incurred the following transaction costs:




(In
                thousands)Cash
                paid to investment banker for underwriting and other fees
            
            $
            1,219Legal,
                printing, accounting and stock exchange registration fees
            
            
            544Travel
                and selling related costs
            
            
            503Warrants
                to purchase 500,000 shares at $4.06 with a fair value based on the
                Black-Scholes option pricing model with a risk free interest rate
                of
                4.64%; dividend yield of 0%; weighted-average expected life of the
                warrants of 1 year; and a 60% volatility factor at $0.56 per
                warrant.
            
            
            280Total
                expenses
            
            $
            2,546




During
      June 2007, the Company issued 80,000 shares of common stock for the purchase
      of
      Green Builders, Inc.




(12)
            Common
                Stock Option / Stock Incentive Plan




In
      August
      2005, the Company adopted the Wilson Family Communities, Inc. 2005 Stock
      Option/Stock Issuance Plan or the Stock Option Plan. The plan contains two
      separate equity programs: 1) the Option Grant Program for eligible persons
      at
      the discretion of the plan administrator, be granted options to purchase shares
      of common stock and 2) the Stock Issuance Program under which eligible persons
      may, at the discretion of the plan administrator, be issued shares of common
      stock directly, either through the immediate purchase of such shares or as
      a
      bonus for services rendered to the Company or any parent or subsidiary. The
      market value of the shares underlying option issuance prior to the merger of
      the
      Company and WFC was determined by the Board of Directors as of the grant date.
      This plan was assumed by Wilson Holdings, Inc. The fair value of the options
      granted under the plan was determined by the Board of Directors or the Board
      prior to the merger of the Company and WFC.




The
      Board
      is the plan administrator and has full authority (subject to provisions of
      the
      plan) and it may delegate a committee to carry out the functions of the
      administrator. Persons eligible to participate in the plan are employees,
      non-employee members of the Board or members of the board of directors of any
      parent or subsidiary.




The
      stock
      issued under the Stock Option Plan shall not exceed 2,500,000 shares. Unless
      terminated at an earlier date by action of the Board of Directors, the Stock
      Option Plan terminates upon the earlier of (1) the expiration of the ten year
      period measured from the date the Stock Option Plan is adopted by the Board
      or
      (2) the date on which all shares available for issuance under the Stock Option
      Plan shall have been issued as fully-vested shares.


F-27
 WILSON
            HOLDINGS, INC.
 Notes
            to Consolidated Financial Statements


The
      Company had 665,000 shares of common stock available for future grants under
      the
      Stock Option Plan at September 30, 2007. Compensation expense related to
      the Company’s share-based awards for the nine months ended September 30,
      2007 and 2006 was approximately $541,000 and $350,000 thousand,
      respectively.  Compensation expense related to the Company’s
      share-based awards during the year ended December 31, 2006, was
      approximately $545,000.




Before
      January 1, 2006, options granted to non-employees were recorded at fair
      value in accordance with SFAS No. 123 and EITF 96-18. These options are issued
      pursuant to the Stock Option Plan and are reflected in the disclosures
      below.




During
      the nine months ended September 30, 2007, the Company issued options to purchase
      1,370,000 shares of common stock at exercise prices ranging from $1.65 to 3.25
      per share. Using the Black-Scholes pricing model with the following
      weighted-average assumptions: risk free interest rate of 4.64%; dividend yields
      of 0%; weighted average expected life of options of 1-5 years; and a 60%
      volatility factor, management estimated the fair market value of the grants
      to
      range from $0.56 to $1.43 per share. Management estimated the volatility factor
      based on an average of comparable companies due to its limited trading
      history.




A
      summary
      of activity in common stock options for the years ended December 31, 2005
      and 2006 and the nine months ended September, 2007 are as follows:






Shares
            Range
                of Exercise Prices
            Weighted-AverageExercise
                PriceOptions
                granted at plan inception
            850,000
            $2.00
            $2.00Options
                forfeited
            (70,000)
            $2.00
            $2.00Options
                outstanding, December 31, 2005
            780,000
            $2.00
            $2.00Options
                granted
            555,000
            $2.00
                - $2.26
            $2.16Options
                forfeited
            (410,000)
            $2.00
                - $2.26
            $2.03Options
                outstanding, December 31, 2006
            925,000
            $2.00
                - $2.26
            $2.17Options
                granted
            1,370,000
            $1.65
                - $3.25
            $2.82Options
                forfeited
            (460,000)
            $2.00
                - $3.25
            $2.45Options
                outstanding, September 30, 2007
            1,835,000
            $2.00
                - $3.25
            $2.24Add:
                Available for issuance
            665,000Total
                available under plan
            2,500,000






The
      following is a summary of options outstanding and exercisable at September
      30,
      2007:




Outstanding
            VestedNumber
                of Shares Subject to Options Outstanding
            Weighted
                Average Remaining Contractual Life (in years)
            Weighted
                Average Exercise Price
            Number
                of Vested Shares
            Weighted
                Average Remaining Contractual Life (in years)
            Weighted
                Average Exercise Price1,835,000
            6.76
            $2.24
            805,965
            5.62
            $2.54





At
      September 30, 2007, there was approximately $1.8 million of unrecognized
      compensation expense related to unvested share-based awards granted under the
      Company’s Stock Option Plan. That expense is expected to be recognized over a
      weighted-average period of 6.76 years.  In February 2007, the
      Company’s Board approved an 819,522 share increase in the number of shares
      issuable pursuant to its option plan for a total of 2,500,000 shares issuable
      under the plan.  This increase will be effective when approved by the
      Company’s shareholders.




(13)         Employee
      Benefits




In
      2006,
      the Company instituted a defined contribution plan under section 401(k) of
      the
      Internal Revenue Code. The plan allows all employees who are over 21 years
      old
      to defer a predetermined portion of their compensation for federal income
      tax purposes. The Company will match 100% up to the first 4% of the employee’s
      contribution subject to Internal Revenue Service limitations.  The
      Company contributed approximately $9,000 and $35,000 for the nine months ended
      September 30, 2007 and 2006 and $13 thousand for the year ended December 31,
      2006.


F-28
 WILSON
            HOLDINGS, INC.
 Notes
            to Consolidated Financial Statements


(14)
            Purchase
                of Green Builders




On
      June
      19, 2007, the Company purchased Green Builders, Inc. for $65,000 in cash and
      80,000 shares of the Company’s common stock valued at $2.70 per share on the
      date of the transaction. The total purchase price for the acquisition was
      approximately $281,000.  In addition the Company spent approximately
      $24,000 in legal fees for the purchase.  The Company allocated the
      purchase price and legal fees to trademark with indefinite life in accordance
      with SFAS 142.






Cash
            
            $
            17,081Accounts
                Receivable
            
            
            2,900Accounts
                Payable
            
            
            (6,190
            )Trademarks
            
            
            292,192Others
            
            
            (8,776
            )$
            297,207




In
      conjunction with the acquisition, the Company increased the size of its Board
      of
      Directors from four to five persons, and appointed Victor Ayad as a director
      of
      the Company. Mr. Ayad was the President and sole shareholder of Green Builders,
      Inc. prior to the acquisition. The pro forma effect of the acquisition on the
      Company’s income was not material and is already consolidated into the Company’s
      results as a VIE under FIN 46(R).







(15)
            Quarterly
                Results
                (Unaudited)






The
      following tables set forth selected quarterly consolidated statements of
      operations information for the quarters ended December 31, 2005 through
      September 30, 2007.




Dec.
                  31,
              
              
              March
                  31.
              
              
              June
                  30,
              
              
              Sept.
                  30,
              
              
              Dec.
                  31,
              
              
              March
                  31,
              
              
              June
                  30,
              
              
              Sept,
                  30,2005
              
              
              2006
              
              
              2006
              
              
              2006
              
              
              2006
              
              
              2007
              
              
              2007
              
              
              2007(In
                  thousands)Sales
              
              $
              -
              
              
              $
              1,033
              
              
              $
              2,355
              
              
              $
              1,897
              
              
              $
              1,470
              
              
              $
              1,767
              
              
              $
              1,384
              
              
              $
              1,293Gross
                  profit
              
              $
              -
              
              
              $
              374
              
              
              $
              418
              
              
              $
              367
              
              
              $
              158
              
              
              $
              289
              
              
              $
              (885
              )
              
              $
              220Operating
                  expenses
              
              $
              878
              
              
              $
              1,119
              
              
              $
              1,441
              
              
              $
              1,450
              
              
              $
              1,160
              
              
              $
              1,072
              
              
              $
              1,769
              
              
              $
              1,403Operating
                  loss
              
              $
              (878
              )
              
              $
              (745
              )
              
              $
              (1,022
              )
              
              $
              (1,083
              )
              
              $
              (1,002
              )
              
              $
              (783
              )
              
              $
              (2,654
              )
              
              $
              (1,183
              )Net
                  loss
              
              $
              (1,208
              )
              
              $
              (1,508
              )
              
              $
              (4,059
              )
              
              $
              (2,059
              )
              
              $
              (6,767
              )
              
              $
              (1,354
              )
              
              $
              (3,316
              )
              
              $
              (1,886
              )Basic
                  and diluted loss per
                  share
              
              $
              (0.16
              )
              
              $
              (0.09
              )
              
              $
              (0.23
              )
              
              $
              (0.12
              )
              
              $
              (0.38
              )
              
              $
              (0.07
              )
              
              $
              (0.16
              )
              
              $
              (0.08
              )




F-29
 WILSON
            HOLDINGS, INC.
 Notes
            to Consolidated Financial Statements


(16)        
      Subsequent Events




In
      October 2007 the Company amended its four notes payable, seller financed, that
      serve a part of the purchase of 534 acres in Travis County described
      above.  The notes payable maturity date has been extended to
      October 12, 2011.  The terms of the notes payable now call for
      quarterly interest payments commencing October 12, 2007 and principal payments
      of $1.4 million in October 2010 and $1.1 million due in October
      2011.




In
      October 2007 the Company refinanced its land obligation on a land loan for
      approximately 120 acres in Georgetown Village Section 9 of approximately $1.1
      million and obtained a new loan of approximately $4.3 million to finance
      development for Georgetown Village Section 9.   The interest rate
      is 12.5% annually and requires monthly interest payments, with a maturity of
      two
      years.




The
      Company is currently considering refinancing some of its land and land
      development loans.







F-30