**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**_____________**




**FORM
      10-QSB**




ý
            
            **QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES**
              **EXCHANGE
                ACTOF 1934**FOR
                THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 2007**o**
            
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE**
              **SECURITIES
                EXCHANGE ACT OF 1934**


Forthe transition period from
            
            to




Commission
      file number: 000-23819


**———————————**


**WILSON
                  HOLDINGS,
                  INC.**(Exact
                  Name of Small Business Issuer as Specified in Its
                  Charter)




**Nevada**
            
            **76-0547762**(State
                or Other Jurisdiction of
              Incorporation
                or Organization)
            
            (I.R.S
                Employer Identification No.)**8121
                Bee Caves Rd., Austin, TX 78746**(Address
                of Principal Executive Offices)**512-732-0932**(Issuer's
              Telephone Number)


****




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 time
      period that the registrant was required to file such reports), and (2) has
      been
      subject to such filing requirements for past 90 days.




Yes
ýNo
o




Indicate
      by check mark whether the registrant is a shell company (as defined in rule
      12b-2 of the Exchange Act):


Yes
      o  
No   x




**State
      the number of shares outstanding of each of the issuer’s classes of common
      equity as of the latest practicable date:** **As of November
      13, 2007, the registrant had 23,135,538 shares of common stock, par value
      $0.001, outstanding.**




Transitional
      Small Business Issuer Disclosure Format:  YesoNoý





Table
          of Content


**Index**








**PART
                  I – FINANCIAL
                  INFORMATION**Item
                  1.
              
              Financial
                  Statements
              
              1Item
                  2.
              
              Management’s
                  Discussion and
                  Analysis or Plan of Operation
              
              22Item
                  3.
              
              Controls
                  and
                  Procedures
              
              34**PART
                  II – OTHER
                  INFORMATION**Item
                  1.
              
              Legal
                  Proceedings
              
              35Item
                  2.
              
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              
              35Item
                  3.
              
              Defaults
                  Upon
                  Senior Securities
              
              35Item
                  4.
              
              Submission
                  of
                  Matters to a Vote of Security Holders
              
              35Item
                  5.
              
              Other
                  Information
              
              35Item
                  6.
              
              Exhibits
              
              35  i
 Table
              of Content


INTRODUCTORY
      NOTE




This
      Report on Form 10-QSB for Wilson Holdings, Inc. (“we,” “us,” or the “Company”)
      may contain forward-looking statements. You can identify these statements
      by forward-looking words such as “may,” “will,” “expect,” “intend,”
“anticipate,” “believe,” “estimate,” and “continue” or similar words.
      Forward-looking statements include information concerning possible or assumed
      future business success or financial results. You should read statements
      that contain these words carefully because they discuss future expectations
      and
      plans, which contain projections of future results of operations or financial
      condition or state other forward-looking information. We believe that it is
      important to communicate future expectations to investors. However, there may
      be
      events in the future that we are not able to accurately predict or
      control. Accordingly, we do not undertake any obligation to update any
      forward-looking statements for any reason, even if new information becomes
      available or other events occur in the future.




Forward-looking
      statements and information are based on current beliefs as well as assumptions
      made by, and information currently available to, us concerning anticipated
      financial performance, business prospects and strategies. Although management
      considers these assumptions to be reasonable based on information currently
      available to it, they may prove to be incorrect. The forward-looking statements
      in this quarterly report on Form 10-QSB are made as of the date it was issued
      and we do not undertake any obligation to update publicly or to revise any
      of
      the included forward-looking statements, whether as a result of new information,
      future events or otherwise, except as required by applicable law.





By
      their
      very nature, forward-looking statements involve inherent risks and
      uncertainties, both general and specific, and risks that outcomes implied by
      forward-looking statements will not be achieved. We caution readers not to
      place
      undue reliance on these statements as a number of important factors could cause
      the actual results to differ materially from the beliefs, plans, objectives,
      expectations and anticipations, estimates and intentions expressed in such
      forward-looking statements.





Copies
      of
      our public filings are available at www.wilsonfamilycommunities.com and on
      EDGAR
      at www.sec.gov.





In
      addition to the information in Part I, Item 2 – “Management’s Discussion and
      Analysis or Plan of Operation” in this quarterly report on Form 10-QSB, new risk
      factors emerge from time to time and it is not possible for us to predict all
      such factors, nor to assess the impact such factors might have on our business
      or the extent to which any factor or combination of factors may cause actual
      results to differ materially from those contained in any forward looking
      statements. Given these risks and uncertainties, investors should not place
      undue reliance on forward-looking statements as a prediction of actual
      results.




*Whenever
      we refer in this report to “Wilson Holdings,” “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 and Green Builders, Inc., a Texas
      corporation.*


ii
 Table
          of Content




Item
      1.                      Financial
      Statements




**WILSON
                  HOLDINGS, INC.**Consolidated
                  Balance SheetsAs
                  of September 30, 2007 and December 31, 2006(Unaudited)September
                  30,
              
              
              December
                  31,ASSETSCash
                  and cash equivalents
              
              $
              13,073,214
              
              
              
              2,673,056Restricted
                  cash
              
              
              -
              
              
              
              2,192,226InventoryLand
                  and land development
              
              
              32,463,411
              
              
              
              29,908,325Homebuilding
                  inventories
              
              
              2,843,704
              
              
              
              847,653Total
                  inventory
              
              
              35,307,116
              
              
              
              30,755,978Other
                  assets
              
              
              729,471
              
              
              
              196,195Debt
                  issuance costs, net of amortization
              
              
              1,265,218
              
              
              
              1,458,050Equipment
                  and software, net of accumulated depreciation and amortization
                  of
                  $32,294 and $46,358, respectively
              
              
              232,357
              
              
              
              97,956Total
                  assets
              
              
              50,607,375
              
              
              
              37,373,461LIABILITIES
                  AND STOCKHOLDERS' EQUITYAccounts
                  payable
              
              
              1,404,151
              
              
              
              1,376,117Accrued
                  real estate taxes payable
              
              
              405,060
              
              
              
              454,764Accrued
                  liabilities and expenses
              
              
              215,372
              
              
              
              529,090Accrued
                  interest
              
              
              464,809
              
              
              
              302,555Deferred
                  revenue
              
              
              159,381
              
              
              
              11,223Lines
                  of credit
              
              
              472,365
              
              
              
              6,436,706Notes
                  payable
              
              
              20,165,993
              
              
              
              9,466,621Notes
                  payable, related party
              
              
              -
              
              
              
              279,800Subordinated
                  convertible debt, net of $3,384,807 and $5,224,502 discount,
                  respectively
              
              
              13,254,780
              
              
              
              8,395,876Derivative
                  liability, convertible note compount embedded derivative
              
              
              -
              
              
              
              7,462,659Derivative
                  liability, contingent warrants issued to subordinated convertible
                  debt
                  holders
              
              
              -
              
              
              
              1,883,252Total
                  liabilities
              
              
              36,541,911
              
              
              
              36,598,663STOCKHOLDERS'
                  EQUITYCommon
                  stock, $0.001 par value, 100,000,000 and 80,000,000 shares authorized,
                  respectively, 23,135,538 and 18,055,538 shares issued and
                  outstanding
                  at September 30, 2007 and December 31, 2006,
                  repectively
              
              
              23,136
              
              
              
              18,056Additional
                  paid in capital
              
              
              27,040,304
              
              
              
              16,809,885Retained
                  deficit
              
              
              (12,997,976
              )
              
              
              (16,053,143
              )Total
                  stockholders' equity
              
              
              14,065,464
              
              
              
              774,798Commitments
                  and contingencies
              
              
              -
              
              
              
              -Total
                  liabilities and stockholders' equity
              
              $
              50,607,375
              
              
              
              37,373,461See
                accompanying notes to the consolidated financial statements.


1
 Table
            of Content


**WILSON
                  HOLDINGS, INC.**Consolidated
                  Statements of OperationsFor
                  the Three Months and Nine Months Ended Sept. 30, 2007 and
                  2006Three
                  Months Ended Sept 30,
              
              
              Nine
                  Months Ended Sept 30,2007
              
              
              2006
              
              
              2007
              
              
              2006(Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)Revenues:Homebuilding
                  and related services
              
              $
              177,901
              
              
              
              1,482,933
              
              
              
              1,295,407
              
              
              
              4,184,905Land
                  sales
              
              
              1,115,186
              
              
              
              413,811
              
              
              
              3,149,093
              
              
              
              1,079,811Total
                  revenues
              
              
              1,293,087
              
              
              
              1,896,744
              
              
              
              4,444,500
              
              
              
              5,264,716Cost
                  of revenues:Homebuilding
                  and related services
              
              
              159,088
              
              
              
              1,255,959
              
              
              
              1,025,514
              
              
              
              3,480,403Land
                  sales
              
              
              913,506
              
              
              
              273,332
              
              
              
              3,794,712
              
              
              
              624,487Total
                  cost of revenues
              
              
              1,072,595
              
              
              
              1,529,291
              
              
              
              4,820,227
              
              
              
              4,104,890Gross
                  profit:Homebuilding
                  and related services
              
              
              18,812
              
              
              
              226,974
              
              
              
              269,892
              
              
              
              704,502Land
                  sales
              
              
              201,680
              
              
              
              140,479
              
              
              
              (645,619
              )
              
              
              455,324Total
                  gross profit
              
              
              220,492
              
              
              
              367,453
              
              
              
              (375,727
              )
              
              
              1,159,826Costs
                  and expenses:Corporate
                  general and administration
              
              
              1,326,161
              
              
              
              1,168,128
              
              
              
              3,871,587
              
              
              
              3,369,843Sales
                  and marketing
              
              
              77,238
              
              
              
              282,328
              
              
              
              372,820
              
              
              
              640,421Total
                  costs and expenses
              
              
              1,403,399
              
              
              
              1,450,456
              
              
              
              4,244,407
              
              
              
              4,010,264Operating
                  loss
              
              
              (1,182,907
              )
              
              
              (1,083,003
              )
              
              
              (4,620,134
              )
              
              
              (2,850,438
              )Other
                  income (expense):Loss
                  on fair value of derivatives
              
              
              -
              
              
              
              (460,000
              )
              
              
              -
              
              
              
              (3,392,500
              )Interest
                  and other income
              
              
              141,235
              
              
              
              54,413
              
              
              
              291,478
              
              
              
              260,199Interest
                  expense
              
              
              (844,307
              )
              
              
              (570,430
              )
              
              
              (2,227,233
              )
              
              
              (1,643,086
              )Total
                  other expense
              
              
              (703,072
              )
              
              
              (976,017
              )
              
              
              (1,935,755
              )
              
              
              (4,775,387
              )Net
                  loss
              
              $
              (1,885,979
              )
              
              
              (2,059,020
              )
              
              
              (6,555,889
              )
              
              
              (7,625,825
              )Basic
                  and diluted loss per share
              
              $
              (0.08
              )
              
              
              (0.12
              )
              
              
              (0.32
              )
              
              
              (0.43
              )Basic
                  and diluted weighted average common shares outstanding
              
              
              23,135,538
              
              
              
              17,706,625
              
              
              
              20,586,649
              
              
              
              17,706,625See
                accompanying notes to the consolidated financial statements.


2
 Table
            of Content




**WILSON
                  HOLDINGS, INC.**Consolidated
                  Statements of Cash FlowsFor
                  the Nine Months Ended September 30, 2007 and 20062007
              
              
              2006(Unaudited)
              
              
              (Unaudited)Cash
                  flows from operating activities:Net
                  loss
              
              $
              (6,555,889
              )
              
              
              (7,625,825
              )Non
                  cash adjustments:Loss
                  on fair value of derivatives
              
              
              -
              
              
              
              3,392,500Amortization
                  of convertible debt discount
              
              
              536,230
              
              
              
              535,983Amortization
                  of debt issuance costs
              
              
              192,832
              
              
              
              157,927Stock-based compensation expense
              
              
              540,900
              
              
              
              349,507Services
                  provided without compensation by principal shareholders
              
              
              20,000Depreciation
                  and amortization
              
              
              55,309
              
              
              
              44,940Loss
                  on land option purchase
              
              
              1,254,968Effect
                  of deconsolidation of variable interest entity
              
              
              259,880Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Increase
                  in total inventory
              
              
              (5,806,106
              )
              
              
              (7,620,582
              )Increase
                  in other assets
              
              
              (272,341
              )
              
              
              (67,763
              )Increase
                  in accounts payable
              
              
              28,034
              
              
              
              435,198(Decrease)
                  in real estate taxes payable
              
              
              (49,704
              )(Decrease)
                  increase in accrued expenses
              
              
              (313,718
              )
              
              
              684,179Increase
                  in deferred revenue
              
              
              148,158
              
              
              
              -(Decrease)
                  increase in accrued interest
              
              
              162,254
              
              
              
              (37,194
              )Net
                  cash used in operating activities
              
              
              (9,799,192
              )
              
              
              (9,751,130
              )Cash
                  flows from investing activities:Purchase
                  of fixed assets
              
              
              (201,565
              )
              
              
              (68,479
              )Cash
                  paid for Green Builders, Inc.
              
              
              (32,919
              )
              
              
              -Net
                  cash used in investing activities
              
              
              (234,484
              )
              
              
              (68,479
              )Cash
                  flows from financing activities:Decrease
                  in restricted cash
              
              
              2,192,226
              
              
              
              -Repayments
                  to related parties, net
              
              
              (279,800
              )Issuances
                  (repayments) of notes payable, net
              
              
              10,699,372
              
              
              
              (897,579
              )(Repayments)
                  advances on lines of credit, net
              
              
              (5,964,341
              )
              
              
              9,713,395Cash
                  paid for debt issuance costs
              
              
              -
              
              
              
              (212,246
              )Common
                  stock sales, net of transaction costs
              
              
              13,786,377
              
              
              
              -Net
                  cash provided by financing activities
              
              
              20,433,834
              
              
              
              8,603,570Net
                  increase (decrease) in cash and cash equivalents
              
              
              10,400,158
              
              
              
              (1,216,039
              )Cash
                  and cash equivalents at beginning of period
              
              
              2,673,056
              
              
              
              10,019,816Cash
                  and cash equivalents at end of period
              
              $
              13,073,214
              
              
              
              8,803,777Cash
                  paid for interest
              
              $
              1,872,716
              
              
              
              1,064,421Cash
                  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
              
              
              
              -See
                accompanying notes to the consolidated financial statements.


3
 Table
            of Content




**WILSON
                  HOLDINGS, INC.**Statements
                  of Stockholders' EquityNine
                  Months Ended September 30, 2007 and 2006**Common
                  Stock**Shares
              
              
              Amount
              
              
              Additional
                  Paid In Capital
              
              
              Accumulated
                  Deficit
              
              
              Total**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




See
      accompanying notes to the consolidated financial statements.


4
 Table
          of Content


**(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.




The
      consolidated financial statements and the notes of the Company as of September
      30, 2007 and for the three months and nine months ending September 30, 2007
      and
      2006 have been prepared by management without audit, pursuant to rules and
      regulations of the Securities Exchange Commission and should be read in
      conjunction with the December 31, 2006 audited financials statements contained
      in the Company’s Form 10-KSB, filed February 16, 2007. In the opinion of
      management, all normal, recurring adjustments necessary for the fair
      presentation of such financial information have been included. 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 amounts reported in the financial statements
      and
      accompanying notes. Certain information and footnote disclosures normally
      included in the annual financial statements prepared in accordance with
      accounting principles generally accepted in the United States of America have
      been condensed or omitted.




In
        September 2007, the Company changed its fiscal year-end from December 31
        to
        September 30 and will file an annual report on Form 10-KSB for the transitional
        period from January 1, 2007 to September 30, 2007 with the Securities and
        Exchange Commission on or before December 31, 2007.




**(2)           
      Summary of Significant Accounting Policies**




***(a)           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.




***(b)           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 different from the actual amounts,
      it could have a material effect on the financial statements.




The
      Company has two of its properties that are in Municipal Utility Districts
      (MUDs). 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 MUDs, the Company expects to be
      reimbursed partially for the above developments costs. The MUDs will issue
      bonds
      to repay the Company, once there is enough assessed value on the property for
      the MUD taxes to repay the bonds. As homes are sold within the MUD, 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 70% of eligible costs spent. In some circumstances, the
      MUDs will pay for property set aside for the preservation of endangered species,
      greenbelts and similar uses.  To the extent that the estimates are
      different to the actual amounts, it could have a material effect on the
      financial statements.


5
 Table
          of Content




****(2)**         
      **Summary of Significant Accounting Policies
      (Continued)**




***(c)           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.




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




***(d)           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.


6
 Table
          of Content




**(2)         
       Summary of Significant Accounting Policies
      (Continued)**




***(e)           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 and warrants convertible into shares of common
      stock. These shares and warrants have been excluded from loss per share at
      September 30, 2007 and 2006 because the effect would be anti-dilutive as
      summarized in the table below:




September
                30,2007
            
            
            2006Stock
                options
            
            
            1,835,000
            
            
            
            1,145,000Common
                stock warrants
            
            
            1,143,125
            
            
            
            1,312,500Total
            
            
            2,978,125
            
            
            
            2,457,500




***(f)           
        Reclassifications***
 
 Certain
        prior period amounts have been
        reclassified to conform to current period presentation.


**(3)           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.






*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.




In
      May
      2007 the Company did not 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 has
                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 thousand to $700
                thousand.


7
 Table
          of Content




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 2008.




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.









**(4)         
       Inventory**




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 $355 thousand and $451 thousand at September 30, 2007 and
      December 31, 2006, respectively, of which $350 thousand and $451 thousand is
      non-refundable if the Company does not exercise the option and purchase the
      land.




As
      of
      September 30, 2007 it had approximately 1,944 acres of land with approximately
      738 acres under development and construction in Hays County, Travis County
      and
      Williamson County, Texas. During June 2007, the Company chose not to exercise
      the option on the Bohls Ranch tract of approximately 428 acres and took a charge
      of approximately $1.3 million against income for prepaid development
      costs.




In
      April
      2007 10 acres of Highway 183 was condemned by the State.  In July 2007
      the Company received final judgement from the State and received proceeds of
      approximately $410 thousand 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.


8
 Table
          of Content


Below
      is
      a summary of the property that is owned or under contract by the Company at
      September 30, 2007:




Property
            
            Approximate
                Acreage
            
            
            Approximate
                Owned Acreage
            
            
            Approximate
                Acreage Under Option
            
            
            Land
                and ProjectCosts at Sept. 30, 2007
              In
                thousands
            
            
            Approximate
                Acreage under Development
            
            Texas
                CountyRutherford
                West
            
            
            666
            
            
            
            666
            
            
            
            n/a
            
            
            
            $ 12,369
            
            
            
            666
            
            HaysHighway
                183
            
            
            5
            
            
            
            5
            
            
            
            n/a
            
            
            
            113
            
            
            
            -
            
            TravisGeorgetown
                Village
            
            
            648
            
            
            
            176
            
            
            
            472
            
            
            
            6,199
            
            
            
            42
            
            WilliamsonVillages
                of New Sweden
            
            
            534
            
            
            
            534
            
            
            
            -
            
            
            
            10,716
            
            
            
            -
            
            TravisElm
                Grove
            
            
            91
            
            
            
            30
            
            
            
            61
            
            
            
            3,011
            
            
            
            30
            
            HaysOther
                land projects
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            55Sub-total
                land
            
            
            1,944
            
            
            
            1,411
            
            
            
            533
            
            
            
            $32,463
            
            
            
            738Homebuilding
                inventory
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,844
            
            
            
            -Total
                inventory
            
            
            1,944
            
            
            
            1,411
            
            
            
            533
            
            
            
            $ 35,307
            
            
            
            738




At
      December 31, 2006, it had approximately 2,430 acres of land under contract,
      including 749 acres under development and construction in Hays County, Travis
      County and Williamson County, Texas.




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





Property
            
            Approximate
                Acreage
            
            
            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
            
            
            
            697
            
            
            
            n/a
            
            
            
            $11,251
            
            
            
            697
            
            HaysHighway
                183
            
            
            15
            
            
            
            15
            
            
            
            n/a
            
            
            
            377
            
            
            
            -
            
            TravisGeorgetown
                Village
            
            
            665
            
            
            
            52
            
            
            
            613
            
            
            
            5,342
            
            
            
            52
            
            WilliamsonVillages
                of New Sweden
            
            
            534
            
            
            
            534
            
            
            
            -
            
            
            
            10,120
            
            
            
            -
            
            TravisElm
                Grove
            
            
            91
            
            
            
            30
            
            
            
            61
            
            
            
            1,755
            
            
            
            -
            
            HaysBohls
                Ranch
            
            
            428
            
            
            
            -
            
            
            
            428
            
            
            
            1,011
            
            
            
            -
            
            TravisOther
                land projects
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            52Sub-total
                land
            
            
            2,430
            
            
            
            1,328
            
            
            
            1,102
            
            
            
            29,908
            
            
            
            749Homebuilding
                inventory
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            848
            
            
            
            -Total
                inventory
            
            
            2,430
            
            
            
            1,328
            
            
            
            1,102
            
            
            
            $30,756
            
            
            
            749




The
      land
      costs in the above projects are Rutherford West, approximately $9.3 million,
      Highway 183 is all land, Georgetown Village, approximately $1.5 million, and
      Elm
      Grove, approximately $1.3 million. All other land and project costs for listed
      properties are associated with earnest money deposits, feasibility and
      development.




**(5)          
      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 three
      months ended September 30, 2007 and 2006:




Three
                Months Ended September 30, 2007WFC
            
            
            VIEs
            
            
            
            Consolidating
                entries
            
            
            ConsolidatedRevenues
            
            
            1,119,405
            
            
            
            177,900
            
            (a)
            
            
            (4,218
            )
            
            
            1,293,087ExpensesCost
                of Revenues
            
            
            913,506
            
            
            
            163,306
            
            (a)
            
            
            (4,218
            )
            
            
            1,072,595General,
                administrative, sales and marketing
            
            
            1,366,546
            
            
            
            25,723
            
            
            
            
            11,130
            
            
            
            1,403,399Costs
                and expenses before interest
            
            
            2,280,052
            
            
            
            189,029
            
            
            
            
            6,912
            
            
            
            2,475,994Operating
                income/(loss)
            
            
            (1,160,648
            )
            
            
            (11,129
            )
            
            
            
            (11,130
            )
            
            
            (1,182,907
            )


9
 Table
          of Content




Three
                Months Ended September 30, 2006WFC
            
            
            VIEs
            
            
            
            Consolidating
                entries
            
            
            ConsolidatedRevenues
            
            
            695,592
            
            
            
            1,482,933
            
            (a)
            
            
            (281,781
            )
            
            
            1,896,744ExpensesCost
                of revenues
            
            
            429,157
            
            
            
            1,374,427
            
            (a)
            
            
            (274,293
            )
            
            
            1,529,291General,
                administrative, sales and marketing
            
            
            1,293,284
            
            
            
            82,698
            
            (b)
            
            
            74,474
            
            
            
            1,450,456Costs
                and expenses before interest
            
            
            1,722,441
            
            
            
            1,457,125
            
            
            
            
            (199,819
            )
            
            
            2,979,747Operating
                income/(loss)
            
            
            (1,026,849
            )
            
            
            25,808
            
            
            
            
            (81,962
            )
            
            
            (1,083,003
            )




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


(b)
            Gain
                of VIE.




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




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, 2006WFC
            
            
            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
            )





(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 thousand increase in
      stockholders equity.




**(6)          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.


10
 Table
          of Content




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




**2007**
            
            
            **2006****Homebuilding
                and Related Services**
            
            
            **Land
                Sales**
            
            
            **Total**
            
            
            **Homebuildingand
                Related Services**
            
            
            **Land
                Sales**
            
            
            **Total**Revenues
                from external customers
            
            $
            177,901
            
            
            
            1,115,186
            
            
            
            1,293,087
            
            
            
            1,482,933
            
            
            
            413,811
            
            
            
            1,896,744Costs
                and expenses:Cost
                of revenues
            
            
            159,088
            
            
            
            913,506
            
            
            
            1,072,595
            
            
            
            1,255,959
            
            
            
            273,332
            
            
            
            1,529,291Selling,
                general and administrative
            
            
            835,007
            
            
            
            568,392
            
            
            
            1,403,399
            
            
            
            993,067
            
            
            
            457,389
            
            
            
            1,450,456Loss
                on fair value of derivatives
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            460,000
            
            
            
            460,000Interest
                & other income
            
            
            (77,680
            )
            
            
            (63,556
            )
            
            
            (141,235
            )
            
            
            (143,741
            )
            
            
            89,328
            
            
            
            (54,413
            )Interest
                expense
            
            
            1,136,652
            
            
            
            (292,345
            )
            
            
            844,307
            
            
            
            286,237
            
            
            
            284,193
            
            
            
            570,430Total
                costs and expenses
            
            
            2,053,068
            
            
            
            1,125,997
            
            
            
            3,179,066
            
            
            
            2,391,522
            
            
            
            1,564,242
            
            
            
            3,955,764Loss
                before taxes
            
            $
            (1,875,167
            )
            
            
            (10,811
            )
            
            
            (1,885,979
            )
            
            
            (908,589
            )
            
            
            (1,150,431
            )
            
            
            (2,059,020
            )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
            
            
            
            -
            
            
            
            -
            
            
            
            -




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




**2007**
            
            
            **2006****Homebuilding
                and Related Services**
            
            
            **Land
                Sales**
            
            
            **Total**
            
            
            **Homebuilding
                and Related Services**
            
            
            **Land
                Sales**
            
            
            **Total**Revenues
                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






**(7)           
      Related Party Transactions**




In
      March
      of 2005, some of the trusts belonging to the Wilson family purchased a note
      for
      approximately $280 thousand 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 the normal course of a land closing.






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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 thousand 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 thousand 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, until January 31,
      2006, was 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
      thousand 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 thousand 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.




**(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
      thousand 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




*Severance
      Agreement*




During
      2006, the Company entered into an employment agreement with Daniel Allen, then
      Chief Financial Officer. The employment agreement provided for payment of
      severance benefits where the termination is without cause. The severance
      benefits included payment of one year of base salary; continue to provide health
      benefits for a period of twelve months, and acceleration of vesting of stock
      options issued to him. Mr. Allen involuntarily resigned from the Company
      effective November 9, 2006. Effective November 9, 2006 the Company has
      continued to pay for Mr. Allen’s salary and benefits. At September 30, 2007
      and December 31, 2006, the Company had approximately $40 thousand and
      approximately $180 thousand, respectively, accrued for this
      contingency.


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*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.




*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 that Lisa Tucker, the Company’s Chief Accounting Officer,
      will assume the role of the Company’s principal financial officer beginning in
      fiscal 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.




*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 thousand as compensation
      expense and credited equity for two months of services recorded at fair market
      value.




**(9)           
        **Indebtedness****




*Revolving
      Credit Facility*




On
      June
      29, 2007, the Company entered into a three-year $55 million revolving credit
      facility with a syndicate of banks led by RBC Centura Bank, as administrative
      agent. 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. WFC currently has approximately $2.7 million in
      borrowings outstanding under the credit facility. The credit facility may be
      increased to $100 million with the consent of the lenders
      thereunder.




The
      credit facility allows the Company 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 WFC and the agent.


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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 terms and covenants limiting the Company’s
      ability to take certain actions, including terms that limit the Company’s
      ability to place liens on property, pay dividends and other restrictions and
      payments.  The covenants are as follows:




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





·
            prohibit
                the Company’s ratio of debt to equity 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
                the Company 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;


·
            a
                condition where 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.  The Company is in compliance with its covenants as
      of  September 30, 2007.




The
      above
      description of the material terms of the credit facility is not a complete
      statement of the parties’ rights and obligations with respect to such
      transactions. The above statements are qualified in their entirety by reference
      to the Borrowing Base Loan Agreement executed in connection with the credit
      facility, a copy of which is filed with the Company's quarterly report for
      the
      second quarter of 2007.




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




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 Table
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In
                Thousands
            
            
            
            
            Rate
            
            Maturity
                Date
            
            2007
            
            
            2006Line
                of Credit, $3 million, development
            
            
            a
            
            
            Prime
                +.50
            %
            Mar-1-08
            
            $
            472
            
            
            
            2,250Line
                of Credit, $15.5 million, purchase and development
            
            
            b
            
            
            Prime
                +2.00
            %
            Oct-1-08
            
            
            -
            
            
            
            3,587Notes
                payable, land
            
            
            c
            
            
            12.50
            %
            Mar-1-09
            
            
            4,700
            
            
            
            n/aNotes
                payable, seller financed
            
            
            d
            
            
            7.0
            %
            Oct.
                2009/10
            
            
            2,475
            
            
            
            2,474Line
                of Credit, $5 million / $10 million, land and construction
            
            
            e
            
            
            Prime
                +.50
            %
            Feb-6-08
            
            
            -
            
            
            
            600Notes
                payable, land
            
            
            f
            
            
            Prime
                +.75
            %
            Jun-1-08
            
            
            -
            
            
            
            6,200Notes
                payable, land
            
            
            g
            
            
            12.50
            %
            Mar-1-09
            
            
            7,300
            
            
            
            n/aNotes
                payable, development
            
            
            h
            
            
            Prime
                +.50%
            
            Feb-1-10
            
            
            1,502
            
            
            
            n/aNotes
                payable, family trust
            
            
            i
            
            
            8.0
            %
            Apr-1-08
            
            
            -
            
            
            
            280Notes
                payable, land, due
            
            
            j
            
            
            Prime
                +.75
            %
            Dec-1-09
            
            
            -
            
            
            
            792Notes
                payable, land and development
            
            
            k
            
            
            Prime
                +3.00
            %
            Feb-1-09
            
            
            1,440
            
            
            
            n/aLine
                of Credit,$55 million, land and development and
                construction
            
            
            l
            
            
            Prime
                + .25
            %
            June-29-08
            
            
            2,749
            
            
            
            n/a2005
                $10 million, Subordinated convertible notes, net of discount of $481
                thousand and $4,288 thousand, respectively
            
            
            
            
            
            5.0
            %
            Dec-1-12
            
            
            9,541
            
            
            
            5,7122006
                $6.50 / $6.75 million, Subordinated convertible notes, net of discount
                of
                $2,903 and $4,066 thousand respectively
            
            
            
            
            
            5.0
            %
            Sep-1-13
            
            
            3,714
            
            
            
            2,684Total
            
            
            
            $
            33,893
            
            
            
            24,579




(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
      thousand, 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 thousand 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 (c).




(c)              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.




(d)              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 thousand 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 thousand in 2009 and $500 thousand in 2010, payable on
      October 12. The notes can be prepaid at anytime without penalty and are
      secured by the real estate purchased.


15
 Table
          of Content


(e)              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)              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 thousand per quarter beginning June 12, 2007. Principal
      reductions from sales of the real estate are credited towards the $800 thousand
      per quarter requirement. This loan was refinanced in February 2007
      (g).




(g)              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.




(h)              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%.




(i)              In
      October 2003, a predecessor entity of the Company exchanged notes payable of
      approximately $280 thousand 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.




(j)              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.




(k)              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.




(l)              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.




*Subordinated
      Convertible Debt*




The
      Company accounts for all derivative financial instruments in accordance with
      SFAS No. 133. 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.




16
 Table
          of
          Content


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.


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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 has recorded the fair value of
      these warrants 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 thousand 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 and at December 31,
      2006*




2007
            
            
            2006Notional
                balance
            
            $
            10,000,000
            
            
            
            10,000,000Unamortized
                discount
            
            
            (459,400
            )
            
            
            (4,287,857
            )Subordinated
                convertible debt balance, net of unamortized discount
            
            $
            9,540,600
            
            
            
            5,712,143





*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 thousand 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 thousand.   In addition, during the
      quarter ended June 30, 2007, one of our convertible debt holders who is also
      the
      seller of Bohl’s 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 Bohl’s tract the convertible debt would be
      used for repayment of the promissory note.  As the Company did not
      exercise the option to purchase Bohl’s 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.


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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 thousand, including placement agent
      fees of approximately $70 thousand 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.




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




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




**(10)         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.


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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
            
            
            497Travel
                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 years; and a 60% volatility factor at $0.56 per
                warrant.
            
            
            280Total
                expenses
            
            $
            2,499




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






**(11)         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.




The
      Company had 765,000 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 $484 thousand and $349 thousand,
      respectively.




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 $3.25 to 1.65
      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 live of options ranging from 1 to 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, 2006
      and the nine months ended September, 2007 are as follows:


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Shares
            
            
            Range
                of Exercise Prices
            
            
            Weighted-Average
                Exercise PriceOptions
                outstanding, December 31, 2006
            
            
            925,000
            
            
            $
            2.00
                - $2.26
            
            
            $
            2.17Options
                granted
            
            
            1,370,000
            
            
            
            $1.65
                - $3.25
            
            
            $
            2.82Options
                exercised
            
            
            -
            
            
            
            -
            
            
            
            -Options
                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
                AverageExercise Price1,835,000
            
            
            
            6.76
            
            
            $
            2.24
            
            
            
            805,965
            
            
            
            5.62
            
            
            $
            2.54





At
      September 30, 2007, there was approximately $1.6 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.




**(12)         Purchase
      of Green Builders, Inc.**




On
      June
      19, 2007, the Company purchased Green Builders, Inc. for $65 thousand in cash
      and issued 80,000 shares of the Company’s common stock valued at $2.70 per share
      on the date of the transaction to the former shareholder of Green Builders,
      Inc.
      The total purchase price for the acquisition was approximately $281
      thousand.  In addition the Company spent approximately $24 thousand 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).




**(13)           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 $1.0 million due in October
      2011.


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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.


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





*The
      information presented in this section should be read in conjunction with our
      audited financial statements and related notes for the periods ended December
      31, 2006 and 2005 included in our Form 10-KSB, as well as the information
      contained in the financial statements, including the notes thereto, appearing
      in
      Part 1 of this report. This report contains forward-looking statements, within
      the meaning of Section 27A of the Securities Act of 1933 and Section 21E of
      the
      Securities Exchange Act of 1934, that involve risks and uncertainties. Our
      expectations with respect to future results of operations that may be embodied
      in oral and written forward-looking statements, including any forward looking
      statements that may be included in this report, are subject to risks and
      uncertainties that must be considered when evaluating the likelihood of our
      realization of such expectations. Our actual results could differ materially.
      The words “believe,” “expect,” “intend,” “plan,” “project,” “will” and similar
      phrases as they relate to us are intended to identify such 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 in the section entitled “Risk
      Factors” below.*





**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, Inc.  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.




We
      have
      derived revenue from the sale of real estate and residential lots, and from
      services provided to homebuilder clients. We exercise significant influence
      over, but hold no controlling interest in, homebuilder clients, but we may
      retain 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.  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.  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.




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We
      terminated our relationship 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 thousand increase to stockholders
      equity.




In
      September 2007, we changed our fiscal year-end from
      December 31 to September 30 and we will file our annual report on Form 10-KSB
      for the transition period from January 1, 2007 to September 30, 2007 with the
      Securities and Exchange Commission on or before December 31, 2007.




**Results
      of Operations**


**Three
                Months Ended September 30,**
            
            
            **Nine
                Months Ended September 30,****2007**
            
            
            **2006**
            
            
            **Delta**
            
            
            **%
                Delta**
            
            
            **2007**
            
            
            **2006**
            
            
            **Delta**
            
            
            **%
                Delta**Sales
            
            $
            1,293
            
            
            
            1,897
            
            
            
            (604
            )
            
            
            -32
            %
            
            
            4,444
            
            
            
            5,265
            
            
            
            (820
            )
            
            
            -16
            %Gross
                profit
            
            
            $220
            
            
            
            367
            
            
            
            (147
            )
            
            
            -40
            %
            
            
            (376
            )
            
            
            1,160
            
            
            
            (1,536
            )
            
            
            -132
            %Operating
                costs
            
            $
            1,396
            
            
            
            1,450
            
            
            
            47
            
            
            
            3
            %
            
            
            4,237
            
            
            
            4,010
            
            
            
            (234
            )
            
            
            -6
            %Operating
                loss
            
            $
            (1,175
            )
            
            
            (1,083
            )
            
            
            (100
            )
            
            
            9
            %
            
            
            (4,613
            )
            
            
            (2,850
            )
            
            
            (1,770
            )
            
            
            62
            %Net
                loss
            
            $
            (1,874
            )
            
            
            (2,059
            )
            
            
            173
            
            
            
            -8
            %
            
            
            (6,544
            )
            
            
            (7,626
            )
            
            
            1,070
            
            
            
            -14
            %









***Homebuilding
      and Related Services Revenues***




*Background*
      - Homebuilding and related services consists of home sales and homebuilder
      services. Historically, 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 three months and nine months ended September 30, 2007, home sales
      declined approximately 88% and 69%, respectively, from the same periods in
      2006,
      primarily due to the reduced home sales from our VIEs.  Homebuilding
      services declined during the three months ended September 30, 2007 by
      approximately 88% as our one remaining homebuilder client depleted their
      inventory.  All homebuilding and related services for the three months
      and nine months ended September 30, 2007 were generated with one homebuilder
      client.  We terminated our relationship with our 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 thousand increase to stockholders
      equity.




In
      June
      2007 we acquired Green Builders, Inc. and have commenced our homebuilding
      activities under the name “Green Builders, Inc.”   Our strategy
      is to build homes that are environmental 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 thousand to $700 thousand.


**Land
        Sales**
  *Background*–
        Land sales revenue consists of revenues from the sale of 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 delivery of lots would be scheduled over several months to possible
        years, or we may use our developed lots for our own homebuilding
        operations.
  *Revenues*–
        Revenues from land sales increased approximately 169% and 192% for the three
        months and nine months ended September 30, 2007, respectively, from the same
        periods in 2006, primarily to the completion and sale of residential lots.
        Gross
        profit as a percentage of total land revenues declined 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
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  *Cost
        of Sales* - In May 2007 we did not exercise a land purchase option to
        purchase the Bohls tract of approximately 428 acres for approximately $7.2
        million.  Due to the current market conditions in the homebuilding
        industry, revenue projections for 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.  We commenced homebuilding under Green Builders, Inc.
        effective June 20, 2007
        and
        plan to develop lots and build environmentally responsive, resource efficient
        and culturally sensitive homes. We are in the process of developing standards
        for “green homebuilding” and plan to sell homes in central Texas, initially in
        the Austin, Texas area for prices ranging from $200 thousand to $700
        thousand.
  **Costs
        and Expenses**
  ***General
        and Administrative Expenses***
  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 three months ended September 30, 2007 and 2006, salaries, benefits, taxes
        and related employee expenses totaled approximately $356 thousand and $563
        thousand, respectively, and represented approximately 27% and 48%, respectively,
        of total general and administrative expenses for the periods. The decrease
        was
        primarily the result of a decrease in the provision for bonuses of approximately
        $189 thousand. 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.
  Legal,
          accounting, audit and transaction expense, which includes the expense of
          filing
          our registration statements and other SEC filings, totaled approximately
          $284
          thousand and $176 thousand, respectively, in the three months ended September
          30, 2007 and 2006. For the nine months ended September 30, 2007 and 2006,
          the
          expenses were approximately $666 thousand and $664 thousand, respectively,
          due
          primarily to expenses relating to the 2007 offering that were a reduction
          in net
          proceeds versus expenses in the same periods the prior year, offset by
          an
          increase in overall filings for the Company in 2007.
  Stock
          compensation expense for the three months ended September 30, 2007 and
          2006 was
          approximately $336 thousand and $147 thousand, respectively, and approximately
          $541 thousand and $350 thousand, respectively for the nine months ended
          September 30, 2007 and 2006.   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.
  Depreciation
          expense included in general and administrative expenses was approximately
          $24
          thousand and $44 thousand, respectively, for the nine months ended September
          30,
          2007 and 2006 and approximately $319 thousand and $157 thousand, respectively
          for the same periods for amortization of subordinated debt issuance
          costs
  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.  24
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***Interest
      Expense and Income***




Interest
      expense for the three months and nine months ended September 30, 2007 and 2006
      increased by approximately $273 thousand and $584 thousand, respectively, and
      was related to the increased subordinated convertible debt issued in September
      2006 and the increase in property 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 thousand
      consecutively.  We expect our interest expense to decrease on land and
      development due to our new line of credit. 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.




**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 us 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.  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.




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
      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 to
                equity 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;  25
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·
            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.




***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.




In
      May
      2007 we did not 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 has
                substantially declined. We concluded that we currently have adequate
                single-family lots for our needs, excluding the Bohls tract. Therefore,
                we
                are attempting to renegotiate the purchase price and other significant
                terms of the contract with the seller of 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.




·
            We
                commenced homebuilding under Green Builders, Inc. 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 thousand to $700
                thousand.




Due
      to
      market conditions stated above, weather related delays and longer than expected
      ramp-up of homebuilding operations our financial projections have
      changed.  We expect to incur significant losses for the first and
      second quarters of 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 2008.




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Land
        and
        homes under construction comprise the majority of the Company’s 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.


In
      October 2007 we amended our 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 $1.0 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**




Our
      accounting policies are more fully described in the notes to our consolidated
      financial statements.




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 capitalized interest 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.


27
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***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 to the actual
      amounts, it could have a material effect on the financial
      statements.




We
      have
      two properties that are in Municipal Utility Districts, or MUDs. We incur
      development costs for water, sewage lines and associated treatment plants and
      other development costs and fees for these properties. Under the agreement
      with
      the MUDs, we expect to be reimbursed partially for the above developments costs.
      The MUDs will issue bonds to repay us once there is enough assessed value on
      the
      property for the MUD taxes to repay the bonds. As homes are sold, the assessed
      value increases in the MUD. It can take several years before there is enough
      assessed value to recapture the costs. We estimate that we will recover
      approximately 50% to 70% of eligible costs. In some circumstances, the MUDs
      will
      pay for property set aside for the preservation of endangered species,
      greenbelts and similar uses. To the extent that the estimates are different
      to
      the actual amounts, it could have a material effect on the financial
      statements.




***Concentrations***




Our
      current activities are limited to 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.




***Risk
      Factors***




An
      investment in our common stock involves risks.  Any of the following
      risks, as well as other risks and uncertainties, could harm our business and
      financial results and cause the value of our securities to decline, which in
      turn could cause investors to lose all or part of their investment in
      us.  The risks below are not the only ones we
      face.  Additional risks not currently known to us, or that we
      currently deem immaterial, also may impair our business.







**Risks
      Related to Our Business**




**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.


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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.




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.




**We
      are seeking 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 $351 thousand 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.**




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.




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**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. 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. 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.




**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.




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




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-venturers’ 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.




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**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.




**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.




**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. 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. The requirements of these laws and the rules and
      regulations promulgated thereunder 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.




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,
      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 highly dependent on Clark N. Wilson, our Chief Executive
      Officer and the founder of WFC, to provide the necessary leadership to execute
      our growth plans. The loss of the services of any of our key employees, the
      inability to attract or retain qualified personnel in the future or delays
      in
      hiring required personnel, and in particular sales personnel, could impede
      our
      ability to expand our sales and marketing activities as desired, and negatively
      impact our profitability.




**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.




**We
      are vulnerable to concentration risks because we intend to focus on the
      residential rather than commercial market.**




We
      intend
      to focus 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.




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**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.




**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.




**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.




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**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 context, 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.




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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
        3.   **Controls
        and Procedures****




Our
      management, including our Chief Executive Officer and our Chief 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
      Quarterly Report on Form 10-QSB. 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.




**Changes
      in Internal Control Over Financial Reporting**





There
      were no changes in our internal controls over financial reporting that have
      materially affected, or are reasonably likely to materially affect, our internal
      controls over financial reporting during the three months ended September 30,
      2007.




The
      Company is required to be in compliance with Sarbanes Oxley Section 404
      certification requirements relating to internal controls for the year ending
      September 30, 2008.




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**PART
      II – OTHER INFORMATION**




**Item
                1.**
            **Legal
                Proceedings**None.**Item
                2.**
            **Unregistered
                Sales of Equity Securities and Use of Proceeds**None.**Item
                3.**
            **Defaults
                Upon Senior Securities**None.**Item
                4.**
            **Submission
                of Matters to a Vote of Security Holders**None.**Item
                5.**
            **Other
                Information**None.**Item
                6.**
            **Exhibits**




Exhibit
                No.
            Description3.1
            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
                3.6
                to the Registrant’s Registration Statement on Form SB-2 (File No.
                333-131486) and incorporated herein by reference)4.1
            Specimen
                certificate for shares of Common Stock of Registrant (filed as Exhibit
                4.1
                to Registrant’s Registration Statement on Form S-1 (File No. 333-140747)
                and incorporated herein by reference)10.1
            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)31.1
            Certification
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                200231.2
            Certification
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                200232
            Certification
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002  35
 
 Table of Content


**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.







**WILSON
                HOLDINGS, INC.**November 14,
                  2007
            /s/ Clark
                WilsonClark
              WilsonPresident
              and Chief Executive
              Officer







EXHIBIT
      INDEX


LIST
      OF
      EXHIBITS





Exhibit
                No.
            Description3.1
            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
                3.6
                to the Registrant’s Registration Statement on Form SB-2 (File No.
                333-131486) and incorporated herein by reference)4.1
            Specimen
                certificate for shares of Common Stock of Registrant (filed as Exhibit
                4.1
                to Registrant’s Registration Statement on Form S-1 (File No. 333-140747)
                and incorporated herein by reference)10.1
            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)31.1
            Certification
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                200231.2
            Certification
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                200232
            Certification
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002