##### 



UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2006
 o
    
    Transition Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File Number 1-32375
 
 Comstock Homebuilding Companies, Inc.
  Delaware
    
    20-1164345(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 11465 Sunset Hills Road
5 th Floor
Reston, Virginia 20190
(703) 883-1700  (Address including zip code, and telephone number, including area
  þ o
  o þ o
 o þ




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
 PagePART I  FINANCIAL INFORMATION
    
    
    3ITEM 1. FINANCIAL STATEMENTS:
    
    
    3Consolidated Balance Sheets (unaudited) -
September 30, 2006 and December 31, 2005
    
    
    3Consolidated Statements of Operations (unaudited) -
Three and Nine Months Ended September 30, 2006 and 2005
    
    
    4Consolidated Statements of Cash Flows (unaudited) -
Nine Months Ended September 30, 2006 and 2005
    
    
    5Notes to Consolidated Financial Statements
    
    
    6ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    20ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    29ITEM 4. CONTROLS AND PROCEDURES
    
    
    30PART II  OTHER INFORMATION
    
    
    31ITEM 1. LEGAL PROCEEDINGS
    
    
    31ITEM 1A. RISK FACTORS
    
    
    31ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    32ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    32ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    32ITEM 5. OTHER INFORMATION
    
    
    32ITEM 6. EXHIBITS
    
    
    33SIGNATURES
    
    
    34
 2




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
 September 30,
    
    
    December 31,2006
    
    
    2005ASSETSCash and cash equivalents
    
    $
    10,840
    
    
    $
    42,167Restricted cash
    
    
    16,330
    
    
    
    10,800Receivables
    
    
    3,906
    
    
    
    6,365Note receivables
    
    
    
    
    
    
    1,250Due from related parties
    
    
    3,567
    
    
    
    2,899Real estate held for development and sale
    
    
    509,692
    
    
    
    263,802Inventory not owned  variable interest entities
    
    
    54,666
    
    
    
    89,890Property, plant and equipment
    
    
    2,071
    
    
    
    605Investment in real estate partnerships
    
    
    (101
    )
    
    
    (35
    )Deferred
income tax (net)
    
    
    
    
    
    
    2,545Other assets
    
    
    17,535
    
    
    
    11,031TOTAL ASSETS
    
    $
    618,506
    
    
    $
    431,319LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable and accrued liabilities
    
    $
    66,668
    
    
    $
    59,131Due to related parties
    
    
    40
    
    
    
    40Obligations related to inventory not owned
    
    
    52,032
    
    
    
    83,015Notes payable
    
    
    310,274
    
    
    
    142,994Junior subordinated debt
    
    
    30,000
    
    
    
    Notes payablerelated parties
    
    
    663
    
    
    
    663Deferred
income tax (net)
    
    
    6,216
    
    
    
    TOTAL LIABILITIES
    
    
    465,893
    
    
    
    285,843Commitments and contingencies (Note 15 )Minority interest
    
    
    414
    
    
    
    400SHAREHOLDERS EQUITYClass A
common stock, $0.01 par value,
77,266,500 shares
authorized, 14,231,822 and 11,532,442 issued and outstanding
    
    
    142
    
    
    
    115Class B
common stock, $0.01 par value, 2,733,500
shares authorized,
2,733,500 issued and
outstanding
    
    
    27
    
    
    
    27Additional paid-in capital
    
    
    147,633
    
    
    
    126,461Treasury Stock, at cost (391,400 Class A Common Stock)
    
    
    (2,439
    )
    
    
    Retained earnings
    
    
    6,836
    
    
    
    18,473TOTAL SHAREHOLDERS EQUITY
    
    
    152,199
    
    
    
    145,076TOTAL LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)
    
    $
    618,506
    
    
    $
    431,319
  3




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005RevenuesSale of real estateHomes
    
    $
    30,367
    
    
    $
    72,409
    
    
    $
    117,083
    
    
    $
    140,473Other revenue
    
    
    4,913
    
    
    
    6,028
    
    
    
    5,489
    
    
    
    6,604Total revenue
    
    
    35,280
    
    
    
    78,437
    
    
    
    122,572
    
    
    
    147,077ExpensesCost of sales of real estate
    
    
    28,290
    
    
    
    50,838
    
    
    
    96,746
    
    
    
    98,087Cost of sales of other
    
    
    4,994
    
    
    
    3,118
    
    
    
    5,024
    
    
    
    3,138Impairments and write-offs
    
    
    1,802
    
    
    
    0
    
    
    
    14,717
    
    
    
    0Selling, general and
administrative
    
    
    9,903
    
    
    
    6,562
    
    
    
    25,978
    
    
    
    17,222Operating (loss) income
    
    
    (9,709
    )
    
    
    17,919
    
    
    
    (19,893
    )
    
    
    28,630Other (income) expense, net
    
    
    (330
    )
    
    
    (463
    )
    
    
    (918
    )
    
    
    (653
    )(Loss) Income before minority interest and equity
in earnings of real estate partnerships
    
    
    (9,379
    )
    
    
    18,382
    
    
    
    (18,975
    )
    
    
    29,283Minority interest
    
    
    12
    
    
    
    6
    
    
    
    17
    
    
    
    14Income before equity in earnings (loss) of real
estate partnerships
    
    
    (9,391
    )
    
    
    18,376
    
    
    
    (18,992
    )
    
    
    29,269Equity in earnings of real estate partnerships
    
    
    (13
    )
    
    
    48
    
    
    
    (66
    )
    
    
    82Total pre tax (loss) income
    
    
    (9,404
    )
    
    
    18,424
    
    
    
    (19,058
    )
    
    
    29,351Income taxes (benefit) provision
    
    
    (3,650
    )
    
    
    6,941
    
    
    
    (7,421
    )
    
    
    10,993Net (loss) income
    
    $
    (5,754
    )
    
    $
    11,483
    
    
    $
    (11,637
    )
    
    $
    18,358Basic earnings (loss) per share
    
    $
    (0.36
    )
    
    $
    0.82
    
    
    $
    (0.78
    )
    
    $
    1.47Basic weighted average shares outstanding
    
    
    15,804
    
    
    
    13,987
    
    
    
    14,946
    
    
    
    12,491Diluted earnings (loss) per share
    
    $
    (0.36
    )
    
    $
    0.81
    
    
    $
    (0.78
    )
    
    $
    1.45Diluted weighted average shares outstanding
    
    
    15,804
    
    
    
    14,168
    
    
    
    14,946
    
    
    
    12,653
  4




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
 Nine Months Ended September 30,2006
    
    
    2005Cash flows from operating activities:Net (loss) income
    
    $
    (11,637
    )
    
    $
    18,358Adjustment to reconcile net (loss) income to net cash used in operating activitiesAmortization and depreciation
    
    
    551
    
    
    
    125Write-down of land, deposits and pre-acquisition costs
    
    
    14,716
    
    
    
    Loss on disposal of assets
    
    
    
    
    
    
    9Minority interest
    
    
    17
    
    
    
    14Equity in (earnings) loss of real estate partnerships
    
    
    66
    
    
    
    (82
    )Distributions from investment in real estate partnerships
    
    
    
    
    
    
    164Amortization of stock compensation
    
    
    2,523
    
    
    
    1,749Deferred income tax
    
    
    (6,983
    )
    
    
    (422
    )Changes in operating assets and liabilities:Restricted cash
    
    
    (5,530
    )
    
    
    (5,647
    )Receivables
    
    
    4,242
    
    
    
    (7,088
    )Due from related parties
    
    
    (668
    )
    
    
    (1,871
    )Real estate held for development and sale
    
    
    (133,869
    )
    
    
    (155,668
    )Other assets
    
    
    (1,571
    )
    
    
    (3,765
    )Accounts payable and accrued liabilities
    
    
    (5,723
    )
    
    
    23,555Income tax payable
    
    
    
    
    
    
    3,656Due to related parties
    
    
    
    
    
    
    (108
    )Net cash (used in) provided by operating activities
    
    
    (143,866
    )
    
    
    (127,021
    )Cash flows from investing activities:Purchase of property, plant, and equipment
    
    
    (1,609
    )
    
    
    (167
    )Distributions of capital from investments in real estate partnerships
    
    
    
    
    
    
    1,000Business acquisitions, net of cash acquired
    
    
    (15,491
    )
    
    
    Net cash used in investing activities
    
    
    (17,100
    )
    
    
    833Cash flows from financing activities:Proceeds from notes payable
    
    
    211,577
    
    
    
    182,666Proceeds from junior subordinated debt
    
    
    30,000
    
    
    
    Proceeds from related party notes payable
    
    
    
    
    
    
    444Payments on notes payable
    
    
    (128,172
    )
    
    
    (93,346
    )Payments on related party notes payable
    
    
    
    
    
    
    (8,125
    )Contribution from minority shareholders
    
    
    
    
    
    
    87Payment of distribution payable
    
    
    
    
    
    
    (9,450
    )Distributions paid to minority shareholders
    
    
    (3
    )
    
    
    (2,409
    )Distributions paid to shareholders
    
    
    
    
    
    
    Proceeds from shares issued under employee stock purchase plan
    
    
    114
    
    
    
    81Purchase of treasury stock
    
    
    (2,438
    )
    
    
    Net proceeds from equity offerings
    
    
    18,561
    
    
    
    52,810Net cash provided by financing activities
    
    
    129,639
    
    
    
    122,758Net decrease in cash and cash equivalents
    
    
    (31,327
    )
    
    
    (3,430
    )Cash and cash equivalents, beginning of period
    
    
    42,167
    
    
    
    67,559Cash and cash equivalents, end of period
    
    $
    10,840
    
    
    $
    64,129
  5




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 ORGANIZATION AND BASIS OF PRESENTATION
       RECENT ACCOUNTING PRONOUNCEMENTS
   6




---



##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   REAL ESTATE HELD FOR DEVELOPMENT AND SALE
      7




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 September 30,
    
    
    December 31,2006
    
    
    2005Land and land development costs
    
    $
    256,140
    
    
    $
    119,530Cost of construction (including
capitalized interest and real estate
taxes and excluding underlying land costs)
    
    
    253,552
    
    
    
    144,272$
    509,692
    
    
    $
    263,802
 CONSOLIDATION OF VARIABLE INTEREST ENTITIES
    8




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 WARRANTY RESERVES
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Balance at beginning of period
    
    $
    1,556
    
    
    $
    945
    
    
    $
    1,206
    
    
    $
    916Additions
    
    
    200
    
    
    
    291
    
    
    
    1,014
    
    
    
    600Releases and/or charges incurred
    
    
    (297
    )
    
    
    (155
    )
    
    
    (761
    )
    
    
    (435
    )Balance at end of period
    
    $
    1,459
    
    
    $
    1,081
    
    
    $
    1,459
    
    
    $
    1,081
 CAPITALIZED INTEREST AND REAL ESTATE TAXES
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Total interest incurred
    
    $
    7,541
    
    
    $
    3,062
    
    
    $
    19,161
    
    
    $
    8,824Beginning interest capitalized
    
    
    20,839
    
    
    
    8,009
    
    
    
    11,590
    
    
    
    4,524Plus: Interest incurred on notes payable
    
    
    7,521
    
    
    
    3,001
    
    
    
    19,093
    
    
    
    8,097Plus: Interest incurred on related party notes payable
    
    
    20
    
    
    
    20
    
    
    
    60
    
    
    
    289Less: Interest expensed as a component of cost of sales
    
    
    (1,569
    )
    
    
    (1,646
    )
    
    
    (3,932
    )
    
    
    (3,526
    )Ending interest capitalized
    
    $
    26,811
    
    
    $
    9,384
    
    
    $
    26,811
    
    
    $
    9,384
 9




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 EARNINGS PER SHARE
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Basic earnings per shareNet income
    
    $
    (5,754
    )
    
    $
    11,483
    
    
    $
    (11,637
    )
    
    $
    18,358Basic weighted-average shares outstanding
    
    
    15,804
    
    
    
    13,987
    
    
    
    14,946
    
    
    
    12,491Per share amounts
    
    $
    (0.36
    )
    
    $
    0.82
    
    
    $
    (0.78
    )
    
    $
    1.47Dilutive earnings per shareNet income
    
    $
    (5,754
    )
    
    $
    11,483
    
    
    $
    (11,637
    )
    
    $
    18,358Basic weighted-average shares outstanding
    
    
    15,804
    
    
    
    13,987
    
    
    
    14,946
    
    
    
    12,491Stock options and restricted stock grants
    
    
    
    
    
    
    181
    
    
    
    
    
    
    
    162Dilutive weighted-average shares outstanding
    
    
    15,804
    
    
    
    14,168
    
    
    
    14,946
    
    
    
    12,653Per share amounts
    
    $
    (0.36
    )
    
    $
    0.81
    
    
    $
    (0.78
    )
    
    $
    1.45
  Comprehensive income
  INVESTMENT IN REAL ESTATE PARTNERSHIPS
   10




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Investment in real estate partnerships
    
    $
    (101
    )Development and construction loan receivable
    
    $
    3,365
  ACQUISITIONS
    11




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 CREDIT FACILITY COVENANTS
  Bank of America
     Wachovia
Bank
  Kodiak
Warehouse, LLC
  Key Bank
  12




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  INCOME TAX
   September 30,
    
    December 31,2006
    
    2005Current:Federal
    
    $
    (373
    )
    
    $
    15,160State
    
    
    (65
    )
    
    
    2,885(438
    )
    
    
    18,045Deferred:Federal
    
    
    (5,875
    )
    
    
    (1,417
    )State
    
    
    (1,108
    )
    
    
    (262
    )(6,983
    )
    
    
    (1,679
    )Total Income Tax (Benefit) Expense
    
    $
    (7,421
    )
    
    $
    16,366
  September 30,
    
    
    December 31,2006
    
    
    2005Deferred tax assets:Inventory
    
    $
    
    
    
    $
    2,245Warranty
    
    
    530
    
    
    
    417Deferred rent
    
    
    45
    
    
    
    26Accrued expenses
    
    
    139
    
    
    
    73Stock based compensation
    
    
    1,733
    
    
    
    7902,447
    
    
    
    3,552Lessvaluation allowance
    
    
    (538
    )
    
    
    (840
    )Net deferred tax assets
    
    
    1,909
    
    
    
    2,712
 13




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 September 30,
    
    
    December 31,2006
    
    
    2005Deferred tax liabilities:Inventory
    
    
    (7,958
    )
    
    
    Investment in Affiliates
    
    
    (8
    )
    
    
    (8
    )Depreciation and amortization
    
    
    (159
    )
    
    
    (159
    )Net deferred tax liabilities
    
    
    (8,125
    )
    
    
    (168
    )Net deferred tax assets (liabilities)
    
    $
    (6,216
    )
    
    $
    2,545
  RESTRICTED STOCK, STOCK OPTIONS, AND OTHER STOCK PLANS
     Stock options
    
    
    213,993Restricted stock grants
    
    
    835,690Total outstanding equity awards
    
    
    1,049,683
  Shares available for issuance at January 1, 2006
    
    
    1,050,231Adjustments:Additional shares added to plan
    
    
    337,757Restricted stock grants  Issued
    
    
    (812,328
    )Shares issued under employee stock purchase plan
    
    
    (13,315
    )Restricted stock grants  Forfeitures
    
    
    236,231Shares available for issuance at September 30, 2006
    
    
    798,576
 14




---



##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Weightedaverage fairvalue at date ofShares
    
    
    grantRestricted shares outstanding at December 31, 2005
    
    
    273,891
    
    
    $
    16.46Granted
    
    
    805,039
    
    
    
    11.10Shares issued
    
    
    (7,009
    )
    
    
    24.15Vested
    
    
    Forefeited
    
    
    (236,231
    )
    
    
    14.19Restricted shares outstanding at September 30, 2006
    
    
    835,690
    
    
    $
    11.67
      15




---



##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  PRIVATE PLACEMENT
    16




---



##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 STOCK REPURCHASE PROGRAM
  COMMITMENTS AND CONTINGENCIES
 Legal Proceedings
     Letters of credit and performance bonds
  Operating leases
  17




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Year Ended
    
    Amount2006
    
    $
    3072007
    
    
    1,2312008
    
    
    1,1202009
    
    
    9032010
    
    
    164Thereafter
    
    
    5
  RELATED PARTY TRANSACTIONS
      18




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        SUBSEQUENT EVENTS
  19




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    Overview
   20




---



##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 Three Months Ended September 30,
    
    Nine Months Ended September 30,2006
    
    2005
    
    2006
    
    2005New orders
    
    
    93
    
    
    
    117
    
    
    
    468
    
    
    
    523New order revenues
    
    $
    26,299
    
    
    $
    34,423
    
    
    $
    139,949
    
    
    $
    197,760Average new order price
    
    $
    283
    
    
    $
    294
    
    
    $
    299
    
    
    $
    378Settlements
    
    
    110
    
    
    
    202
    
    
    
    387
    
    
    
    403Settlement revenue
- Homebuilding
    
    $
    30,367
    
    
    $
    72,409
    
    
    $
    117,083
    
    
    $
    140,473Average settlement price
    
    $
    276
    
    
    $
    358
    
    
    $
    303
    
    
    $
    349Backlog units
    
    
    550
    
    
    
    567
    
    
    
    550
    
    
    
    567Backlog
    
    $
    211,261
    
    
    $
    231,833
    
    
    $
    211,261
    
    
    $
    231,833Average backlog price
    
    $
    384
    
    
    $
    409
    
    
    $
    384
    
    
    $
    409
  As of September 30, 2006Lots under
    
    Average NewEstimated
    
    
    
    
    
    
    
    
    
    Lots
    
    Option
    
    OrderUnits at
    
    
    
    
    
    
    
    
    
    Owned
    
    Agreement
    
    Revenue toProject
    
    State
    
    Completion
    
    Units Settled
    
    Backlog(2)
    
    Unsold
    
    Unsold
    
    DateStatus: Active(1)Allen Creek
    
    GA
    
    
    26
    
    
    
    17
    
    
    
    1
    
    
    
    8
    
    
    
    
    
    
    $
    210,322Arcanum
    
    GA
    
    
    34
    
    
    
    7
    
    
    
    4
    
    
    
    23
    
    
    
    
    
    
    $
    403,508Brentwood Estates
    
    GA
    
    
    32
    
    
    
    11
    
    
    
    3
    
    
    
    2
    
    
    
    16
    
    
    $
    138,294Falling Water
    
    GA
    
    
    23
    
    
    
    6
    
    
    
    4
    
    
    
    13
    
    
    
    
    
    
    $
    429,565Gates of Luberon
    
    GA
    
    
    32
    
    
    
    1
    
    
    
    1
    
    
    
    30
    
    
    
    
    
    
    $
    392,000Glenn Ivey
    
    GA
    
    
    107
    
    
    
    5
    
    
    
    6
    
    
    
    20
    
    
    
    76
    
    
    $
    227,017Highland Station
    
    GA
    
    
    105
    
    
    
    15
    
    
    
    10
    
    
    
    80
    
    
    
    
    
    
    $
    296,043Maristone
    
    GA
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    Senators Ridge
    
    GA
    
    
    60
    
    
    
    11
    
    
    
    6
    
    
    
    43
    
    
    
    0
    
    
    $
    239,748Traditions
    
    GA
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    Sub-Total / Weighted Average(4):
    
    
    
    
    
    
    463
    
    
    
    73
    
    
    
    35
    
    
    
    263
    
    
    
    92
    
    
    $
    270,263Emerald Farm
    
    MD
    
    
    84
    
    
    
    75
    
    
    
    1
    
    
    
    8
    
    
    
    
    
    
    $
    456,614Sub-Total/Weighted Average:
    
    
    
    
    
    
    84
    
    
    
    75
    
    
    
    1
    
    
    
    8
    
    
    
    
    
    
    $
    456,614Allyns Landing
    
    NC
    
    
    117
    
    
    
    30
    
    
    
    18
    
    
    
    68
    
    
    
    1
    
    
    $
    227,263Brookefield Station
    
    NC
    
    
    130
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130
    
    
    
    Carpenter Pointe
    
    NC
    
    
    5
    
    
    
    3
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    $
    149,967Deerfield
    
    NC
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    90,000Haddon Hall
    
    NC
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    90
    
    
    
    
    
    
    
    Kelton at Preston
    
    NC
    
    
    56
    
    
    
    35
    
    
    
    5
    
    
    
    16
    
    
    
    
    
    
    $
    309,061North Farms
    
    NC
    
    
    138
    
    
    
    18
    
    
    
    7
    
    
    
    
    
    
    
    113
    
    
    $
    179,593Pine Hollow
    
    NC
    
    
    10
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    $
    174,363Providence-SF
    
    NC
    
    
    148
    
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    114
    
    
    
    
 21




---



##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 As of September 30, 2006Lots under
    
    Average NewEstimated
    
    
    
    
    
    
    
    
    
    Lots
    
    Option
    
    OrderUnits at
    
    
    
    
    
    
    
    
    
    Owned
    
    Agreement
    
    Revenue toProject
    
    State
    
    Completion
    
    Units Settled
    
    Backlog(2)
    
    Unsold
    
    Unsold
    
    DateRiverbrooke
    
    NC
    
    
    66
    
    
    
    23
    
    
    
    5
    
    
    
    11
    
    
    
    27
    
    
    $
    167,424Strathaven
    
    NC
    
    
    6
    
    
    
    2
    
    
    
    1
    
    
    
    0
    
    
    
    3
    
    
    $
    395,868Wakefield Plantation
    
    NC
    
    
    77
    
    
    
    40
    
    
    
    1
    
    
    
    16
    
    
    
    20
    
    
    $
    496,120Wheatleigh Preserve
    
    NC
    
    
    28
    
    
    
    3
    
    
    
    9
    
    
    
    16
    
    
    
    
    
    
    $
    281,073Sub-Total / Weighted Average:
    
    
    
    
    
    
    872
    
    
    
    157
    
    
    
    46
    
    
    
    253
    
    
    
    416
    
    
    $
    286,890Barrington Park
    
    VA
    
    
    148
    
    
    
    
    
    
    
    9
    
    
    
    139
    
    
    
    
    
    
    $
    327,170Beacon Park at Belmont Bay 8&9
    
    VA
    
    
    600
    
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    488
    
    
    
    Blooms Mill Carriage
    
    VA
    
    
    91
    
    
    
    91
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    453,642Carter Lake
    
    VA
    
    
    258
    
    
    
    
    
    
    
    
    
    
    
    258
    
    
    
    
    
    
    
    Commons at Bellemeade
    
    VA
    
    
    316
    
    
    
    55
    
    
    
    2
    
    
    
    259
    
    
    
    
    
    
    $
    221,442Commons on
Potomac Sq (3)
    
    VA
    
    
    192
    
    
    
    25
    
    
    
    15
    
    
    
    152
    
    
    
    
    
    
    $
    259,575Commons on Williams Sq
    
    VA
    
    
    180
    
    
    
    93
    
    
    
    6
    
    
    
    81
    
    
    
    
    
    
    $
    352,357Countryside
    
    VA
    
    
    102
    
    
    
    67
    
    
    
    2
    
    
    
    33
    
    
    
    
    
    
    $
    285,829Penderbrook
    
    VA
    
    
    424
    
    
    
    230
    
    
    
    1
    
    
    
    193
    
    
    
    
    
    
    $
    255,835River Club at Belmont Bay 5
    
    VA
    
    
    84
    
    
    
    78
    
    
    
    2
    
    
    
    4
    
    
    
    
    
    
    $
    451,475The Eclipse on Center Park
    
    VA
    
    
    465
    
    
    
    
    
    
    
    412
    
    
    
    53
    
    
    
    
    
    
    $
    410,852Woodlands at Round Hill
    
    VA
    
    
    46
    
    
    
    23
    
    
    
    1
    
    
    
    22
    
    
    
    
    
    
    $
    756,057Sub-Total / Weighted Average:
    
    
    
    
    
    
    2,906
    
    
    
    662
    
    
    
    450
    
    
    
    1,306
    
    
    
    488
    
    
    $
    363,731Total Active
    
    
    
    
    
    
    4,325
    
    
    
    967
    
    
    
    532
    
    
    
    1,830
    
    
    
    996
    
    
    
    n/aStatus: Pre-development & DevelopmentEast Capitol
    
    DC
    
    
    130
    
    
    
    
    
    
    
    
    
    
    
    130
    
    
    
    
    
    
    
    n/aSub-Total:
    
    
    
    
    
    
    130
    
    
    
    
    
    
    
    
    
    
    
    130
    
    
    
    Cedars Road
    
    GA
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109
    
    
    
    n/aHighland Avenue
    
    GA
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    n/aJames Road
    
    GA
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    n/aKelly Mill Road
    
    GA
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    n/aMcGinnis Ferry SF
    
    GA
    
    
    48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    n/aPost Road
    
    GA
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    
    
    
    
    n/aPost Road II
    
    GA
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    n/aSettingdown Circle
    
    GA
    
    
    172
    
    
    
    
    
    
    
    
    
    
    
    172
    
    
    
    
    
    
    
    n/aShiloh Road
    
    GA
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    n/aTribble Lakes
    
    GA
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    n/aWyngate
    
    GA
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    n/aSub-Total:
    
    
    
    
    
    
    842
    
    
    
    
    
    
    
    
    
    
    
    572
    
    
    
    270Boyce Road
    
    NC
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    n/aCleveland Springs
    
    NC
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    n/aHolland Road
    
    NC
    
    
    81
    
    
    
    
    
    
    
    18
    
    
    
    63
    
    
    
    
    
    
    
    n/aLakeshore Hills
    
    NC
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    n/aMassey Preserve
    
    NC
    
    
    297
    
    
    
    
    
    
    
    
    
    
    
    185
    
    
    
    112
    
    
    
    n/aProvidence-TH
    
    NC
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    n/aStowe Road
    
    NC
    
    
    110
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    n/aSub-Total:
    
    
    
    
    
    
    723
    
    
    
    
    
    
    
    18
    
    
    
    248
    
    
    
    457Aldie Singles
    
    VA
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    n/a
 22




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 As of September 30, 2006Lots under
    
    Average NewEstimated
    
    
    
    
    
    
    
    
    
    Lots
    
    Option
    
    OrderUnits at
    
    
    
    
    
    
    
    
    
    Owned
    
    Agreement
    
    Revenue toProject
    
    State
    
    Completion
    
    Units Settled
    
    Backlog(2)
    
    Unsold
    
    Unsold
    
    DateBlake Crossing
    
    VA
    
    
    130
    
    
    
    
    
    
    
    
    
    
    
    130
    
    
    
    
    
    
    
    n/aBrandy Station
    
    VA
    
    
    350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350
    
    
    
    n/aLoudoun Station Condominiums
    
    VA
    
    
    484
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    484
    
    
    
    n/aStation View
    
    VA
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    47
    
    
    
    
    
    
    
    n/aSub-Total:
    
    
    
    
    
    
    1,026
    
    
    
    
    
    
    
    
    
    
    
    177
    
    
    
    849Total Development
    
    
    
    
    
    
    2,721
    
    
    
    
    
    
    
    18
    
    
    
    1,127
    
    
    
    1,576
    
    
    
    n/aTotal Active & Development
    
    
    
    
    
    
    7,046
    
    
    
    967
    
    
    
    550
    
    
    
    2,957
    
    
    
    2,572
    
    
    
    n/aStatus: Joint VentureNorth Shore Condominiums
    
    NC
    
    
    196
    
    
    
    
    
    
    
    7
    
    
    
    189
    
    
    
    
    
    
    $
    286,361North Shore Townhomes
    
    NC
    
    
    163
    
    
    
    33
    
    
    
    7
    
    
    
    123
    
    
    
    
    
    
    $
    239,107Total Joint Venture
    
    
    
    
    
    
    359
    
    
    
    33
    
    
    
    14
    
    
    
    312
    
    
    
    
    
    
    
    n/a
 (1)
    
    Active communities are open for sales. Development communities are in the development
process and have not yet
opened for sales. Completed communities have settled all units during the three months ended
September 30, 2006.(2)
    
    Backlog means we have an executed order with a buyer, inclusive of lot sales, but the
settlement has not yet taken place.(3)
    
    Includes 38 affordable dwelling units, ADUs,
which sales prices will be mandated by the respective county
government.(4)
    
    Weighted Average means the weighted average new
order sale price.
 Results of Operations
 Three and nine months ended September 30, 2006 compared to three and nine months ended September
30, 2005
 Orders and Backlog
   23




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Revenues
    Other Revenue
  Cost of sales
  Impairments and write-offs
  24




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
   Selling, general and administrative
   Operating (loss) income
  25




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Other (income) expense, net
  Income taxes
   Liquidity and Capital Resources
   Credit Facilities
   26




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
       Cash Flow
  
 27




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Recent Accounting Pronouncements
    Critical Accounting Policies and Estimates
 Managements
Discussion and Analysis of Financial Condition and Results of Operations
 Outlook
    28




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   29




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
CONTROLS AND PROCEDURES
 ITEM 4. CONTROLS AND PROCEDURES
     30




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
PART II  OTHER INFORMATION
 PART II  OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS
    ITEM 1A. RISK FACTORS
  Home prices and sales activities in the Washington, D.C.,
Atlanta, Georgia, and Raleigh, North Carolina geographic markets have a
large impact on our profitability because we conduct substantially
all of our business in these markets.
  31




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
PART II  OTHER INFORMATION
 Our growth requires additional capital, which may not be
available.
   Our growth depends on the availability of construction,
acquisition and development loans.
  ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
       Total Number of
    
    
    Maximum NumberShares Purchased as
    
    
    of Shares that MayTotal Number
    
    
    Average
    
    
    Part of Publicly
    
    
    Yet Be Purchasedof Shares
    
    
    Price Paid
    
    
    Announced Plans or
    
    
    Under the Plans orPeriod
    
    Purchased
    
    
    per Share
    
    
    Programs
    
    
    ProgramsJuly 1 - 31, 2006
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    741,600August 1 - 31, 2006
    
    
    133,000
    
    
    
    4.32
    
    
    
    133,000
    
    
    
    608,600September 1 - 30, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    608,600Total
    
    
    133,000
    
    
    $
    4.32
    
    
    
    133,000
    
    
    
    608,600
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  ITEM 5. OTHER INFORMATION.
  32




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
PART II  OTHER INFORMATION
 ITEM 6. EXHIBITS
 Exhibit Number
    
    Exhibit3.1
    
    Amended and Restated Certificate of Incorporation
(incorporated by reference to an exhibit to the
Registrants Annual Report on Form 10-K for the year ended
December 31, 2004)3.2
    
    Amended and Restated Bylaws (incorporated by reference
to an exhibit to the Registrants Annual Report on Form
10-K for the year ended December 31, 2004)4.1
    
    Specimen Stock Certificate (incorporated by reference
to an exhibit to the Registrants Amendment No. 6 to the
Registration Statement on Form S-1 filed with the
Commission on December 9, 2004 (No. 333-118193)31.1
    
    Certification of Chairman and Chief Executive Officer
pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated
under the Securities Exchange Act of 1934, as amended31.2
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a), promulgated under the
Securities Act of 1934, as amended31.3
    
    Certification of Chairman and Chief Executive Officer and
Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
 33




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##### 



COMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
 SIGNATURES
  COMSTOCK HOMEBUILDING COMPANIES, INC.Date: November 8, 2006
    By:

/s/
Christopher ClementeChristopher ClementeChairman and Chief Executive OfficerBy:

/s/
Bruce J. LabovitzBruce J. LabovitzChief Financial Officer 34