UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

_____________ FORM 10-QSB (MARK ONE) ý

QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT  OF 1934FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2006o

TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Forthe transition period from  toCommission file number: 000-23819 WILSON HOLDINGS, INC. (Name of
small business issuer in its charter) Nevada

76-0547762(State or
other jurisdiction of 
Incorporation or organization)

(I.R.S Employer
Identification No.)2700 Via Fortuna, Suite 400, 
Austin, TX78746(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 Sections 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 August
14, 2006 the registrant had 17,706,625 shares of common stock, par value $0.001, outstanding. Transitional Small Business Issuer Disclosure Format:Yes oNo
ý 
   Index




ITEMPART I  FINANCIAL INFORMATIONItem 1.
 Financial Statements
 1Item 2.
 Managements Discussion and Analysis or Plan of Operation
 15Item 3.
 Controls and Procedures
 19PART II  OTHER INFORMATIONItem 1.
 Legal Proceedings
 20Item 2.
 Unregistered Sales of Equity Securities and Use of Proceeds
 20Item 3.
 Defaults Upon Senior Securities
 20Item 4.
 Submission of Matters to a Vote of Security Holders
 20Item 5.
 Other Information
 20Item 6.
 Exhibits
 20i


Table of Contents


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.
The forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties set forth under Risk Factors in
our Form 10-KSB and any other periodic reports filed with the Securities and Exchange Commission. Accordingly, to the extent that this Quarterly Report contains forward-looking statements regarding the financial condition, operating results, business prospects
or any other aspect of the Company, please be advised that the Companys actual financial condition, operating results and business performance may differ materially from that projected
or estimated by the Company in forward-looking statements.
Whenever we refer in this report to "Wilson Holdings," "the Company," "we," "us," or "our," we mean Wilson Holdings, Inc., a Nevada corporation, and, unless the
context indicates otherwise, its predecessors and subsidiaries, including its wholly-owned subsidiary, Wilson Family Communities, Inc., a Delaware corporation.
ii


Table of Contents

Item 1. Financial Statements
WILSON HOLDINGS, INC. 
 Consolidated Balance Sheets 
 As of June 30, 2006 and December 31, 2005


June 30,
 
 December 31,2006
 
 2005(unaudited)ASSETSCurrent assets:Cash and cash equivalents
 $
 4,591,970
 
 10,019,816InventoryLand
 
 10,359,124
 
 12,299,872Construction in progress
 
 9,390,517
 
 655,145Total inventory
 
 19,749,641
 
 12,955,017Other assets
 
 78,301
 
 48,056Total current assets
 
 24,419,912
 
 23,022,889Non-current assets:Debt issuance costs, net of amortization
 
 1,374,085
 
 1,420,669Equipment and software, net of accumulated depreciation andamortization
 
 200,691
 
 70,875Total assets
 
 25,994,688
 
 24,514,433LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable and accrued liabilities
 
 812,132
 
 260,137Notes payable
 
 5,000
 
 6,683,879Lines of credit
 
 3,874,866
 
 253,945Accrued expenses
 
 565,999
 
 135,168Accrued interest
 
 91,777
 
 237,592Deferred revenue
 
 11,223
 
 11,223Notes payable, related party
 
 -
 
 279,800Total current liabilities
 
 5,360,997
 
 7,861,744Long term liabilities:Notes payable
 
 6,200,000
 
 424,700Notes payable, related party
 
 279,800
 
 -Convertible debt, net of $4,645,179 and $5,002,500 discount,respectively
 
 5,354,821
 
 4,997,500Derivative liability, convertible note compound embedded derivative
 
 7,050,000
 
 4,500,000Derivative liability, contingent warrants issued to convertible debtholders
 
 1,057,500
 
 675,000Total long term liabilities
 
 19,942,121
 
 10,597,200Total liabilities
 
 25,303,118
 
 18,458,944STOCKHOLDERS' EQUITYCommon stock, $0.001 par value, 80,000,000 shares authorized,17,706,625 shares issued and outstanding at June 30, 2006 andDecember 31, 2005
 
 17,707
 
 17,707Additional paid in capital
 
 7,900,754
 
 7,697,868Retained deficit
 
 (7,226,891
 )
 (1,660,086
 )Total stockholders' equity
 
 691,570
 
 6,055,489Total liabilities and stockholders' equity
 $
 25,994,688
 
 24,514,433See accompanying notes to the consolidated financial statements. 1


Table of Contents

WILSON HOLDINGS, INC.
 Consolidated Statements of Operations
  For the Three
Months and Six Months Ended March 31, 2006 and 2005

3 Months Ended June 30,
 
 6 Months Ended June 30,2006
 
 2005
 
 2006
 
 2005(unaudited)
 
 (unaudited)
 
 (unaudited)
 
 (unaudited)Revenues:Homebuilding and related services
 $
 2,284,972
 
 -
 
 2,701,972
 
 -Land sales
 
 50,000
 
 -
 
 666,000
 
 -Total revenues
 
 2,334,972
 
 -
 
 3,367,972
 
 -Cost of revenues:Homebuilding and related services
 
 1,892,654
 
 -
 
 2,224,444
 
 -Land sales
 
 23,859
 
 -
 
 351,155
 
 -Total cost of revenues
 
 1,916,513
 
 -
 
 2,575,599
 
 -Gross profit:Homebuilding and related services
 
 392,318
 
 -
 
 477,528
 
 -Land sales
 
 26,141
 
 -
 
 314,845
 
 -Total gross profit
 
 418,459
 
 -
 
 792,373
 
 -Costs and expenses:Corporate general and administrative
 
 1,211,489
 
 64,532
 
 2,201,715
 
 65,035Sales and marketing
 
 229,010
 
 7,172
 
 358,093
 
 7,172Total costs and expenses
 
 1,440,499
 
 71,704
 
 2,559,808
 
 72,207Operating loss
 
 (1,022,040
 )
 (71,704
 )
 (1,767,435
 )
 (72,207
 )Other income (expense):Loss on fair value of derivatives
 
 (2,587,500
 )
 -
 
 (2,932,500
 )
 -Interest income
 
 108,831
 
 7,846
 
 205,786
 
 7,874Interest expense
 
 (558,184
 )
 (16,313
 )
 (1,072,656
 )
 (16,742
 )Total other expense
 
 (3,036,853
 )
 (8,467
 )
 (3,799,370
 )
 (8,868
 )Net loss
 $
 (4,058,893
 )
 (80,171
 )
 (5,566,805
 )
 (81,075
 )Basic and diluted loss per share
 $
 (0.23
 )
 (0.02
 )
 (0.31
 )
 (0.05
 )Basic and diluted weighted averagecommon shares outstanding
 
 17,706,625
 
 3,333,333
 
 17,706,625
 
 1,666,667See accompanying notes to the consolidated financial statements.
2


Table of Contents

WILSON HOLDINGS, INC. Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2006 and 2005

June 30,
 
 June 30,2006
 
 2005(unaudited)
 
 (unaudited)Cash flows from operating activities:Net loss
 $
 (5,566,805
 )
 (81,075
 )Non cash adjustments:Loss on fair value of derivative liability
 
 2,932,500
 
 -Amortization of convertible debt discount
 
 357,321
 
 -Amortization of debt issuance costs
 
 105,099
 
 -Compensation expense
 
 202,886
 
 -Adjustments to reconcile net loss to net cash used in operatingactivities:Depreciation and amortization
 
 31,474
 
 135Increase in total inventory
 
 (6,794,624
 )
 (9,283
 )Increase in other assets
 
 (30,245
 )
 (14,519
 )Increase in accounts payable
 
 551,995
 
 26,380Increase in
	accrued expenses
 
 430,831
 
 19,533Decrease in interest payable
 
 (145,815
 )
 -Net cash used in operating activities
 
 (7,925,383
 )
 (58,829
 )Cash flows from investing activities:Purchase of fixed assets
 
 (161,289
 )
 (6,247
 )Net cash used in investing activities
 
 (161,289
 )
 (6,247
 )Cash flows from financing activities:Advances from related parties, net
 
 -
 
 240,000Issuances (repayments) of notes payable, net
 
 (903,579
 )
 -Advances (repayments) on lines of credit
 
 3,620,921
 
 -Common stock sales
 
 -
 
 60,000Series A Preferred stock sales
 
 -
 
 4,400,000Cash paid for debt issuance costs
 
 (58,516
 )
 -Net cash provided by financing activities
 
 2,658,826
 
 4,700,000Net decrease in cash and cash equivalents
 
 (5,427,846
 )
 4,634,924Cash and cash equivalents at beginning of period
 
 10,019,816
 
 8,943Cash and cash equivalents at end of period
 $
 4,591,970
 
 4,643,867Cash paid for interest
 $
 817,211
 
 -Cash paid for income taxes
 $
 -
 
 -Supplemental disclosures of cash flow information:Notes payable issued for land
 $
 -
 
 6,890,988Preferred stock issued for land
 
 -
 
 2,404,788Land
 $
 -
 
 9,295,776Common stock exchanged for partnership interests
 $
 -
 
 18,286See accompanying notes to the consolidated financial statements.
3


Table of Contents


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

Wilson Holdings, Inc., (the Company) is a Nevada corporation formerly known as Cole Computer Corporation, a Nevada corporation.
Effective October 11, 2005 pursuant to an Agreement and Plan of Reorganization dated as of September 2, 2005 by and among Wilson Holdings, Inc., a Delaware corporation and a majority
of its shareholders, 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 Companys common stock is quoted on the
Over-the-Counter Bulletin Board under the symbol WSHD.OB.
The consolidated financial statements and the notes of the Company as of June
30, 2006 and December 31, 2005, and for the three months and six months ended
June 30, 2006 and 2005 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, 2005 audited financials statements
contained in the Company's  Form 10-KSB, filed March 31, 2006.  In the
opinion of management, all normal, recurring adjustments necessary for the fair
presentation of such financial information have been included.  The
preparation of financials 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 principals generally accepted in the United States of
America have been condensed or omitted.
The Company is focused on three principal activities: strategic land acquisition, land development and related services and services to homebuilders.

  Strategic Land Acquisition: The core business plan is to acquire land and land rights either through purchase or option agreements.
  Land Development and Related Services: In connection with the Companys land acquisition efforts, and based upon its strategic market analysis, it
develops residential real estate for homebuilding, sells residential lots, and sells land in various stages of development. It offers assistance and site-specific analysis
to land owners desiring to maximize land values. Such analysis can help owners design neighborhoods with pocket parks, natural space and varying lot sizes to attract a broader range of buyers; accelerating the absorption of the subdivision and thereby maximizing value. Its primary target group
for sales is regional and national homebuilders.
  Services to Homebuilders: The Company delivers residential lots and customized services to local builders who have strong technical skills but
who may lack the financial resources to compete effectively against national companies. In addition to selling residential lots to the builders, the Company
offers a package of services designed to help them effectively manage their business. These services include marketing, sales, accounting, bill payment, compliance reviews, financing, surety and management services. The Companys homebuilding services represent a complimentary strategy to accelerate the rate of sales
of its residential lot and land holdings. The Company is currently evaluating whether to continue providing these services.(2)
        Summary of Significant Accounting Policies(a)
        Consolidation of Variable Interest EntitiesThe Company offers certain homebuilder clients surety for their interim construction loans and cash advances to facilitate sales of the Companys residential lots.
The Company may be considered the primary beneficiary as defined under FASB Interpretation No. 46(R) (FIN 46(R)), Consolidation of Variable Interest Entities (VIE), and the Company
may have a significant, but less than controlling, interest in the entities. The Company accounts for each of these entities in accordance with FIN 46(R). Management uses its judgment when determining if the
Company is the primary beneficiary of, or has a controlling interest in, any of these entities. Factors considered in determining whether the Company has significant influence or has
control include risk and reward sharing, experience and financial condition of the other partners, voting rights, involvement in day-to-day capital and operating decisions and continuing
involvement.


(b)
        Stock-Based CompensationEffective January 1, 2006, the Company adopted the provisions of SFAS No. 123 (revised 2004), Share-Based Payment, (SFAS 123R) using the prospective-transition
method. Under this transition method, compensation expense recognized during the three months and six months ended June 30, 2006 included: (a) compensation expense for all share-based awards
granted prior to, but not yet vested as of December 31, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation
expense for all share-based awards granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. In accordance with the
modified-prospective-transition method, results for prior periods have not been restated. The adoption of SFAS 123R resulted in a charge to net losses of approximately
$82 thousand and $203 thousand for the three months and the six months ended June 30, 2006, respectively. Before January 1, 2006, the Company accounted for its stock options using
the intrinsic value method under "Accounting Principles Board Opinion No. 25."
4
Table of Contents


WILSON HOLDINGS, INC.Notes to Unaudited Consolidated Financial Statements(c)
        Loss per Common  Share (continued)Incremental common shares attributable to the exercise of outstanding options
and warrants totaling 1,660,000 and 1,570,000 as ofMarch 31 and June 30, 2006,
respectively, were excluded from the computation of diluted loss per share
because the effect would be antidilutive.
(3)
			Inventory

The Companys inventory includes real estate held for sale or development and land, , which includes real estate under development, development costs, prepaid development
costs, capitalized development costs on land under option but not yet owned, and earnest money on land purchase options. As of June 30, 2006, it had approximately 1,314 acres
of land under contract, plus approximately 735 acres owned with 720 acres under development in Hays County, Travis County and Williamson County, Texas. Development costs capitalized on land
under option totaled $673 thousand at June 30, 2006, all of which is non-refundable if the Company does not exercise the option and purchase the land. Earnest money deposits
for land options included in inventory totaled approximately $933 thousand at June 30, 2006, all of which is non-refundable.


(4)
        Consolidation of Variable Interest EntitiesWe exercise significant influence over, but hold no controlling interest in our homebuilder clients. We bear the majority of the rewards and risk of loss. At June 30,
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) (Note 2 (a)) that we have a significant, but less than controlling, interest in the entities. The results of these clients have been consolidated into our financial statements.
Below is a summary of the effect of the consolidation of these entities for the six months ended June 30, 2006:
Six Months Ended June 30, 2006ConsolidatingWFC
 
 VIEs
 
 entries
 
 ConsolidatedRevenues
 1,191,987
 
 2,713,972
 (a)
 (537,987
 )
 3,367,972Expenses:Cost of Revenues
 685,672
 
 2,427,914
 (a)
 (537,987
 )
 2,575,599General, administrative, sales and marketing
 2,241,615
 
 204,956
 (b)
 113,237
 
 2,559,808Costs and expenses before interest
 2,927,287
 
 2,632,870
 
 (424,750
 )
 5,135,407Operating income/(loss)
 (1,735,300
 )
 81,102
 
 (113,237
 )
 (1,767,435
 )(a) Eliminates WFC revenues in VIE expenses, eliminates VIE expenses in WFC.
(b) Loss of VIEs.
Below is a summary of the effect of the consolidation of these entities for the three months ended June 30, 2006:
Three Months Ended June 30, 2006ConsolidatingWFC
 
 VIEs
 
 entries
 
 ConsolidatedRevenues
 394,025
 
 2,296,972
 (a)
 (356,025
 )
 2,334,972Expenses:Cost of revenues
 212,864
 
 2,059,674
 (a)
 (356,025
 )
 1,916,513General, administrative, sales and marketing
 1,233,466
 
 132,615
 (b)
 74,418
 
 1,440,499Costs and expenses before interest
 1,446,330
 
 2,192,289
 
 (135,579
 )
 3,357,012Operating income/(loss)
 (1,052,305
 )
 104,683
 
 (74,418
 )
 (1,022,040
 )(a) Eliminates WFC revenues in VIE expenses, eliminates VIE expenses in WFC.
(b) Loss of VIEs.


(5)
        Operating and Reporting SegmentsThe 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, does not build or sell homes but is required to
consolidate its homebuilder services clients per FIN (46), (Note 4). The Company identifies the clients it consolidates as VIEs. Land sales consists 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.
5


Table of Contents


 WILSON HOLDINGS, INC.Notes to Unaudited Consolidated Financial Statements(5)
        Operating and Reporting Segments (continued)The following table presents segment operating results before taxes for the six months ended June 30, 2006:
Homebuilding and
Related Services
 
 Land Sales
 
 TotalRevenues from external customers
 $
 2,701,972
 
 666,000
 
 3,367,972Costs and expenses:Cost of revenues
 
 2,224,444
 
 351,155
 
 2,575,599Selling, general and administrative
 
 1,241,525
 
 560,918
 
 1,802,443Allocated corporate expenses
 
 416,551
 
 340,814
 
 757,365Loss of fair value of derivatives
 
 -
 
 2,932,500
 
 2,932,500Interest revenue
 
 (10
 )
 (205,776
 )
 (205,786
 )Interest expense
 
 364,479
 
 708,177
 
 1,072,656Total costs and expenses
 
 4,246,989
 
 4,687,788
 
 8,934,777Loss before taxes
 $
 (1,545,017
 )
 (4,021,788
 )
 (5,566,805
 )-Segment Assets
 $
 7,160,909
 
 18,833,779
 
 25,994,688Capital expenditures
 $
 -
 
 161,289
 
 161,289The following table presents segment operating results before taxes for the three months ended June 30, 2006:
Homebuilding and
Related Services
 
 Land Sales
 
 TotalRevenues from external customers
 $
 2,284,972
 
 50,000
 
 2,334,972Costs and expenses:Cost of revenues
 
 1,892,654
 
 23,859
 
 1,916,513Selling, general and administrative
 
 763,066
 
 346,525
 
 1,109,591Allocated corporate expenses
 
 181,999
 
 148,909
 
 330,908Loss of fair value of derivatives
 
 -
 
 2,587,500
 
 2,587,500Interest revenue
 
 (10
 )
 (108,821
 )
 (108,831
 )Interest expense
 
 248,028
 
 310,156
 
 558,184Total costs and expenses
 
 3,085,737
 
 3,308,128
 
 6,393,865Loss before taxes
 $
 (800,765
 )
 (3,258,128
 )
 (4,058,893
 )Segment Assets
 $
 7,160,909
 
 18,833,779
 
 25,994,688Capital expenditures
 $
 -
 
 10,170
 
 10,170(6)
        Related Party TransactionsIn 2004, Clark N. Wilson, the Company President and Chief Executive Officer, became the sole remaining partner of Athena Equity Partners-Hays, L.P., a Texas limited partnership. On May 31, 2005 Athena
merged with WFC and the remaining Athena assets and partnership interests were exchanged for 9,000,000 shares of WFC common stock.  In addition, at the time of the merger, trusts belonging to various
members of the Wilson family purchased 1,000,000 shares of WFC common stock for $60 thousand.
6


Table of Contents

WILSON HOLDINGS, INC.Notes to Unaudited Consolidated Financial Statements(6)
        Related Party Transactions (continued)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 for two years, changing the maturity date to
April 4, 2008. (Note 9)
In June 2005, Clark N. Wilson, President and CEO of the Company and another investor purchased 2,200,000 and 2,000,000 shares, respectively, of Series A Convertible Preferred Stock
from WFC for $1.00 per share. In December 2005, the other investor purchased $800 thousand of convertible debt. (Note 9)
In August 2005, WFC repaid $121 thousand that Mr. Wilson had
advanced to WFC before the merger with Athena for working capital. In October 2005, WFC repaid the remaining $140 thousand advanced by Mr. Wilson to WFC.
In 2005, WFC obtained a line of credit of $2 million that was personally guaranteed by Mr. Wilson. The personal guarantee was released during May 2006.
During the three months and six months ended June 30, 2006, Mr. Wilsons brother provided services to the Company for which he was paid approximately $5 thousand
and $20 thousand, respectively. These services were primarily related to the development of information systems for the Company. Management believes that these services were provided at fair market
value.
Real Property Purchase
SGL Development, Ltd. and SGL Investments, Ltd., (collectively, SGL) were owners of approximately 736 acres of undivided land in Hays County, Texas. Clark N. Wilson
directly and beneficially (through Steamboat Joint Venture) owned 13.59% (the Wilson Beneficial Interest) of the property and John O. Gorman indirectly owned 12.33% (the Gorman
Beneficial Interest) of the property. In June 2005, SGL distributed to Mr. Wilson and Mr. Gorman their beneficial ownership in the property which they sold to WFC in exchange for 1,260,826 and
1,143,963, respectively, of the 2,404,789 preferred shares issued by WFC in the transaction. SGL then sold the remaining property, approximately 74.08%, to WFC in exchange for notes payable of
approximately $6.9 million. The Company believes that WFC purchased the property at fair market value due to the price paid for the preferred stock paid by the other parties involved in the
transaction. The notes payable issued had principal and interest due at maturity on June 30, 2006, with interest at the prime rate as reported in the Wall Street Journal adjusted for changes, (Prime Rate)
for the first six months, Prime Rate plus 2.00% for the second six months and Prime Rate plus 2.25% with an exercise of an extension period of 90 days on the notes if the notes are not
in default. The interest rate on the notes increased to 9.75% as of March 31, 2006.  The notes are secured by the entire property acquired. There is a provision for partial releases of the land,
lots, and tracts, with assignments ranging from 100% to 140% of the par value per acre as a condition of the releases.
As of June 2006, the Company had repaid approximately $700 thousand in principal through the sales of acreage lots and during June 2006, the Company refinanced the loan
balance of $6.2 million with a financial institution (Note 9).
Issuance of Convertible Debt
As part of the convertible debt issuance discussed in Note 9, an existing common stock investor purchased $800 thousand of the $10 million of convertible
debt that was issued.


(7)
        Liquidity and Capital ResourcesLiquidity
The Company had approximately $4.6 million in cash and cash equivalents at June 30, 2006. It plans to commit several million dollars in cash to exercise option rights
to purchase land, develop land and guarantee certain payments regarding the development of the optioned land over the next year. The Company has secured lines of credit totaling approximately
$9.7 million. It had approximately $3.9 million drawn against these lines of credit, which will be repaid as finished lots and completed homes are sold. At June 30, 2006, the Company owed
approximately $223 thousand on a $2 million line of credit which was subsequently reduced to a zero balance in July 2006. Approximately $1.2 million of the notes payable relate
to VIEs that had drawn on lines of credit, guaranteed by the Company, to build homes, that will be repaid with as the completed homes are sold. The Company currently does not expect to
experience losses from these guarantees.
7


Table of Contents

WILSON HOLDINGS, INC.Notes to Unaudited Consolidated Financial Statements(7)
        Liquidity and Capital Resources (continued)Liquidity (continued)
The Company anticipates investing approximately $8 million for the purchase of land, installment payments, options fees and development costs over the next six
months and approximately $23 million for purchase of land, installment payments, options fees and development costs over the next twelve months. This includes the development of
land including the installation of water and wastewater infrastructure, streets and common areas. The Company intends to and expects to purchase or obtain options to purchase
additional acreage for development and additional finished lots for sale. The Company is actively seeking additional debt financing and intends to raise additional equity, possibly using
joint venture financing as well as cash generated from lot and land sales, to finance these activities.
The Companys growth will require substantial amounts of cash for earnest money deposits, land purchases, development costs, interest payments and to provide
financing or surety services to its homebuilder clients. Until it begins to sell an adequate number of lots and services 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 equity, and believes it can continue to do so in the future,
through a combination of conventional and convertible debt, joint venture financing, sales of selected lot positions, sales of land and lot options, and raising
additional equity. The Companys current short term financing is indexed to the prime rate, which has increased over the past few months and could increase substantially in the future.
An increase in interest rates could have a material adverse effect on the Companys operations by increasing expenses and cash outlays, decreasing profitability or increasing
losses, depleting cash and thereby making it difficult to meet the its cash obligations, and make it unlikely that the Company could meet the borrowing criteria of future lenders.
Land comprises the majority of the Companys assets, which could suffer devaluation if the housing and real estate markets suffer 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 its cash. A significant downturn
could also make it more difficult for the Company to liquidate assets to raise cash and pay off debts, which could have a material adverse effect upon the Company.
In the normal course of business, the Company enters into various land purchase option agreements that require earnest money deposits. In order for the
Company to start or continue the development process on optioned land, it may incur development costs it purchases the land. At June 30, 2006, the Company had capitalized development
costs of $673 thousand, all of which is non-refundable if the Company does not exercise the option and purchase the land. Currently it has approximately $933 thousand in earnest
money and deposits outstanding of which the entire $933 thousand would be forfeited and expensed if the Company were to cancel the agreements.
On December 19, 2005, the Company issued $10 million in aggregate principal amount of 5% Convertible Debt due December 1, 2012, with interest payments due June 1 and December 1 beginning in 2006
until converted. These interest payments will be paid from cash and total approximately $500 thousand per year.
Capital Resources
During June 2006, the Company refinanced $6.2 million of notes. 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 and required principal reductions of $800 thousand per quarter beginning 12 months from the
date of closing. Principal reductions from sales of real estate are credited towards the $800 thousand per quarter requirement.
The Company anticipates purchasing and committing to various
agreements to purchase land that could have performance clauses requiring several million dollars in cash and borrowings. The majority of its expenditures in the past have been for inventory,
consisting of land, land development and land options totaling almost $20 million as of June 30, 2006. To secure additional inventory, it will be required to put up earnest
money deposits, make cash down payments, acquire acreage tracts and pay for certain land development activities costing several million dollars.
The Company also provides financing services to its homebuilder clients, acting as surety on their interim construction loans or by providing interim
construction financing for their homebuilding activities. The Company may also provide working capital loans to its homebuilder clients. The Company plans to raise additional
equity, combined with its current equity and convertible debt, to obtain additional interim construction, and development financing. The Company believes that it can finance 50% to 80% of the
cost of the land and development costs for acquired properties.
8


Table of Contents

WILSON HOLDINGS, INC.Notes to Unaudited Consolidated Financial Statements(7)
        Liquidity and Capital Resources (continued)Capital Resources (continued)
To address the Companys cash needs, it raised $10 million of subordinated convertible debt in December 2005 due December 1, 2012, at 5% per annum with semi-annual interest payments
due May and December, beginning in May 2006. In September 2005, it obtained a $2 million line of credit for interim construction financing, of which it owed approximately $223 thousand at
June 30, 2006. In March 2006, the Company obtained an additional construction loan of approximately $3.0 million, which will be repaid during the year following completion,
through lot sales to builders. The Company must make cumulative principal reductions in the aggregate amount of approximately $494 thousand every three months in the calendar months
beginning at the end of the first calendar month in which the completion date occurs which was during July 2006.
The Company anticipates that it will be able to obtain additional financing through the sale of stock or other debt or equity instruments to finance its growth.
The Company also may participate in joint ventures to develop and secure additional land holdings, which would decrease the need for cash, versus purchasing the property outright, but could
pose other risks such as the financial condition of the joint venture partner, which would be disclosed upon reaching definitive agreements.
During June 2006, the Company refinanced $6.2
million of notes. 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 and required principal reductions of $800 thousand per quarter beginning 12 months from the date of closing. Principal reductions from sales of real estate
are credited towards the $800 thousand per quarter requirement.


(8)
        Commitments and ContingenciesOptions 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. At June 30, 2006, the Company had capitalized development costs of $673 thousand, all of which is non-refundable if the Company does not
exercise the option and purchase the underlying land.
Non-Compete
Clark Wilson, the Companys executive officer, served as the President and Chief Executive Officer of Clark Wilson Homes, Inc., a subsidiary of Capital Pacific Holdings,
from 1992 to 2002. Pursuant to an agreement executed in connection with the sale of Clark Wilson Homes to J.M. Peters Company in 1994, Mr. Wilson agreed not to engage in the businesses
of acquisition, ownership, development, construction or sale of dwelling units in certain portions of the United States in which we plan to do business, including the Central Texas
region, as well as in any other county in the United States in which J.M. Peters Company conducts business.
The stated term of the covenant not to compete is five years from the date his employment terminated, for certain enumerated counties in Texas, including the counties in and
around Austin, Dallas, Houston and San Antonio, Texas, and for three years for certain other counties in the United States, beginning on the date Mr. Wilsons employment with Capital
Pacific terminated, which occurred in 2002. The covenant not to compete relates to the business of building homes and not the purchase and sale of real estate as contemplated by us. In the
Companys opinion, its current activities do not violate the terms of the covenant and we do not intend to engage in homebuilding activities until the covenant terminates in June
of 2007. The Companys consolidation of its homebuilding clients required under certain reporting requirements, specifically FIN 46(R) should not be construed as a legal merger of the
entities. If J. M. Peters determines that these activities do violate the covenant, and if that determination results in a claim, the Company will likely incur material legal costs as a result.
9


Table of Contents

WILSON HOLDINGS, INC.Notes to Unaudited Consolidated Financial Statements(8)
        Commitments and Contingencies
   (continued)Non-Compete (continued)
The Company is not aware of any material pending legal proceedings, or other litigation incidental to our business, which would have a material adverse affect, to which
the Company or any of its subsidiaries is a party or of which any of their property is the subject.
Office Lease
The Company entered into a sublease agreement with a related party for 4,000 square feet of office space. The sublease term is nineteen months beginning July 1, 2005 at approximately
$6 thousand per month and may be cancelled by either party with 60 days written notice. The Lease provides for expansion space with 30 days written notice.
Loan Guarantees
The Company is the guarantor of a $5 million master construction line of credit that matures on January 11, 2007, for 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. At June 30, 2006, approximately
$1.2 million had been drawn against the line of credit which was the balance owed.


(9)
        IndebtednessIn 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 Hays 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 note until April 4, 2008. All other terms remained the same.
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 at December 31, 2005. The Company reduced the principal balance through sales of acreage tracts and to approximately $6.2
million and during June 2006, it refinanced the notes 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 and required principal reductions of $800 thousand per quarter beginning 12 months from the date of closing, June 2007.
Principal reductions from sales of the real estate are credited towards the $800 thousand per quarter requirement.
Lines of Credit
In September 2005, the Company secured a $2 million, one year, line of credit master construction loan that provides for draws and repayments for construction
and lots. Interest is payable monthly and each draw must be repaid within one year. At December 31, the interest rate on borrowings was 7.25% per annum. Loans made on specific lots and
construction is collateralized by such property and construction. Mr. Wilson personally guaranteed the Loan. The Company had drawn approximately $254 thousand against the loan at
December 31, 2005 which was the balance owed. During May 2006, the lending institution released Mr. Wilsons personal guarantee.
In March 2006, the Company secured, from a different lending institution, a $3.0 million development loan, maturing on March 30, 2007, at prime plus 0.50% with a minimum
floor of 7.00%, and interest payable monthly. The loan is secured by the 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. At June 30, 2006, the Company had drawn approximately $2.45 million against the line of credit which was the balance owed.
10


Table of Contents

WILSON HOLDINGS, INC.Notes to Unaudited Consolidated Financial Statements(9)
        Indebtedness(continued)Convertible Debt
On December 19, 2005, the Company issued $10 million in aggregate principal amount of 5% Convertible Debt due December 1, 2012 to certain purchasers. The following are the key
features of the Convertible Debt: Interest accrues on the principal amount of the Convertible Debt at a rate of 5% per annum, the debt is payable semi-annually on June 1 and December 1 of each year, with
interest payments beginning on June 1, 2006. The 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 Convertible Debt after December 1, 2008 at a redemption price that incorporates a premium that ranges from 10% to 3%
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 Convertible Debt. Upon a change in control
event, each holder of the Convertible Debt may require us to repurchase some or all of its Convertible Debt at a purchase price equal to 100% of the principal amount of the 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 Convertible Debt only after all senior indebtedness has been paid.
The Convertible Debt has a Registration Rights Agreements (RRA), 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.
The Company also issued warrants to purchase an aggregate of 750,000 shares of common stock to the purchasers of the Convertible Debt, 562,500 of which were vested
on June 30, 2006. 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
February 3, 2006 if this 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 this registration statement shall not have been declared effective by the SEC by such date, which it wasnt; (iii) with respect to an additional 25%
of the Warrant Shares, on May 19, 2006 if this 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 this 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 Company received notice that the shelf registration 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.
Wilson Holdings accounts for all derivative financial instruments in accordance with SFAS No. 133. Derivative financial instruments are recorded as liabilities in the
consolidated balance sheet and measured at fair value. When available, quoted market prices are used in determining fair value. However, if quoted market prices are not available, the Company estimates fair value
using either quoted market prices of financial instruments with similar characteristics or other
valuation techniques. These derivative liabilities will be marked-to-market each quarter with the change in fair value recorded in the income statement.
11


Table of Contents


WILSON HOLDINGS, INC.Notes to Unaudited Consolidated Financial Statements(9)
        Indebtedness(continued)Convertible Debt (continued)
The Convertible Note is a hybrid instrument which contains both freestanding derivative financial instruments and more than one embedded derivative feature which would individually warrant
separate accounting as derivative instruments under SFAS 133. The freestanding derivative financial instruments are the Penalty Warrants, which were initially valued individually and totaled approximately $653 thousand. The
various embedded derivative features have been bundled together as a single, compound embedded derivative instrument that has been 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 Note of approximately $4.4 million. The unamortized discount will be 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
of $1.60, using a Black-Scholes valuation model, 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.
The unamortized discount is being amortized to interest expense over the 7-year life of the notes using the straight-line method.
The Company also incurred closing costs of $635 thousand which included placement agent fees of $300 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 to be amortized over the 7-year life of the notes using the effective interest rate 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.
Using a Black-Scholes model, the fair value of the Derivative Liability with Single Compound Embedded Derivatives within Convertible Note was computed at approximately $4.4
million as of December 31, 2005, using substantially the same assumptions as stated above. The fair value of the additional embedded derivative instruments was immaterial at December 31, 2005. The value of this
single, compound embedded derivative instrument 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) to the notional amount of the Convertible Note.
Convertible Note at June 30, 2006 and at December 31, 2005December 31,June 30, 2006
 
 2005Notional balance
 $
 10,000,000
 
 10,000,000Unamortized discount
 
 4,645,179
 
 5,002,500Convertible debt balance, net of unamortized discount
 $
 5,354,521
 
 4,997,500 The above derivative liabilities were re-valued as of December 31, 2005 based on fair value of the Companys common stock of $1.64, using an independent valuation,
and substantially the same assumptions stated above. This resulted in a loss on fair value of derivative liabilities and an increase in the derivative liabilities by approximately $173 thousand.
At June 30, 2006, the derivative liabilities were re-valued based on the fair value of the Companys common stock of $2.26, using an independent valuation. These warrants
were valued 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.
The valuation resulted in a loss on the fair value of the derivative liabilities and an increase in the derivative liabilities by approximately $2.9 million for the six months
ended June 30, 2006.
12


Table of Contents


WILSON HOLDINGS, INC.Notes to Unaudited Consolidated Financial Statements

(9)
        Indebtedness(continued)Convertible Debt (continued)
The following is a summary of derivative liabilities
December 31,June 30, 2006
 
 2005Convertible note compound embedded derivatives
 $
 7,050,000
 
 4,500,000Warrants
 
 1,057,500
 
 675,000Total derivative liabilities
 $
 8,107,500
 
 5,175,000The Company reviews its valuation methods periodically and will institute a change to another appropriate method if it determines a different method provides a more
accurate fair value.
Notes Payable
In November of 2005, the Company
paid cash and issued a long-term note payable of approximately $425 thousand
with a maturity date of February 15, 2008 at an interest rate of 6.5% for the
purchase of approximately 31 acres of land. The terms of the note payable called
for one installment of approximately $213 thousand plus interest, payable on
February 15, 2007, and the balance of the principal and accrued interest due and
payable on February 15, 2008. The interest rate would increase to 12% on
matured, unpaid amounts. The note can be prepaid at anytime without penalty and
is secured by the real estate purchased. The Company repaid the note in March
2006.
During June 2006, the Company refinanced $6.2 million of notes. 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 and required principal reductions of $800 thousand per quarter beginning 12 months from the
date of closing. Principal reductions from sales of real estate are credited towards the $800 thousand per quarter requirement.


(10)
        Common StockThe Company is authorized to
issue 80,000,000 shares of common stock. Each common stockholder is entitled to
one vote per share of common stock owned.


(11)
        Common Stock Option / Stock Incentive PlanStock Option Plan
In August 2005, the Company adopted the Wilson Family Communities, Inc. 2005 Stock Option/Stock Issuance Plan, 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 was determined by the Board of Directors as of the grant date. This plan was assumed by Wilson Holdings, Inc. at the time of the merger of the Company and WFC. The fair value
of the options granted under the plan was determined by the Board of Directors (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 1,680,478 shares. Unless terminated at an earlier date by action of the Board of Directors, the Plan terminates
upon the earlier of (1) the expiration of the ten year period measured from the date the Plan is adopted by the Board or (2) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares.
13


Table of Contents

WILSON HOLDINGS, INC.Notes to Unaudited Consolidated Financial Statements(11)
        Common Stock Option / Stock Incentive Plan(continued)Stock Option Plan (continued)
The Company had 860,478 shares of common stock available for future grants under the Plan at June 30, 2006.
Compensation expense related to the Companys share-based awards during the three months and six months ended June 30, 2006 was approximately $121 thousand and $203 thousand,
respectively. There was no compensation expense for the three months or six months ended June 30, 2005, as no share based compensation plan was in place at the time.
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 Plan and are reflected in the disclosures below. None of the options issued to date were vested as of December 31, 2005. The Company issued options to purchase 850,000 shares
of common stock at a strike price of $2.00 per share during 2005. These options had a fair value of $1.45 per share at the grant date. The fair value of options issued in 2005 was
calculated at the date of grant using the Black-Scholes pricing model with the following weighted-average assumptions for the year ended December 31, 2005: risk free interest rate of 4.25%; dividend yield
of 0%; weighted-average expected life of options of 5 years; and a 60% volatility factor. Options issued during 2005 to employees had a fair value of $1.45 per share. There were no
options issued before the Plans inception in August 2005.
During the six months ended June 30, 2006, the Company issued options to purchase 210,000 shares of common stock at a strike price of $2.00 per share. The
Black-Scholes pricing model was used with the following assumptions for the year ended December 31, 2005: risk free interest rate of 4.25%; dividend yield of 0%; weighted-average expected life of
options of 5 years; and a 60% volatility factor. Management has estimated the fair market value of the grants to be $1.20 per share. Management estimated the volatility factor based on an average
of comparable companies. A summary of activity in common stock options for the six months ended June 30, 2006 and year ended December 31, 2005 are as follow:


Shares
        Range of

Exercise  Prices
        Weighted-Average  Exercise PriceOptions granted at plan inception
        850,000
        $2.00
        $2.00Options exercised
        -
        -
        -Options forfeited
        (70,000)
        $2.00
        $2.00Options outstanding, December 31, 2005
        780,000
        $2.00
        $2.00Options granted
        210,000
        $2.00
        $2.00Options exercised
        -
        -
        -Options forfeited
        (170,000)
        $2.00
        $2.00Options outstanding,
			June 30, 2006
        820,000
        $2.00
        $2.00Add: Available for issuance
        860,478Total available under plan
        1,680,478Thefollowingis a summary of options outstanding and exercisable at June 30, 2006:


Outstanding
        Vested and OutstandingNumber of

Shares 
Subject to
Options 
Outstanding
        Weighted

Average
Remaining Contractual
Life (in
years)
        Weighted
Average
Exercise 
Price
        Number of

Vested 
Shares
        Weighted

Average 
Remaining 
Contractual 
Life (in 
years)
        Weighted Average Exercise

Price820,000
        9.2
        $2.00
        100,000
        9.2
        $2.00


At June 30, 2006, there was approximately $998
thousand 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 4.5
years.


(12)
        Subsequent EventsOn August 1, 2006,theCompanys Form SB-2 was declared effective by the SEC for the shares underlying
the convertibledebtdiscussed in Note 9.
14


Table of Contents

Item 2. Managements Discussion and Analysis or Plan of Operations
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, 2005
and 2004 included in our Form 10-KSB, as well as the information contained in the financial statements, including the notes thereto, appearing elsewhere in this report. This discussion contains
forward-looking statements reflecting our current expectations that involve risks and uncertainties. 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 and elsewhere in this report.
Whenever we refer in this prospectus to "Wilson Holdings," "the Company," "we," "us," or "our," we mean Wilson Holdings, Inc., a Nevada corporation, and, unless
the context indicates otherwise, its predecessors and subsidiaries, including its wholly-owned subsidiary, Wilson Family Communities, Inc., a Delaware corporation.
Corporate InformationWilson Holdings is a holding company and was formerly known as Cole Computer Corporation. In connection with its acquisition of Wilson Family
Communities, Inc., or WFC, in October 2005, Cole Computer Corporation changed its name to Wilson Holdings, Inc. Wilson Holdings is the sole stockholder of
Wilson Family Communities, which is our sole operating company. Our common stock trades on the Over-the-Counter Bulletin Board under the symbol WSHD. Our business was
originally conducted, beginning in 2002, by Athena Equity Partners-Hays, L.P., a Texas limited partnership. In May 2005, Athena merged into WFC. Our principal executive offices are located at 2700 Via Fortuna, Suite
400, Austin, Texas 78746 and the telephone number of our offices is (512) 732-0932. Our website is www.wilsonfamilycommunities.com.
OverviewWilson Holdings merged with Wilson Family Communities (WFC) in October 2005. WFC was formed early in 2005 with the intention of focusing on acquiring and developing
residential land in the Central Texas region. In May 2005, WFC merged with a limited partnership that had engaged in various land acquisition and development services.
The core of our business plan is to secure land strategically based on our understanding of population growth patterns and infrastructure development. This
portion of the business will require the majority of our financial resources. In tandem with our land acquisition efforts, and based upon our strategic market analysis, we plan to
prepare raw real estate for homebuilding and sell raw and developed land.
To both increase and accelerate lot sales, we also intend to deliver residential lots and financial support to local homebuilders who have strong technical skills
but who may lack the personnel and financial resources to compete effectively against the national companies. We will earn revenue from the sale of real estate and residential lots, as well as
on services provided to clients. The payment we receive will typically be determined by the gross selling price of the builders finished homes as well as the specific services we provide to individual
homebuilders. We currently have signed agreements to provide these services to two homebuilder clients, although one client may not initiate any new projects. We are evaluating whether to
continue providing such services to homebuilders in the future. We exercise significant influence over, but hold no controlling interest in homebuilder clients but we may retain the majority
of the risk of loss and of the profits. At June 30, 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 we have a significant, but less than controlling, interest in the entities. The results of these clients have been
consolidated into our financial statements.
15


Table of Contents

Results of OperationsHomebuilding and Related Services RevenuesHomebuilding and related services consists of home sales and homebuilder services. All of the home sales are 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 are referred to as VIEs.
During the six months ended June 30, 2006,
home sales accounted for approximately 80% of revenues at a gross profit margin of approximately 18%. We expect the revenues from home sales to increase as more homes are started
and sold in the coming quarters by our client. However, we are evaluating whether to continue providing homebuilder services. One client is not starting any new homes and accounted for
approximately $1.8 million or 66% of the approximately $2.7 million of home sales. We do not expect the inactivity of this client to have a material affect in future periods.
If we discontinue offering the services, or our remaining client does not perform as expected, or if both occur, our revenues would decrease materially and could have a material
adverse affect upon our financial performance. Homebuilder services revenues are eliminated in the consolidation of our financial statements as cost of revenues to our VIEs. There were
no revenues during the six months ended June 30, 2005 as the Company had recently received funding and had limited operations.
During the three months ended June 30, 2006, home sales accounted for 98% of revenues with a gross profit of 18%. The majority of home sales generated during this
period reflect the increased client activity level. Approximately $2.3 million of the $2.7 million of homebuilding revenue was produced in the three months ended June 30, 2006. Our currently
inactive client accounted for 66% of the revenue for the six months ended June 30, 2006, it only accounted for $1.4 million of the revenue generated in the three months ended June 30, 2006.
We expect home sales to increase and margins to remain approximately the same, unless our homebuilding clients do not perform as expected.
Land SalesIt takes approximately 2 years to develop raw land into finished lots. During the six months and three months ended June 30, 2006, we were in the process of acquiring and
developing land and did not have any revenues or significant operations as the Company had just received funding and was in the process of ramping operations.
Land sales were approximately $666 thousand for the six months ended June 30, 2006, of which approximately $50 thousand was generated in the three months ended June 30, 2006.
Approximately $616 thousand of the revenue for the six months ended June 30, 2006 was from the sale of acreage tracts. The $50 thousand of revenue for the three months ended June 30,
2006 was from income on land options. Approximately $292 thousand of lots was sold to our VIEs for their homebuilding activities but was eliminated in
consolidation of the financial statements.
The Company has been developing and acquiring land for sale to homebuilders and expects to see a significant increase in its land sales as its VIEs expand their operations and the
Company offers more land for sale to national and regional homebuilders as well as local homebuilders. Developing finished lots from raw land takes approximately two years
and we expect sales of finished lots to increase in the coming quarters as lots we are currently developing are completed and sold. We plan to sell the majority of our lots to
national, regional and local homebuilders that may purchase anywhere from 5 to a 100 or more lots at a time. We also plan to sell lots under contract, whereby the purchaser
commits to buy a large number of lots, but actually takes possession and pays for the lots in blocks over a period of months up to five or more years. We expect lot
sales to vary significantly from quarter to quarter causing significant fluctuations in revenues and gross profit.
Costs and ExpensesGeneral and Administrative ExpensesGeneral and administrative expenses are composed primarily of salaries and related employee benefits and taxes, accounting and legal, and general office expenses and insurance. During the three
months and six months ended June 30, 2006, salaries, benefits and taxes totaled approximately $356 thousand and $735 thousand respectively and represented approximately
29% and 33% of total
general and administrative costs for the same periods. Legal, accounting, audit and transaction cost amortization, which includes the expenses of filing our shelf registration and other SEC
filings, totaled approximately $305 thousand and $488 thousand for the three months and six months ended June 30, 2006, respectively and represented approximately
25% and 22%, respectively, of
total general and administrative costs.. Fees and expenses, warranty expense, architecture fees, consulting services were $242 thousand and $422 for the three months and six months ended June 30, 2006,
respectively, and represented approximately 20% and 19% of total general and
administrative expenses, respectively. The remaining expenses were for general
overhead such as rent, office expenses and insurance. Depreciation expense
included in general and administrative was $19 thousand and approximately $31
thousand for the three months and six months ended June 30, 2006, respectively.
General and administrative expenses
16


Table of Contents

included from the consolidation of
our VIEs were less than 10% of the total general and administrative expenses for the three months and six months ended June 30, 2006 respectively. We expect total general and administrative expenses to
remain at approximately the same level for the next quarter.
Sales and marketing expenses include salaries and related taxes and benefits, marketing activities including website, brochures and catalogs, signage, billboards and market research. Sales and marketing
salaries and related expenses for the three months and six months ended June 30, 2006 were approximately $73 thousand and $131 thousand, respectively and represented approximately 32% and 37% of
total marketing costs for the respective periods. Expenses for advertising, brochures and catalogs, signage, public relations and other selling expenses for the three months and six months
ended June 30, 2006 was approximately $133 thousand and $201 thousand respectively and represented approximately 58% and 56% of total sales and marketing costs for the same periods. The remaining
expenses for the three months and six months ended June 30, 2006, were for other incidental items and services. The Approximately 15% of the sales and marketing expenses resulted from the
consolidation of the VIEs.
Operating expenses for the three months and six months ended June 30, 2005 were not comparable, as the Company had limited operations during the period.
Interest expense for the three months and six months ended June 30, 2006 of approximately $558 thousand and $1.1 million, respectively, relates directly to properties
purchased, convertible debt interest costs and amortization of the convertible debt discount. The convertible debt discount amortization was approximately $179 thousand and
$357 thousand respectively, for the three months and six months ended June 30, 2006. Interest on the convertible debt was $125 thousand and $250 thousand for the three months and six
months, respectively. Our interest expense will increase if interest rates increase, and as we continue borrowing to finance land acquisitions and land development.
We experienced a loss on the fair value of derivatives during the three months and six months ended June 30, 2006 of approximately $2.6 million and $2.9 million,
respectively, which is the increase in the fair value of the derivative liabilities related to the convertible notes and contingent warrants. This increase was primarily the result of the increase in value of
our common stock. We intend to finance a major portion of land purchases and expect interest expense to increase with borrowings in future periods.
Interest income of approximately $109 thousand and $206 thousand for the three months and six months ended June 30, 2006 was interest earned on the Companys
cash and cash equivalents.
Financial Condition and Capital ResourcesLiquidityWe had approximately $4.6 million in cash and cash equivalents at June 30, 2006. We plan to commit several million dollars in cash to exercise option rights to purchase
land, develop land and guarantee certain payments regarding the development of the optioned land over the next year. We have secured lines of credit totaling approximately $9.7 million.
Approximately $3.9 million was drawn against these lines of credit as of June 30, 2006, which will be repaid as finished lots and completed homes are sold. At June 30, 2006, We owed approximately
$223 thousand on a $2 million line of credit, which was subsequently reduced to a zero balance in July 2006. Approximately $1.2 million of the notes payable relate to VIEs that had
drawn on the lines of credit, guaranteed by the Company, to build homes that will be repaid as the completed homes are sold. The Company currently does not expect to experience losses
from these guarantees.
We anticipates investing approximately $8 million for the purchase of land, installment payments, options fees and development costs over the next six months and
approximately $23 million for purchase of land, installment payments, options fees and development costs over the next twelve months. This includes the development of land including the
installation of water and wastewater infrastructure, streets and common areas. We intend to and expect to purchase or obtain options to purchase additional acreage for development
and additional finished lots for sale. We are actively seeking additional debt financing and intend to raise additional equity, possibly using joint venture financing as well as cash generated from
lot and land sales, to finance these activities.
Our growth will require substantial amounts of cash for earnest money deposits, land purchases, development costs, 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 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 equity, and believes we can continue to do so in the future,
through a combination of conventional and
17


Table of Contents

convertible debt, joint venture financing, sales of selected lot positions, sales of land and lot options, and additional equity. Our current short term financing is indexed to the prime rate, which has increased over
the past few months and could increase substantially in the future. An increase in interest rates could have a material adverse effect on our operations by increasing expenses and cash outlays, decreasing
profitability or increasing losses, depleting cash and thereby making it difficult to meet the our cash obligations, and make it unlikely that we could meet the borrowing criteria of future
lenders.
Land comprises the majority of our assets, which could suffer devaluation if the housing and real estate markets suffer 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 use our cash. A significant downturn could also make it
more difficult for us to liquidate assets to raise cash and pay off debts, which could have a material adverse effect upon the Company.
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. At June 30, 2006, we had capitalized development costs of $673 thousand, all
of which is non-refundable if we do not exercise the option and purchase the land. Currently we have approximately $933 thousand in earnest money and deposits outstanding of which the
entire $933 thousand would be forfeited and expensed we were to cancel the agreements.
On December 19, 2005, we issued $10 million in aggregate principal amount of 5% Convertible Debt due December 1, 2012, with interest payments due June 1 and December 1 beginning in 2006 until
converted. These interest payments will be paid from cash and total approximately $500 thousand per year.
Capital ResourcesDuring June 2006, we refinanced $6.2 million of notes. 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 and required principal reductions of $800 thousand per quarter beginning 12 months from the date of
closing. Principal reductions from sales of real estate are credited towards the $800 thousand per quarter requirement.
We anticipate purchasing and committing to various agreements to purchase land that could have performance clauses requiring several million dollars in cash and borrowings.
The majority of our expenditures in the past have been for inventory, consisting of land, land development and land options totaling almost $20 million as of June 30, 2006.
To secure additional inventory, we will be required to put up earnest money deposits, make cash down payments, acquire acreage tracts and pay for certain land development activities costing several
million dollars.
We also provide financing services to our homebuilder clients, acting as surety on their interim construction loans or by providing interim construction
financing for their homebuilding activities. We may also provide working capital loans to our homebuilder clients. We plan to raise additional equity, combined with our current equity
and convertible debt, to obtain additional interim construction, and development financing. We believe that we can finance 50% to 80% of the cost of the land and development costs
for acquired properties.
To address our cash needs, we raised $10 million of subordinated convertible debt in December 2005 due December 1, 2012, at 5% per annum with semi-annual interest payments due May and
December, beginning in May 2006. In September 2005, we obtained a $2 million line of credit for interim construction financing, and we owed approximately $223 thousand at June 30, 2006. In March
2006, we obtained an additional construction loan of approximately $3.0 million, which will be repaid during the year following completion , through lot sales to
builders. We must make cumulative principal reductions in the aggregate amount of approximately $494 thousand every three months, beginning at the end of the first calendar month in which the
completion date occurs which was during July 2006.
We anticipate that we will be able to obtain additional financing through the sale of stock or other debt or equity instruments to finance our growth. We also
may participate in joint ventures to develop and secure additional land holdings, which would decrease the need for cash, versus purchasing the property outright, but could pose other risks
such as the financial condition of the joint venture partner, which would be disclosed upon reaching definitive agreements.
During June 2006, we refinanced $6.2 million of notes. 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 and required principal reductions of $800 thousand per quarter beginning 12 months from the date of
closing. Principal reductions from sales of real estate are credited towards the $800 thousand per quarter requirement.
18


Table of Contents

Off-Balance Sheet ArrangementsAs of June 30, 2006, we had no off-balance sheet arrangements.Contractual Obligations and CommitmentsWe are the guarantors of a $5 million master construction line of credit that matures on January 11, 2007, for one of our homebuilding clients. Under the
agreement, the Company as guarantor is subject to certain covenants. Among others, we must maintain a minimum tangible net worth of $2.5 million, the debt to equity ratio shall not
exceed 7.5 to 1 as of the end of any calendar quarter. Debt excludes our convertible debt, and equity is defined as tangible net worth. In addition, Mr. Wilson must remain active in the day-today business
management affairs of the Company. At June 30, 2006, approximately $1.2 million had been drawn against the line of credit which was the balance owed.
Critical Accounting Policies and EstimatesRevenue RecognitionRevenues from property sales are recognized in accordance with SFAS No. 66, Accounting for Sales of Real Estate when the risks and rewards of ownership are
transferred to the buyer and the consideration received. Revenues from land development services to builders are recognized when the properties associated with the services are sold and when the
risks and rewards of ownership are transferred to the buyer. For projects that are consolidated, all revenues will be categorized as revenues from property sales.
Consolidation of Variable Interest EntitiesThe Company offers certain homebuilder clients surety for their interim construction loans and cash advances to facilitate sales of the Companys residential lots.
The Company may be considered the primary beneficiary as defined under FASB Interpretation No. 46(R) (FIN 46(R)), Consolidation of Variable Interest Entities, (VIE) and the Company
may have a significant, but less than controlling, interest in the entities. The Company accounts for each of these entities in accordance with FIN 46(R). Management uses its judgment when determining if the
Company is the primary beneficiary of, or has a controlling interest in, any of these entities. Factors considered in determining whether the Company has significant influence or has
control include risk and reward sharing, experience and financial condition of the other partners, voting rights, involvement in day-to-day capital and operating decisions and continuing
involvement.
Stock-Based CompensationEffective January 1, 2006, the Company adopted the provisions of SFAS No. 123 (revised 2004), Share-Based Payment, (SFAS 123R) using the prospective-transition
method. Under this transition method, compensation expense recognized during the three months and six months ended June 30, 2006 included: (a) compensation expense for all share-based awards
granted prior to, but not yet vested as of December 31, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation
expense for all share-based awards granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. In accordance with the
modified-prospective-transition method, results for prior periods have not been restated. The adoption of SFAS 123R resulted in a charge to net losses of approximately
$121 thousand and $203 thousand for the three months and the six months ended June 30, 2006, respectively. Before January 1, 2006, the Company accounted for its stock options using
the intrinsic value method.
Item 3. Controls and ProceduresOur 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 June 30, 2006, the period covered by this Quarterly Report on
19


Table of Contents

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 June 30, 2006 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. 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 June 30, 2006.
PART II  OTHER INFORMATIONItem 1. Legal ProceedingsNone.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 HoldersNone.Item 5. Other InformationNone.Item 6. ExhibitsExhibit No.
 Description3.1
 Articles of Incorporation of Pandoras Golden Box (filed as Exhibit 3.1 to Registrants

Registration Statement on Form 10-SB (SEC File No. 000-23819) (the Form 10-SB) and

incorporated herein by reference)3.2
 Certificate of Amendment to Articles of Incorporation (filed as Exhibit 3.2 to the Form 10-SB)3.3
 Certificate of Amendment to Articles of Incorporation (filed as Exhibit 3.1 to Registrants Current

Report on Form 8-K dated September 29, 2005 and incorporated herein by reference)3.4
 Bylaws (filed as Exhibit 3.3 to the Form 10-SB and incorporated herein by reference.3.5
 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, not yet effective)4.1
 Specimen certificate for shares of Common Stock (filed as Exhibit 4.1 to Registrants Current

Report on Form 8-K dated October 11, 2005 and incorporated herein by reference)31.1
 Certification31.2
 Certification31.3
 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
20


Table of Contents


SIGNATURESIn 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.August 14, 2006
 /s/ Clark WilsonClark Wilson, President and Chief Executive OfficerAugust 14, 2006
 /s/ Dan AllenDan Allen, Executive Vice President, Chief Financial Officer
and Secretary21


Table of Contents

EXHIBIT INDEXLIST OF EXHIBITSExhibit No.
 Description3.1
 Articles of Incorporation of Pandoras Golden Box (filed as Exhibit 3.1 to Registrants

Registration Statement on Form 10-SB (SEC File No. 000-23819) (the Form 10-SB) and

incorporated herein by reference)3.2
 Certificate of Amendment to Articles of Incorporation (filed as Exhibit 3.2 to the Form 10-SB)3.3
 Certificate of Amendment to Articles of Incorporation (filed as Exhibit 3.1 to Registrants Current

Report on Form 8-K dated September 29, 2005 and incorporated herein by reference)3.4
 Bylaws (filed as Exhibit 3.3 to the Form 10-SB and incorporated herein by reference.3.5
 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, not yet effective)4.1
 Specimen certificate for shares of Common Stock (filed as Exhibit 4.1 to Registrants Current

Report on Form 8-K dated October 11, 2005 and incorporated herein by reference)31.1
 Certification31.2
 Certification31.3
 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 200222