UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to____

Commission file number: 000-23819

GREEN BUILDERS, INC.

(Exact name of registrant as specified in its charter)

Texas	76-0547762
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

8121 Bee Caves Road, Austin, Texas	78746
(Address of principal executive offices)	(Zip Code)

(512) 732-0932

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

N/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definitions of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large Accelerated Filer	¨	Accelerated Filer	¨
Non-Accelerated Filer	¨	Smaller Reporting Company	x

Indicate by check mark whether the registrant is a Shell Company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares of common stock, par value of $0.001 per share, outstanding at May 14, 2009 was 23,135,539.

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PART I – FINANCIAL INFORMATION			Page

	Item 1.	Financial Statements (Unaudited)	3
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 4T.	Controls and Procedures	24

PART II – OTHER INFORMATION

	Item 1.	Legal Proceedings	25
	Item 1A.	Risk Factors	25
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
	Item 3.	Defaults Upon Senior Securities	26
	Item 4.	Submission of Matters to a Vote of Security Holders	26
	Item 5.	Other Information	26
	Item 6.	Exhibits	27

		Signatures and Certifications	28

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for Green Builders, Inc. (“we,” “us,” or the “Company”) contains 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 conditions 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.

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.greenbuildersinc.com and on EDGAR at www.sec.gov.

Please see “Part I, Item 1—Risk Factors” of our annual report on Form 10-KSB for the year ended September 30, 2008, for further discussion regarding our exposure to risks. Additionally, 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 filing to “Green Builders,” “the Company,” “we,” “us,” or “our,” we mean Green Builders, Inc., a Texas corporation, and, unless the context indicates otherwise, its predecessors and subsidiaries, including its wholly owned subsidiaries, Wilson Family Communities, Inc., a Delaware corporation (“WFC”), and GB Operations, Inc., a Texas corporation (“GB Operations”). All references in this report to “$” or “dollars” are to United States of America currency. References to “fiscal 2008” means our fiscal year ended September 30, 2008 and references to “fiscal 2009” means our fiscal year ending September 30, 2009.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GREEN BUILDERS, INC.

Balance Sheets

As of March 31, 2009 and September 30, 2008

	March 31, 2009			September 30, 2008
	(Unaudited)
Cash and cash equivalents	$	1,391,819			3,711,180
Inventory
Land and land development		31,820,538			32,738,655
Homebuilding inventories		4,739,859			8,204,129
Total inventory		36,560,397			40,942,784
Other assets		89,885			478,420
Debt Issuance costs, net of amortization		909,700			1,028,206
Property and equipment, net of accumulated depreciation and amortization of $210,315 and $84,005, respectively		1,299,435			1,418,588
Total assets		40,251,236			47,579,178
LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable		617,574			1,690,763
Accrued real estate taxes payable		131,666			697,699
Accrued liabilities and expenses		533,393			421,385
Accrued interest		1,357,559			528,683
Deferred revenue		23,013			31,135
Lines of credit		11,860,002			15,779,310
Notes payable		14,474,620			14,474,620
Subordinated convertible debt, net of $2,407,698 and $2,686,872 discount, respectively		14,092,302			13,813,128
Total liabilities		43,090,129			47,436,723
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value, 100,000,000 shares authorized and 23,135,539 shares issued and outstanding, respectively		23,136			23,136
Additional paid in capital		28,036,212			27,949,903
Retained deficit		(30,898,241	)		(27,830,584	)
Total stockholders' deficit		(2,838,893	)		142,455
Commitments and contingencies		-			-
Total liabilities and stockholders' deficit	$	40,251,236			47,579,178

See accompanying notes to the financial statements.

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GREEN BUILDERS, INC.

Statements of Operations

For the Three and Six Months Ended March 31, 2009 and 2008

	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
	Three Months Ended March 31, 2009			Three Months Ended March 31, 2008			Six Months Ended March 31, 2009			Six Months Ended March 31, 2008
Revenues:
Homebuilding and related services	$	3,145,323			484,511			7,381,773			484,511
Land sales		47,000			657,036			393,146			1,765,348
Remodeling revenues		270			-			540			-
Total revenues		3,192,593			1,141,547			7,775,459			2,249,859

Cost of revenues:
Homebuilding and related services		2,674,477			405,558			6,436,732			405,558
Land sales		32,690			222,484			304,922			931,539
Remodeling		300			-			900			-
Inventory impairments and land option cost write-offs		11,000			-			22,900			-
Total cost of revenues		2,718,467			628,042			6,765,454			1,337,097

Total gross profit		474,126			513,505			1,010,005			912,762

Costs and expenses:
Corporate general and administration		532,810			949,243			1,351,099			2,629,957
Sales and marketing		361,453			501,250			855,367			756,549
Total costs and expenses		894,263			1,450,493			2,206,466			3,386,506
Operating loss		(420,137	)		(936,988	)		(1,196,461	)		(2,473,744	)
Other income (expense):
Interest and other income		12,987			65,763			110,830			158,958
Interest expense		(999,404	)		(774,437	)		(1,982,026	)		(1,688,014	)
Total other expense		(986,417	)		(708,674	)		(1,871,196	)		(1,529,056	)
Income before income taxes		(1,406,554	)		(1,645,662	)		(3,067,657	)		(4,002,800	)
Provision for income taxes		-			-			-			-
Net loss	$	(1,406,554	)		(1,645,662	)		(3,067,657	)		(4,002,800	)

Basic and diluted loss per share	$	(0.06	)		(0.07	)		(0.13	)		(0.17	)

Basic and diluted weighted average common shares outstanding		23,135,539			23,135,539			23,135,539			23,135,539

See accompanying notes to the financial statements.

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GREEN BUILDERS, INC.

Statements of Cash Flows

For the Six Months Ended March 31, 2009 and 2008

	Six Months Ended March 31, 2009			Six Months Ended March 31, 2008
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net loss	$	(3,067,657	)		(4,002,800	)
Non cash adjustments:
Amortization of convertible debt discount		279,174			279,174
Amortization of debt issuance costs		118,506			118,506
Stock-based compensation expense		78,809			675,635
Services provided without compensation by principal shareholders		7,500			60,000
Depreciation and amortization		173,635			192,722
Inventory impairments and land option cost write-offs		22,900			-
Adjustments to reconcile net loss to net cash used in operating activities:
Decrease (increase) in total inventory		4,359,487			(12,946,240	)
Decrease (increase) in other assets		341,210			(147,166	)
Increase (decrease) in accounts payable		(1,073,189	)		2,615,024
Increase (decrease) in real estate taxes payable		(566,033	)		19,306
Increase in accrued expenses		112,008			229,197
Decrease in deferred revenue		(8,122	)		(159,381	)
Increase (decrease) in accrued interest		828,876			(254,570	)
Net cash provided by (used in) operating activities		1,607,104			(13,320,593	)
Cash flows from investing activities:
Purchase of fixed assets		(7,157	)		(72,019	)
Net cash used in investing activities		(7,157	)		(72,019	)
Cash flows from financing activities:
Decrease in restricted cash		-			(117,603	)
Issuances of notes payable		-			3,962,730
Issuances and repayments of lines of credit, net		(3,919,308	)		9,200,459
Repayments of notes payable		-			(2,942,679	)
Net cash provided by (used in) financing activities		(3,919,308	)		10,102,907
Net decrease in cash and cash equivalents		(2,319,361	)		(3,289,705	)
Cash and cash equivalents at beginning of period		3,711,180			13,073,214
Cash and cash equivalents at end of period	$	1,391,819			9,783,509

Cash paid for interest	$	850,533			1,829,188

See accompanying notes to the financial statements.

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(1) Organization and Business Activity

Green Builders, Inc., (the “Company”), is a Texas corporation formerly known as Wilson Holdings, Inc. Effective April 4, 2008, Wilson Holdings, Inc, a Nevada corporation, completed its reincorporation to the State of Texas pursuant to the Plan of Conversion as ratified by the shareholders at the 2008 annual meeting of shareholders held on April 3, 2008. As part of the reincorporation, a new Certificate of Formation was adopted and Wilson Holdings, Inc.’s corporate name was changed to Green Builders, Inc., and the Certificate of Formation will now govern the rights of holders of the Company’s common stock. The Company has been using the name “Green Builders” in its regular business operations since June 2007 and will continue to do so. Effective April 8, 2008, the Company’s common stock began trading under the symbol “GBH” on the NYSE Amex LLC (formerly the American Stock Exchange) “the “Exchange”.

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, a majority of its stockholders, Wilson Family Communities, Inc., a Delaware corporation (“WFC”) and Wilson Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the Company, WFC and Wilson Acquisition Corp. merged and WFC became a wholly-owned subsidiary of the Company.

The financial statements are presented on a going concern basis. The Company has experienced significant losses and expects to continue to generate negative cash flows from operations. This raises substantial doubt about its ability to continue as a going concern. The Company’s ability to continue as a going concern will depend upon its ability to restructure its existing debt and obtain additional capital. Failure to restructure and obtain additional capital would result in a depletion of its available funds.

On January 23, 2009, the Company received notice from the staff of the Exchange that it was not considered to be in compliance with Section 1003(a)(i) of the Exchange’s Company Guide (the “Company Guide”) because it reported stockholders' equity of less than $2,000,000 and losses from continuing operations and net losses in two of its three most recent fiscal years; it was not considered to be in compliance with Section 1003(a)(ii) of the Company Guide because it reported stockholders’ equity of less than $4,000,000 and losses from continuing operations and net losses in three of its four most recent fiscal years; it was not considered to be in compliance with Section 1003(a)(iii) of the Company Guide because it reported stockholders’ equity of less than $6,000,000 and losses from continuing operations and net losses in its five most recent fiscal years; and it was not considered to be in compliance with Section 1003(a)(iv) of the Company Guide because it had sustained losses which were so substantial in relation to its overall operations or its existing financial resources, or its financial condition had become so impaired that it appeared questionable, in the opinion of the Exchange, as to whether the Company would be able to continue operations and/or meet its obligations as they mature.

On February 23, 2009 the Company submitted a plan of compliance to the Exchange. On April 24, 2009 the Exchange notified the Company that it had accepted its plan for regaining compliance with the continued listing requirements and granted the Company an extension until July 23, 2009 to become compliant with Section 1003 (a)(iv) and until July 23, 2010 to regain compliance with Section 1003(a)(i), Section 1003 (a)(ii), and Section 1003(a)(iii) of the continued listing standards. The Company will be subject to periodic review by the Exchange staff during the extension periods. If the Company fails to make progress consistent with the plan or to regain compliance with the continued listing standards by the end of the applicable extension period, the Company could be delisted from the Exchange.

(2) Liquidity and Capital Resources

Liquidity

The Company’s growth will require substantial amounts of cash for earnest money deposits, development costs, interest payments and homebuilding costs. Until the Company begins to sell an adequate number of lots and homes to cover its monthly operating expenses, sales and marketing, general and administrative costs will deplete cash. Due to current market conditions and slow home and land sales, the Company will need to obtain additional capital. In addition the Company is seeking additional capital to support future growth and current operations for the next twelve months.

On March 31, 2009 the Company had approximately $1.4 million in cash and cash equivalents. The Company completed a public offering of its common stock in May 2007, resulting in net proceeds of approximately $14 million.

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On June 29, 2007, Wilson Family Communities entered into a $55 million revolving credit facility (the “Credit Facility”) with a syndicate of banks led by RBC Bank (formerly RBC Centura Bank), as administrative agent pursuant to a Borrowing Base Loan Agreement (the “Loan Agreement”). International Bank of Commerce, Laredo, Texas (“IBC Bank”) and Franklin Bank, S.S.B. (“Franklin Bank”) are the other two banks that make up the syndicate of banks. The Credit Facility was reduced to $30 million in June 2008. The initial maturity date for the Credit Facility was June 29, 2008. The Company entered into an agreement to extend the maturity date to October 1, 2008. On October 1, 2008, the Credit Facility expired pursuant to its terms. Although the Company is currently out of compliance with certain covenants set forth in the Borrowing Base Agreement under the Loan Agreement, RBC and IBC have continued to make amounts available to WFC pursuant to the Credit Facility for loans made prior to the expiration of the facility. The Company received notification on November 7, 2008 that Franklin Bank was closed by the Texas Department of Savings and Mortgage Lending and the Federal Deposit Insurance Corporation (the “FDIC”) was named Receiver.

Green Builders has guaranteed the obligations of WFC under the Credit Facility. 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 by WFC and the agent. The Company’s obligations 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.

Outstanding borrowings under the Credit Facility bear interest at the prime rate plus 0.25%, with a floor of 5.5%. The Company is charged a letter of credit fee equal to 1.10% of each letter of credit issued under the Credit Facility. The Company may elect to prepay the Credit Facility at any time without premium or penalty. Quarterly principal reductions are required during the final 12 months of the term.

The Credit Facility contains customary covenants limiting the ability to take certain actions. At March 31, 2009 the Company was not in compliance with the tangible net worth, the ratio of debt to equity, working capital, number of completed speculative homes and number of land and developed lot loans covenants. On May 14, 2009 the Company entered into a Fourth Agreement to Modify Loan Documents (“Modification”). See Part I, Item 1, “Financial Statements, Footnote 12” and Part II, Item 5, “Other Information” for a description of the modification.

Capital Resources

The Company has raised approximately $16.5 million of subordinated convertible debt, and approximately $14 million in a public offering of its common stock completed in May 2007. The Company entered into a $55 million revolving Credit Facility that was reduced to $30 million in June 2008. The initial maturity date for the Credit Facility was June 29, 2008. The Company entered into an agreement to extend the maturity date to October 1, 2008. On October 1, 2008, the Credit Facility expired pursuant to its terms. Although WFC is currently out of compliance with certain covenants set forth in the Borrowing Base Agreement under the Loan Agreement, RBC and IBC have continued to make amounts available to WFC pursuant to the Loan Agreement for loans made prior to the expiration of the facility. We were notified on November 7, 2008 that Franklin Bank was closed by the Texas Department of Savings and Mortgage Lending and the FDIC was named receiver. Land and homes under construction comprise the majority of the Company’s assets. These assets have suffered devaluation due to the downturn in the housing and real estate market for central Texas. The Company is considering selling tracts of commercial and residential land in order to increase sales revenues and increase cash. The Company expects to incur losses in 2009. Due to current market conditions and slow home and land sales, it is anticipated that the Company will need additional capital to support operations for the next twelve months. In March 2009 the Company entered into an agreement with LNZCO to provide up to $2 million in financing for homebuilding construction. See Part I, Item 1, “Financial Statements, Footnote 7” for a description of the financing agreement.

(3) 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) Cash and Cash Equivalents

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

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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, homebuilding costs, interest and real estate taxes incurred during development and construction phases.

(d) Use of Estimates

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

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

(f) Municipal Utility and Water District Receivables

The Company owns one property located in a Municipal Utility District (MUD) and one property located in a Water Control and Improvement District (WCID) (collectively, the “Districts”). The Company incurs development costs for water, sewage lines and associated treatment plants and other development costs and fees for these properties. Under the agreement with the Districts, the Company expects to be reimbursed partially for the above developments costs. The Districts will issue bonds to repay the Company, once the property has sufficient assessed value for the District taxes to repay the bonds. As the project is completed and homes are sold within the Districts, the assessed value increases. It can take several years before the assessed value is sufficient to provide sufficient tax revenue for the Company to recapture its costs. The Company has estimated that it will recover approximately 50% to 100% of eligible costs spent through March 31, 2009. The Company has completed Phase 1 for the Rutherford West (as defined herein) project and has approximately $1.1 million of Water Control and Improvement District reimbursements included in inventory that it anticipates it will collect from bond issuances made by the district. When the reimbursements are received they will be recorded as reductions in the related asset’s balance. The Districts will pay for property set aside for the preservation of endangered species, greenbelts and similar uses. To the extent that the estimated reimbursements are dramatically different to the actual reimbursements, it could have a material effect on the Company’s financial statements.

(f) Subordinated Convertible Debt

The Company’s 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”.

(g) Debt Restructuring

The Company’s debt restructuring agreement has been accounted for in accordance with accordance with SFAS 15, “Accounting by Debtors and Creditors for Troubled Debt Restructuring”. The Company has treated the related warrants issued in accordance with “APB 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants”.

(h) Loss per Common Share

Earnings per share are accounted for in accordance with SFAS No. 128, “Earnings per Share,” which requires 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.

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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 March 31, 2009 and 2008 because the effect would be anti-dilutive. The stock options and warrants are convertible into common stock as summarized in the table below:

	March 31, 2009		March 31, 2008
Stock options		579,800		1,653,333
Common stock warrants		1,837,191		1,143,125
Subordinated convertible debt warrants		8,250,000		8,250,000
Total		10,666,991		11,046,458

(i) Adoption of New Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS 157 are effective for the Company beginning with its fiscal year 2009. The adoption of this standard did not have a material impact on the Company’s financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115.” The statement permits entities to choose to measure certain financial assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective in fiscal year 2009. The adoption of this standard did not have a material impact on the Company’s financial statements.

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

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

(4) Inventory

The Company’s land and land development inventory includes land costs, prepaid development costs, development costs, option money and earnest money on land purchase options. Homebuilding inventory represents model homes, speculative homes under construction and units sold and under construction. Earnest money deposits for land costs and development costs on land under option, not owned, totaled approximately $575,000 at March 31, 2009 and September 30, 2008 respectively, of which all $575,000 is non-refundable if the Company does not exercise the option and purchase the land.

Of the earnest money capitalized, $400,000 is for the remaining 30 acres under option in Elm Grove (as defined herein). The purchase price is approximately $1.3 million less the outstanding earnest money. The Company’s original land purchase contract called for a purchase of the remaining acreage in December 2008. During the three months ended March 31, 2009, the Company received an extension to purchase the land to October 2009 due to issues created by another developer that altered the recorded plat and the manner in which the land was represented to the Company. The Company is in negotiations with the seller and the developer regarding these issues and has hired a law firm to represent them. Pending the resolution of these issues the Company will maintain the earnest money on its balance sheet.

The remaining $175,000 of earnest money is for the Georgetown Village (as defined herein) option contract which requires the Company to takedown 30 acres of land each year from May 2009 through May 2017. The earnest money will be applied to the purchase price for the final takedown of land.

As of March 31, 2009 the Company owned approximately 1,209 acres of unfinished acreage. Below is a description of the property completed, owned or under contract by the Company as of March 31, 2009:

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Rutherford West – Rutherford West is a residential community located southwest of Austin, Texas. Rutherford West is planned as an “earth-friendly” acreage development and each lot includes a deed restricted conservation easement. The Company commenced the development of this project in October 2006 and has completed development on a total of 58 lots in Phase 1.

Georgetown Village – Georgetown Village is a mixed use master-planned development in Williamson County, located north of Austin, Texas in Georgetown. The Company purchased the land for this project pursuant to an option contract in August 2005. Under the option contract the Company is required to purchase a minimum of 30 acres during May of each year through 2017. The Company is required to purchase 30 acres in May 2009 for $13,500 per acre. The Company commenced the development of this project in January 2006. The Company completed development on a total of 120 lots in Section 6 and 100 lots in Section 9.

Villages of New Sweden – New Sweden is a master planned, mixed-use community which includes single family residential homes, commercial properties, an onsite school, an amenity center, a fire station, and an open green space in the Pflugerville, Texas school district. The Company purchased the land for this project in October 2005 with a combination of bank financing, seller financing and cash on hand.

Elm Grove – Elm Grove is a residential project located south of Austin, Texas in the city of Buda. The master plan includes single-family residential lots and open green space all within walking distance Elm Grove elementary school. The Company acquired the first phase of land for this project in December 2006. The Company has completed development on a total of 105 lots in Phase 1.

In January 2009, the Company entered into an agreement with Graham Mortgage Capital to modify the debt agreement for the $7.3 million loan for Rutherford West and the $4.7 million loan for New Sweden. As of March 31, 2009 the Company had $611,375 in accrued interest for the Rutherford West loan and $393,625 in accrued interest for the New Sweden loan. The agreement allows deferral of the $599,208 and $385,792 of accrued interest until December 31, 2009 or until the property is sold. Effective January 1, 2009, the Company began paying 2% interest on each loan (“Modified Interest Payment”) and is accruing an additional 12% interest on the loan. In exchange for entering into the agreement the Company will issue a warrant for the purchase of 1.5% of the issued and outstanding shares of the Company’s common stock at December 31, 2009. The warrants call for a $5.00 strike price and can be exercised from January 1, 2010 through December 31, 2012. The Company is required to make monthly payments for 1/12th of the estimated 2009 property taxes. The agreement calls for the Company to list the property and retain a broker to market the property. In the event the Company receives an offer for a price less than sufficient to satisfy the note payment, the Company must notify the lender who will at its sole discretion accept or reject the offer. In the event that the property is not sold by December 31, 2009, the Deed (in Lieu of Foreclosure) will be released, and provided that all Modified Interest Payments and real estate taxes for 2009 which are due on January 31, 2010 have been paid, the corporate guaranty will be returned, and the borrower and holder shall exchange mutual releases.

The Company performed an impairment analysis of its inventory at March 31, 2009. The Company recorded impairments of $11,000 for its speculative units during the quarter ended March 31, 2009.

Below is a summary of the property completed, owned or under contract by the Company at March 31, 2009. Land and land development inventory includes land costs, prepaid development costs, development costs, option money and earnest money on land purchase options. Homebuilding inventory represents model homes, speculative homes under construction, units sold and under construction, and capitalized indirect costs.

Property	Unsold Finished Lots/Homes		Owned Unfinished Acreage		Approximate Acreage Under Option		Land and Homebuilding Costs at March 31, 2009 (In thousands)		Texas County
Rutherford West		33		538		-	$	9,770	Hays
Georgetown Village		125		119		419		9,775	Williamson
Villages of New Sweden		-		522		-		7,479	Travis
Elm Grove		68		30		31		4,792	Hays
Other land		-		-		-		4
Sub-total land		226		1,209		450	$	31,820
Rutherford West		1		-		-		690	Hays
Georgetown Village		1		-		-		2,033	Williamson
Elm Grove		2		-		-		1,963	Hays
Other homebuilding		-		-		-		53
Sub-total homebuilding		4		-		-	$	4,740
Total inventory		230		1,209		450	$	36,560

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Below is a summary of the property completed, owned or under contract by the Company at September 30, 2008:

Property	Unsold Finished Lots/Homes		Owned Unfinished Acreage		Approximate Acreage Under Option		Land and Homebuilding Costs at March 31, 2009 (In thousands)		Texas County
Rutherford West		33		538		-	$	9,770	Hays
Georgetown Village		125		119		419		9,775	Williamson
Villages of New Sweden		-		522		-		7,479	Travis
Elm Grove		68		30		31		4,792	Hays
Other land		-		-		-		4
Sub-total land		226		1,209		450	$	31,820
Rutherford West		1		-		-		690	Hays
Georgetown Village		1		-		-		2,033	Williamson
Elm Grove		2		-		-		1,963	Hays
Other homebuilding		-		-		-		53
Sub-total homebuilding		4		-		-	$	4,740
Total inventory		230		1,209		450	$	36,560

(6) Operating and Reporting Segments

The Company has three reporting segments: (i) homebuilding and related services, (ii) land sales and (iii) remodeling 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. Land sales consist of land in various stages of development sold, including finished lots. Remodeling includes remodeling products and services. The Company charges identifiable direct expenses and interest to each segment and allocates corporate expenses and interest based on an estimate of each segment’s relative use of those expenses. Depreciation expense is included in selling, general and administrative and is immaterial.

The following table presents segment operating results before taxes for the three and six months ended March 31, 2009 and 2008:

	Three Months Ended March 31, 2009												Three Months Ended March 31, 2008
	Homebuilding Sales			Land Sales			Remodeling Sales			Total			Homebuilding Sales			Land Sales			Total
Revenues from external customers	$	3,145,323		$	47,000		$	270		$	3,192,593		$	484,511		$	657,036		$	1,141,547
Costs and expenses:		-			-			-
Cost of revenues		2,674,477			32,690			300			2,707,467			405,558			222,484			628,042
Impairment and write-offs		11,000			-			-			11,000
Selling, general and administrative		658,538			235,206			519			894,263			987,295			463,198			1,450,493
Interest & other income		(45,933	)		32,946			-			(12,987	)		(36,169	)		(29,594	)		(65,763	)
Interest expense		246,011			753,393			-			999,404			231,307			543,130			774,437
Total costs and expenses		3,544,093			1,054,235			819			4,599,147			1,587,990			1,199,218			2,787,209
Loss before taxes	$	(398,770	)	$	(1,007,235	)	$	(549	)	$	(1,406,554	)	$	(1,103,479	)	$	(542,182	)	$	(1,645,662	)
Segment Assets	$	7,279,875		$	32,971,361		$	-		$	40,251,236		$	16,016,768		$	44,272,702		$	60,289,470
Capital expenditures	$	7,157		$	-		$	-		$	7,157		$	23,368		$	2,596		$	25,964

	Six Months Ended March 31, 2009												Six Months Ended March 31, 2008
	Homebuilding Sales			Land Sales			Remodeling Sales			Total			Homebuilding Sales			Land Sales			Total
Revenues from external customers		7,381,773		$	393,146		$	540		$	7,775,459		$	484,511		$	1,765,348		$	2,249,859
Costs and expenses:
Cost of revenues		6,436,732			304,922			900			6,742,554			405,558			931,539			1,337,097
Impairment and write-offs		22,900			-			-			22,900
Selling, general and administrative		1,502,861			690,209			13,396			2,206,466			2,260,354			1,126,152			3,386,506
Interest & other income		(99,747	)		(11,083	)		-			(110,830	)		(87,427	)		(71,531	)		(158,958	)
Interest expense		504,073			1,477,953			-			1,982,026			421,517			1,266,497			1,688,014
Total costs and expenses		8,366,819			2,462,001			14,296			10,843,116			3,000,002			3,252,657			6,252,659
Loss before taxes		(985,046	)	$	(2,068,855	)	$	(13,756	)	$	(3,067,657	)	$	(2,515,491	)	$	(1,487,309	)	$	(4,002,800	)
Segment Assets		7,279,875		$	32,971,361		$	-		$	40,251,236		$	16,016,768		$	44,272,702		$	60,289,470
Capital expenditures		7,157		$	-		$	-		$	7,157		$	64,817		$	7,202		$	72,019

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(7) Related Party Transactions

Consulting Arrangement with Audrey Wilson

In February 2007 the Company entered into a consulting agreement with Audrey Wilson, the wife of Clark N. Wilson, its 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 six 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 the Company’s marketing strategy. Subsequent to the completion of the six month period in July 2007, Ms. Wilson continued to provide consulting services to the Company at no cost to the Company. In accordance with Staff Accounting Bulletin 5A, for the three months ended December 31, 2007, the Company recorded $30,000 as compensation expense and credited equity for services recorded at fair market value. On May 13, 2008, the Company entered into a new agreement with Ms. Wilson in which she was to be paid $10,000 per month for a maximum of 12 months. In an effort to reduce Company expenditures as of December 31, 2008, Ms. Wilson will no longer be paid for any consulting services she provides to the Company. The company paid Audrey Wilson $30,000 for services performed in the three months ended December 31, 2008. In accordance with Staff Accounting Bulletin 5A, for the three months ended March 31, 2009 the Company recorded $7,500 as compensation expense and credited equity for services recorded at fair market value.

Financing with LNZCO, LLC

On March 12, 2009 the Company entered into an agreement with LNZCO, LLC (“LNZCO”) that LNZCO will provide between $1 and $2 million in financing for the construction of single family residences. Each promissory note bears interest at a rate of prime plus 5.0%, has a one point origination fee, and matures in one year. The loan for each residence is 65% of the sales price of the associated improved property. The Company had borrowings of $242,000 from LNZCO at March 31, 2009.

LNZCO is wholly-owned by the Lindsey May Kathryn Wilson 1995 Trust, the beneficiaries of which are the minor children of Clark Wilson, the President and Chief Executive Officer of the Company. The Company’s Audit Committee reviewed the proposed terms of the Financing Agreements and compared them to the terms of other financing arrangements available to WFC at this time. The Audit Committee of the Company’s Board of Directors determined that LNZCO could provide the most favorable financing terms to WFC and approved the Financing Agreements as being fair as to the Company and WFC as of the time of authorization.

Vendor Payments

The Company has entered into contractual work agreements with Wilson Roofing. Wilson Roofing is owned by relatives of Clark N. Wilson, the Company’s President and Chief Executive Officer. The Company paid Wilson Roofing approximately $31,000 and $132,000 for the three and six months ended March 31, 2009. The company paid Wilson Roofing approximately $127,000 and $216,000 for the three and six months ended March 31, 2008. Management believes that services were provided at fair market value.

(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 a 36 month 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 $12,000 per month. In September 2008, the Company subleased out approximately 1,626 square feet of the property. The sublease requires monthly payments to the Company for $5,000 per month for 12 months. The Company entered into sale/leaseback agreements for three of its model homes. Two of the contracts were entered into in August 2008 and one in September 2008. The leasebacks of the three model homes require monthly payments of approximately $7,300 per month for 24 months. The Company also has office equipment leases and job trailer leases. The Company’s future minimum lease payments for future fiscal years are as follows:

		2009				2010			2011				2012				2013
Lease obligations		$	107,015			87,534				240				240				240

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Employment Agreements with Clark Wilson

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 of 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.

(9) Indebtedness

The following schedule lists the Company’s notes payable and lines of credit balances at March 31, 2009 and September 30, 2008:

In Thousands	Rate	Status	Maturity Date		3/31/2009	9/30/2008
Notes payable, land	12.50%	Modification Agreement entered January 2009	Dec-31-09	$	4,700	4,700
Notes payable, seller financed	7% & Prime + 2%	Default as of October 2008	Oct. 2010/11		2,475	2,475
Notes payable, land	12.50%	Modification Agreement entered January 2009	Dec-31-09		7,300	7,300
Line of Credit, $30 million facility, land, land development, and homebuilding	Prime+.25%	Expired as October 2008	Oct-1 08		11,618	15,779
Line of Credit, $2 million facility, homebuilding	Prime+5%	Entered March 2009			242	-
2005 $10 million, Subordinated convertible notes, net of discount of $350 thousand and $372 thousand, respectively	5.00%	Cross-default as of March 2008	Dec-1-12		9,672	9,628
2006 $6.50 million, Subordinated convertible notes, net of discount of $2,197 and $2,314 thousand respectively	5.00%	Cross-default as of March 2008	Sep-1-13		4,420	4,185
	Total			$	40,427	44,067

(a) In March 2007, the Company secured a $4.7 million term land loan to finance the New Sweden project which is approximately 522 acres of land in Travis County. The loan is secured by the underlying land and is guaranteed by the Company. In January 2009, the Company entered into an agreement with Graham Mortgage Capital to modify the debt agreement for the loan. Effective January 1, 2009, the Company began paying the Modified Interest Payment on each loan and will accrue an additional 12% interest on the loan. As of March 31, 2009 the Company had $393,625 in accrued interest for New Sweden. The agreement allows deferral of $385,792 of the accrued interest until December 31, 2009 or until the property is sold. In exchange for entering into the agreement the Company will issue a warrant for the purchase of 1.5% of the issued and outstanding shares of the Company’s common stock at December 31, 2009. The warrants will call for a $5.00 strike price and can be exercised from January 1, 2010 through December 31, 2012. The warrants were valued based on the fair value of the Company’s common stock on the issuance date of $0.23, using a Black-Scholes approach, risk free interest rate of 3.04%; dividend yield of 0%; weighted-average expected life of the warrants of 4 years; and a 60% volatility factor, resulting in an immaterial value. The Company is required to make monthly payments for 1/12th of the estimated 2009 property taxes. The agreement calls for the Company to list the property and retain a broker to market the property. In the event the Company receives an offer for a price less than sufficient to satisfy the note payment, the Company must notify the lender who will at its sole discretion accept or reject the offer. In the event that the property is not sold by December 31, 2009, the Deed (in Lieu of Foreclosure) will be released, and provided that all Modified Interest Payments and real estate taxes for 2009 which are due on January 31, 2010 have been paid, the corporate guaranty will be returned, and the borrower and holder shall exchange mutual releases.

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(b) As part of the purchase of 522 acres in Travis County described above, the Company entered into four notes payable, seller financed with a cumulative balance of approximately $2.5 million. Three of the notes payable with a cumulative balance of $1.9 million are at an interest rate of 7.0% and the fourth note payable issued for approximately $600,000 is at an interest rate of prime rate with an anniversary date of October 28 of each year plus 2.0%. The terms of the note were modified in October 2007 with the principal payments extended for one year. The revised 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. The Company has not made interest payments since October 2008 and is currently in default on the loan. The Company is currently in negotiations to dispose of the assets including but not limited to deed in lieu of foreclosure of these assets.

(c) In February 2007 the company secured a $7.3 million land loan to finance the Rutherford West project which is approximately 538 acres in Hays County. The loan is secured by the underlying land and is guaranteed by the Company. In January 2009, the Company entered into an agreement with Graham Mortgage Capital to modify the debt agreement for the loan for Rutherford West. Effective January 1, 2009, the Company began paying the modified interest payment on each loan and will accrue an additional 12% interest on the loan. As of March 31, 2009 the Company had $611,375 in accrued interest. The agreement allows deferral of $599,208 of the accrued interest until December 31, 2009 or until the property is sold. In exchange for entering into the agreement the Company will issue a warrant for the purchase of 1.5% of the issued and outstanding shares of the Company’s common stock at December 31, 2009. The warrants call for a $5.00 strike price and can be exercised from January 1, 2010 through December 31, 2012. The warrants were valued based on the fair value of the Company’s common stock on the issuance date of $0.23, using a Black-Scholes approach, risk free interest rate of 3.04%; dividend yield of 0%; weighted-average expected life of the warrants of 4 years; and a 60% volatility factor, resulting in an immaterial value. The Company is required to make monthly payments for 1/12th of the estimated 2009 property taxes. The agreement calls for the Company to list the property and retain a broker to market the property. In the event the Company receives an offer for a price less than sufficient to satisfy the note payment, the Company must notify the Lender who will at its sole discretion accept or reject the offer. In the event that the property is not sold by December 31, 2009, the Deed (in Lieu of Foreclosure) will be released, and provided that all Modified Interest Payments and real estate taxes for 2009 which are due on January 31, 2010 have been paid, the corporate guaranty will be returned, and the borrower and holder shall exchange mutual releases.

(d) In June 2007 the Company established the Credit Facility with a syndicate of banks in the amount of $55 million. In June 2008 the Credit Facility was reduced to $30 million. The Company has been out of compliance with certain covenants under the loan agreement since March 2008. On October 1, 2008 the line expired. The Company currently has approximately $11.6 million in borrowings for land and home construction. The Company is in negotiations with the banks to extend the payoff of the current borrowings. The Company has continued to receive draws for its homebuilding loans.

(e) In March 2009 the Company entered into an agreement with LNZCO pursuant to which LNZCO will provide between $1 and $2 million in financing for the construction of single family residences. Each promissory note issued pursuant to such agreement bears interest at a rate of prime plus 5.0%, has a one point origination fee, and matures in one year. The loan for each residence is 65% of the sales price of the associated improved property. The Company current has approximately $242,000 in borrowings for home constructions.

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. The subordinated convertible debt has a registration rights agreement whereby the Company filed a registration statement registering the resale of the underlying shares with the Securities Exchange Commission (the “SEC”). 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 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 subordinated convertible debt, 562,500 shares of which vested and remain exercisable and the remaining shares will never vest. The warrants were valued based on the fair value of the Company’s common stock on the issuance date of $1.60. The 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.

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Subordinated Convertible Notes Issued December 19, 2005 at March 31, 2009 and September 30, 2008:

	March 31, 2009			September 30, 2008
Notional balance	$	10,000,000			10,000,000
Unamortized discount		(328,144	)		(371,986	)
Subordinated convertible debt balance, net of unamortized discount	$	9,671,856			9,628,014

2006, $6.5MM, 5%, Subordinated Convertible Debt

On September 29, 2006, the Company raised capital of $6. 5 million in aggregate principal amount of 5% subordinated convertible debt due September 1, 2013 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 March 1 and September 1 of each year, with interest payments beginning on March 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.

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. The subordinated convertible debt has a registration rights agreement whereby the Company filed a registration statement registering the resale of the underlying shares with the SEC. 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, 379,688 shares of which vested and remain exercisable and the remaining shares will never vest. The warrants were valued based on the fair value of the Company’s common stock on the issuance date of $1.91.

Subordinated Convertible Notes Issued September 29, 2006 at March 31, 2009 and September 30, 2008:

	March 31, 2009			September 30, 2008
Notional balance	$	6,500,000			6,500,000
Unamortized discount		(2,079,554	)		(2,314,976	)
Subordinated convertible debt balance, net of unamortized discount	$	4,420,446			4,185,024

(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.

(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 (the “Board”) as of the grant date. This plan was assumed by Green Builders, Inc. The fair value of the options granted under the plan was determined by the Board prior to the merger of the Company and WFC.

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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, 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 1,890,000 shares of common stock available for future grants under the Stock Option Plan at March 31, 2009. Compensation expense related to the Company’s share-based awards for the three months ended March 31, 2009 and 2008 was approximately $36,000 and $37,000, respectively. These options are issued pursuant to the Stock Option Plan and are reflected in the disclosures below.

During the three months ended March 31, 2009, the Company issued options to purchase shares of common stock at an exercise prices at $0.19 per share. Using the Black-Scholes pricing model with the following weighted-average assumptions: interest rate of 2.92%; dividend yields of 0%; weighted average expected life of options of 5 years; and a 60% volatility factor, management estimated the fair market value of the grants to be $0.10 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 three months ended March 31, 2009:

	Share Roll Forward			Ranges Of Exercise Prices		Weighted-Average Exercise Price
Balance September 30, 2008		1,474,083		$	0.80 - $3.25	$	2.52
Granted		25,000		$	0.23	$	0.23
Forfeited		(409,083	)	$	0.44 - $3.25	$	2.45
Balance December 31, 2008		1,090,000		$	0.23 - $3.25	$	2.50
Granted		25,000		$	0.19	$	0.19
Forfeited		(535,200	)	$	0.44 - $3.25	$	2.88
Balance March 31, 2009		579,800		$	0.19 - $3.25	$	2.05

The following is a summary of options outstanding and exercisable at March 31, 2009

Outstanding Number of Shares Subject to Options Outstanding				Weighted Average Remaining Contractual Life (in years)				Weighted Average Exercise Price				Vested Number of Vested Shares				Weighted Average Remaining Contractual Life (in years)				Weighted Average Exercise Price
	579,800				7.72				2.05				367,503				7.33				2.19

At March 31, 2009, there was approximately $316,000 of unrecognized compensation expense related to unvested share-based awards granted under the Company’s Stock Option Plan.

(12) Subsequent Events

On May 14, 2009, WFC entered into a Fourth Agreement to Modify Loan Documents (the “Modification”) with the syndicate of banks led by RBC Centura Bank. The Modification modified the terms of the Borrowing Base Loan Agreement dated as of June 29, 2007 (the “Loan Agreement”) by reducing the loan commitment amount pursuant to the Loan Agreement from $30,000,000 to $10,846,163. The Modification extended the maturity of the master line of credit issued pursuant to the Loan Agreement (the “Master Line”) until March 31, 2011. The modification agreement revised the interest rate of the facility from prime plus .25%, with a floor of 5.5% to libor plus 3.5%, with a floor of 6%. At May 14, 2009 the Company has $10,807,956 outstanding under the Master Line.

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The Modification Agreement also revised certain covenants contained in the original agreement. The terms of the Modification Agreement:

require WFC to maintain a minimum net worth of $7,000,000, including subordinated debt, although the minimum net worth may be reduced to an amount not less than $5,000,000 upon the sale and close of escrow any land owned by WFC which causes WFC to be in violation of the $7,000,000 minimum net worth covenant,

·	prohibit WFC’s ratio of debt to equity from exceeding 3.00 to 1.00;

·	require WFC to maintain working capital of at least $5,000,000;

·	require WFC to make certain quarterly principal reduction payments; and

·	require WFC to maintain cash of not less than $500,000.

The modification of the Loan Agreement also contains a waiver for certain inventory covenants contained in the original Loan Agreement that WFC of which WFC was not in compliance prior to the date of the Modification. This includes a waiver of the following covenants:

·	the spec home limitation covenant until March 31, 2011;

·	the developed lot limitation covenant until March 31, 2011;

·	the land, lots under development and developed lot limitation covenant until March 31, 2011

·	the entitled land and pods limitation covenant until March 31, 2011;

·	the entitled land, pods, lots under development, and developed lots limitation covenant until March 31, 2011; and

·	the land, pods lots under development, developed lots and spec home limitation covenant until March 31, 2011.

Pursuant to the Modification, WFC will be required to reduce the outstanding principal amount under the Master Line to approximately $9.0 million by September 30, 2009, $6.0 million by December 31, 2010 and to repay the Master Line in full by March 31, 2011.

WFC is currently in compliance with the revised covenants of the Modification Agreement.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

Overview

We are a real estate development and homebuilding company. We commenced our homebuilding operations in June 2007 with the purchase of Green Builders, Inc. We build energy efficient homes in Austin, Texas and we make it a priority to fully utilize sustainable building practices and to use earth-friendly products and materials.

From late 2007 through March 31, 2009 our business has been significantly impacted by the continued deterioration of the real estate and homebuilding industry. Although central Texas has been less affected than other areas, national real estate trends and global economic conditions have had a significant impact on home buyers and lenders and we believe that sales of new homes in our market may continue to decline in fiscal 2009. We believe this slowdown is attributable to a decline in consumer confidence, the inability of some buyers to sell their current homes and the direct and indirect impact of the well-publicized turmoil in the mortgage and credit markets.

In June 2007 we purchased Green Builders, Inc. and commenced our homebuilding operations under that name. Our strategy is to build homes that are environmentally responsible, resource efficient and consistent with local style. Substantially all of our construction work is performed by subcontractors who are retained for specific subdivisions pursuant to contracts entered in. We intend to build homes on some of the lots we currently have completed and sell those as finished homes as well as continue to sell lots to other builders. We are currently exploring options with other developers to enter into agreements that would give us the option to purchase additional finished lots in the future. In November 2008 we updated our homebuilding services to include “build on your lot”. “Build on your lot” allows customers to build our existing plans on lots that they own.

Prior to our acquisition of Green Builders, we were solely focused on the acquisition of undeveloped land that we believed, based on our research of population growth patterns and infrastructure development, was strategically located. We have funded these acquisitions primarily with bank debt and cash we raised from financing activities. We currently have completed 220 lots in Georgetown Village, 105 lots in Elm Grove and 58 lots in Rutherford West. This portion of our business focus has required the majority of our financial resources. Due to the continued deterioration of the homebuilding industry and based on our current liquidity, we are currently in negotiations to dispose of some of our land positions including but not limited to deed in lieu of foreclosure of these assets.

In tandem with our land acquisition efforts and based upon our strategic market analysis, we also prepare land for homebuilding. A focus of our business had been the sale of developed lots to homebuilders, including national homebuilders. Due to deteriorating conditions in the homebuilding industry both nationally and to a lesser extent locally, during the second quarter of 2007 and continuing through March 31, 2009, demand for finished lots by national homebuilders is, and we expect will continue to be, significantly reduced. As a result, orders placed for some of our finished lots were cancelled. We elected to retain some of our lots for use in our homebuilding business. We believe that retaining some of our lots for use in homebuilding activities will allow us to generate homebuilding revenue to replace some of the revenue from the loss of sales of these finished lots. We will continue to pursue lot sales contracts with both national and regional builders.

In November 2008 we expanded our services to include “green” remodeling of existing homes. We have taken a comprehensive approach to engaging in the green remodeling business and offer customers a “one-stop” process for updating their existing home with a focus on energy efficiency. Our green remodeling program currently caters to existing homeowners in the Austin, Texas area who want to reduce home energy demands and utility bills, lessen home maintenance costs and increase the comfort of their home. Initially we anticipate that substantially all of our construction work will be performed by subcontractors. By subcontracting out the work, there is limited additional capital required to enter this business line. We also feel that entering into remodeling will help us supplement revenue during this slowdown in the real estate industry. To date we have received some energy audit requests and are reviewing the results and discussing the next steps with our customers. At March 31, 2009 we had approximately $340,000 in backlog for a signed contract for future remodeling contract work.

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Results of Operations

Comparison of Three Months Ended March 31, 2009 and 2008

	Three Months Ended March 31, 2009			Three Months Ended March 31, 2008			Change			Change %
Revenues
Homebuilding and related services revenues	$	3,145,323		$	484,511		$	2,660,812			549	%
Land revenues		47,000			657,036			(610,036	)		-93	%
Remodeling revenues		270			-			270			n/a
Gross Profit
Homebuilding and related services gross profit		470,846			78,953			391,893			496	%
Land gross profit		14,310			434,552			(420,242	)		-97	%
Remodeling gross profit		(30	)		-			(30	)		n/a
Inventory impairments and land option cost write-offs		(11,000	)		-			(11,000	)		n/a
Costs & Expenses
Operating expenses		894,263			1,450,493			(556,230	)		-38	%
Operating Loss		(420,137	)		(936,988	)		516,851			-55	%
Net Loss	$	(1,406,554	)	$	(1,645,662	)	$	239,108			-15	%

	Six Months Ended March 31, 2009			Six Months Ended March 31, 2008			Change			Change %
Revenues
Homebuilding and related services revenues	$	7,381,773		$	484,511		$	6,897,262			1424	%
Land revenues		393,146			1,765,348			(1,372,202	)		-78	%
Remodeling revenues		540			-			540			n/a
Gross Profit
Homebuilding and related services gross profit		945,041			78,953			866,088			1097	%
Land gross profit		88,224			833,809			(745,585	)		-89	%
Remodeling gross profit		(360	)		-			(360	)		n/a
Inventory impairments and land option cost write-offs		(22,900	)		-			(22,900	)		n/a
Costs & Expenses
Operating expenses		2,206,466			3,386,506			(1,180,040	)		-35	%
Operating Loss		(1,196,461	)		(2,473,744	)		1,277,283			-52	%
Net Loss	$	(3,067,657	)	$	(4,002,800	)	$	935,143			-23	%

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Homebuilding and Related Services Revenues

Background – Homebuilding and related services revenue consists of revenue from home sales. Prior to fiscal 2008, all home sales were generated by our homebuilder customers utilizing our homebuilder services. In June 2007 we acquired Green Builders, Inc and commenced our homebuilding activities. We sell homes in the Austin, Texas area for prices ranging from $170,000 to $550,000. For the three months ended March 31, 2009 we had sixteen home sales and four cancellations for a total of twelve net sales. We had twelve home closings. Revenue is not recognized on the sale of a home until closing.. At March 31, 2009, we had four speculative units, seven completed models, and 17 units in backlog. Backlog is defined as homes under contract but not yet delivered to our home buyers. We believe that the turmoil in the mortgage market combined with national publicity of significantly deteriorating general and economic conditions has caused a lack of urgency for buyers. We expect that they will continue to be slow throughout fiscal 2009. In accordance with these anticipated market conditions, our strategy is to build a limited number of speculative units per community and build the majority of our homes after a contract is entered into with a homebuyer.

Revenues – During the three months ended March 31, 2009, home sales accounted for approximately 99% of revenues. For the three months ended March 31, 2009 there were twelve home closings at an average sales price of $262,000. During the three months ended March 31, 2008 we had two home closings at an average sales price of $242,000.

Gross Profit – Gross profit percentage before impairments was 15% for the three months ended March 31, 2009. During the quarter we reviewed our homebuilding inventory for impairments. We determined that we had $11,000 in impairments on speculative units. The impairment analysis for each of our communities generally assumed that sales prices in future periods would be equal to current sold unit’s prices.

Land and Land Development

Background – Land sales revenue consists of revenues from the sale of undeveloped land and developed lots. Developing finished lots from raw land takes approximately one to three years. In response to the slowdown in the national housing market and the reduction in demand for finished lots, we changed our strategy and have elected to use some of our developed lots for our own homebuilding operations. We may still sell our lots to national, regional and local homebuilders that may purchase anywhere from five to one hundred or more lots at a time. The delivery of these lots would likely be scheduled over periods of several months or years.

Revenues – Revenues from the sale of land decreased by 93% during the three months ended March 31, 2009 compared to the three months ended March 31, 2008. During the three months ended March 31, 2009 we closed one finished lot as compared to thirteen finished lots for the three months ended March 31, 2008. The decrease in revenues in 2009 was due to the cancellation of lot sales contracts from regional and local homebuilders during the last twelve months.

Gross Profit – Gross profit as a percentage of revenues decreased for the three months ended March 31, 2009 compared to the same period in 2008. The decrease in margin percentage is due to a $240,000 refund of previously written off refunds of Living Unit Equivalent (LUE) fees from the Bohl’s Tract. Gross profit percentage excluding the refund of LUE fees was 30% for the three months ended March 31, 2009 and 2008.

General and Administrative Expenses

Breakdown of G&A Expenses	Three Months Ended March 31, 2009		Three Months Ended March 31, 2008		Change			Change %
Salaries, benefits, payroll taxes and related emp. exps.	$	226,523	$	375,230	$	(148,707	)		-40	%
Stock compensation expense		36,523		35,935		588			2	%
Legal, accounting, auditing, consultants, and investor relations		86,311		269,840		(183,529	)		-68	%
General overhead, including office expenses, insurance, and travel		111,160		208,985		(97,825	)		-47	%
Restructuring expenses		13,040		-		13,040			n/a
Amortization of subordinated debt costs and transaction costs		59,253		59,253		-			0	%
Total G&A	$	532,810	$	949,243	$	(416,433	)		-44	%

Breakdown of G&A Expenses	Six Months Ended March 31, 2009		Six Months Ended March 31, 2008		Change			Change %
Salaries, benefits, payroll taxes and related emp. exps.	$	510,486	$	877,979	$	(367,493	)		-42	%
Stock compensation expense		78,809		675,635		(596,826	)		-88	%
Legal, accounting, auditing, consultants, and investor relations		209,032		494,646		(285,614	)		-58	%
General overhead, including office expenses, insurance, and travel		251,740		463,191		(211,451	)		-46	%
Restructuring expenses		182,526		-		182,526			n/a
Amortization of subordinated debt costs and transaction costs		118,506		118,506		-			0	%
Total G&A	$	1,351,099	$	2,629,957	$	(1,278,858	)		-49	%

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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 March 31, 2009 and 2008, salaries, benefits, taxes and related employee expenses totaled approximately $227,000 and $375,000, respectively, and represented approximately 43% and 40%, respectively, of total general and administrative expenses for the periods. The decrease for the year is due to a decrease in headcount from an average of 18 employees during the three months ended March 31, 2008 to an average of 8 employees during the three months ended March 31, 2009

Legal, accounting, audit, consulting and investor relation expense totaled $86,000 and $270,000 for the three months ended March 31, 2009 and 2008, respectively. General overhead, including office expenses, insurance, and travel totaled $111,000 and $209,000 for the three months ended March 31, 2009 and 2008, respectively. The decrease in these general and administrative costs resulted from our initiative to control costs.

Restructuring expenses relates to expenses incurred to restructure our debt agreement with Graham Mortgage Capital and our syndicate of banks. In the prior year we incurred no expenses for restructuring.

Sales and Marketing Expenses

Sales and marketing expenses include selling costs, commissions, salaries and related taxes and benefits, finished inventory maintenance and property tax expense, marketing activities including websites, brochures, catalogs, signage, and billboards, and market research, all of which benefit our corporate presence and are not included as homebuilding cost of sales. The increase was due to an increase in commissions and closing costs due to an increase in homebuilding revenue for the three months ended March 31, 2009.

Interest Expense and Income

	Three Months Ended March 31, 2009			Three Months Ended March 31, 2008			Change			Change %
Interest expense - convertible debt	$	206,250		$	214,689			(8,439	)		-4	%
Interest discount expense - convertible debt		139,587			139,587			-			0	%
Interest expense - land and development loans		653,567			420,161			233,406			56	%
Interest income and misc income		(12,987	)		(65,763	)		52,776			-80	%
Total interest and other expense and income	$	986,417		$	708,674			277,743			39	%

	Six Months Ended March 31, 2009			Six Months Ended March 31, 2008			Change			Change %
Interest expense - convertible debt	$	412,500		$	420,939			(8,439	)		-2	%
Interest discount expense - convertible debt		279,174			279,174			-			0	%
Interest expense - land and development loans		1,290,352			987,901			302,451			31	%
Interest income and misc income		(110,830	)		(158,958	)		48,128			-30	%
Total interest and other expense and income	$	1,871,196		$	1,529,056			342,140			22	%

Interest expense for land and development loans increased by approximately $233,000 for the three months ended March 31, 2009 over the same period in 2008. The increase is primarily attributable to expense of interest expense for property not under development and an increase in interest expense for Rutherford West and New Sweden property due to the increase in interest rate from 12.5% to 14%.

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Financial Condition and Capital Resources

Liquidity

On March 31, 2009 we had $1.4 million in cash and cash equivalents. We will need to raise additional cash to continue our business, whether through the sale of debt, equity, or combination thereof or through the sale of certain of our assets.

On June 29, 2007, WFC entered into a $55 million revolving credit facility (the “Credit Facility”) with a syndicate of banks led by RBC Bank (formerly RBC Centura Bank), as administrative agent pursuant to a Borrowing Base Loan Agreement (“the Loan Agreement”). IBC Bank and Franklin Bank, S.S.B. (“Franklin Bank”) are the other two banks that make up the syndicate of banks. The Credit Facility was reduced to $30 million in June 2008. The initial maturity date for the Credit Facility was June 29, 2008. We entered into an agreement to extend the maturity date to October 1, 2008. On October 1, 2008, the Credit Facility expired pursuant to its terms. Although we are currently out of compliance with certain covenants set forth in the Borrowing Base Agreement under the Loan Agreement, the syndicate of banks has continued to make amounts available to WFC pursuant to the Loan Agreement for loans made prior to the expiration of the facility. We were notified on November 7, 2008 that Franklin Bank was closed by the Texas Department of Savings and Mortgage Lending and the Federal Deposit Insurance Corporation (the “FDIC”) was named Receiver.

Green Builders has guaranteed the obligations of WFC under the Credit Facility. 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 by us and the agent. Our obligations under the Credit Facility are secured by the assets of each subdivision that was to be developed with the proceeds of loans available under the Credit Facility.

Outstanding borrowings under the Credit Facility bear interest at the prime rate plus 0.25%, with a floor of 5.5%. We are charged a letter of credit fee equal to 1.10% of each letter of credit issued under the Credit Facility. We may elect to prepay the Credit Facility at any time without premium or penalty. Quarterly principal reductions are required during the final 12 months of the term.

The Credit Facility contains customary covenants limiting our ability to take certain actions. At March 31, 2009, we were not in compliance with the terms of the Borrowing Base Agreement under the Credit Facility. We were not in compliance with the tangible net worth, the ratio of debt to equity, working capital, number of completed speculative homes and number of land and developed lot loans covenants. On May 14, 2009 we entered into a Fourth Agreement to Modify Loan Documents (“Modification”). See Part I, Item 1, “Financial Statements, Footnote 12” and Part II, Item 5, “Other Information” for a description of the modification.

In March 2009 we entered into an agreement with LNZCO that LNZCO will provide between $1 and $2 million in financing for the construction of single family residences. Each promissory note bears interest at a rate of prime plus 5.0%, has a one point origination fee, and matures in one year. The loan for each residence is 65% of the sales price of the associated improved property.

Our growth will require substantial amounts of cash for earnest money deposits, development costs, interest payments and homebuilding costs. Until we begin to sell an adequate number of lots and homes to cover our monthly operating expenses, our sales, marketing, general and administrative costs will deplete cash. Due to current market conditions and slow home and land sales, we will need to obtain additional capital. We are currently in negotiations to dispose of some of our current land positions, but there is no assurance that we will be successful in selling these land positions at an acceptable price or at all. If we are not able to sell the New Sweden and Rutherford West tracts of land by December 31, 2009 we will deed in lieu of foreclosure the land back to our lender In addition we are seeking additional capital in the form of debt or equity to support future growth and current operations. We do not have sufficient cash to continue operations for the next twelve months. We will need to raise additional cash to continue our business, whether through the sale of debt, equity, or combination thereof or through the sale of certain of our assets.

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Capital Resources

We have raised approximately $16.5 million of subordinated convertible debt, and approximately $14 million in a public offering of our common stock completed in May 2007. We entered into a $55 million revolving Credit Facility that was reduced to $30 million in June 2008. On October 1, 2008, the Credit Facility expired pursuant to its terms. Although we are currently out of compliance with certain covenants set forth in the Borrowing Base Agreement under the Loan Agreement, RBC and IBC have continued to make amounts available to WFC pursuant to the Loan Agreement for loans made prior to the expiration of the facility. We were notified on November 7, 2008 that Franklin Bank was closed by the Texas Department of Savings and Mortgage Lending and the FDIC was named receiver. We evaluate the financial stability of the remaining syndicate banks making up the Credit Facility and believe the remaining banks have the ability to satisfy their obligations under the Credit Facility. On May 14, 2009 we entered into a Fourth Agreement to Modify Loan Documents (“Modification”). See Part I, Item 1, “Financial Statements, Footnote 12” and Part II, Item 5, “Other Information” for a description of the modification.

In March 2009 we entered into an agreement with LNZCO to provide up to $2 million in financing for homebuilding construction.

Land and homes under construction comprise the majority of our assets. These assets have suffered devaluation due to the downturn in the housing and real estate market for central Texas. We are considering selling tracts of commercial and residential land in order to increase sales revenues and increase cash. We are also in negotiations to deed in lieu of foreclosure some of our land positions. We expect that we will incur losses in 2009. Due to current market conditions and slow home and land sales, we anticipate that we will need additional capital to support operations for the next twelve months.

Off-Balance Sheet Arrangements

As of March 31, 2009, we had no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The SEC defines “critical accounting policies” as those that require application of management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our accounting policies are more fully described in the notes to our consolidated financial statements.

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.

Inventory

Revenue Recognition

Use of Estimates

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

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Municipal Utility and Water District Receivables

We currently have planned the community of Villages of New Sweden within the boundaries of New Sweden Municipal Utility District No. 1 and the community of Rutherford West in Greenhawe Water Control and Improvement District No. 2 (each a “District” and together the “Districts”). We incur development costs for the initial creation and operating costs of these Districts and continuing costs for the water, sewer and drainage infrastructure for these Districts. The Districts will issue bonds to repay us, once the property has sufficient assessed value for the District taxes to repay the bonds. As the project is completed and homes are sold within the Districts, the assessed value increases. It can take several years before the assessed value is sufficient to provide sufficient tax revenue for us to recapture its costs. We estimate that we will recover approximately 50 to 100% of eligible initial creation and operating costs spent through March 31, 2009 for costs spent for Rutherford West Phase 1. We have completed Phase 1 for the Rutherford West project and have approximately $1.1million of water district reimbursements included in inventory that we anticipate will be collected from bond issuances made by such District. When the reimbursements are received we will record them as reductions of the related asset’s balance. Usually, a District issues its first bond issue only after completion of construction of approximately 200 houses. The Districts will pay for property set aside for the preservation of endangered species, greenbelts and similar uses. To the extent that the estimates are dramatically different from the actual facts, it could have a material effect on our financial statements.

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.

Debt Restructuring

The debt restructuring agreement has been accounted for in accordance with accordance with SFAS 15, “Accounting by Debtors and Creditors for Troubled Debt Restructuring”. The related warrants issued have been treated in accordance with “APB 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants”.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS 157 are effective beginning with our fiscal year 2009. The adoption of this standard did not have a material impact on our financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115.” The statement permits entities to choose to measure certain financial assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for our fiscal year 2009. The adoption of this standard did not have a material impact on our financial statements.

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

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

ITEM 4T. CONTROLS AND PROCEDURES

Evaluation of Effectiveness of Disclosure Controls and Procedures

Our management, including our principal executive officer and our principal financial officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of the period ended March 31, 2009, the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2009 due to the significant deficiency described in our annual report filed December 23, 2008.

Changes in Internal Control Over Financial Reporting

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

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in lawsuits and other contingencies in the ordinary course of business. While the outcome of such contingencies cannot be predicted with certainty, we believe that the liabilities arising from these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, to the extent the liability arising from the ultimate resolution of any matter exceeds our estimates reflected in the recorded reserves relating to such matter, we could incur additional charges that could be significant.

ITEM 1A. RISK FACTORS

In addition to the risk factors previously identified in our annual report on Form 10-K for the year ended September 30, 2008, we add the following risk factors:

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 finance and accounting organization that we believe is an appropriate size to support our current operations; however, the rigorous demands of being a public reporting company may lead to a determination that our finance and accounting group is undersized. In addition, our President and Chief Executive Officer is our majority shareholder and controls the company. He also has significant control over our daily operations and we are required to implement proper and effective controls and procedures due to the extent of his control over the company.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002. 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. 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. The size of our financial and accounting organization has resulted in a significant deficiency in our internal control over financial reporting as reported in our Annual Report on Form 10-KSB for the year ended September 30, 2008.

In addition, these rules and regulations to which we are subject 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.

If we are unable to comply with the compliance plan that we submitted to, and that was approved by, the NYSE Amex in connection with our failure to meet certain of the NYSE Amex's continued listing standards, then our common stock could be subject to delisting.

Our common stock is listed on the NYSE Amex (formerly the NYSE Alternext US LLC) under the symbol “GBH.” All companies listed on NYSE Amex are required to comply with certain continued listing standards, including maintaining stockholders' equity at required levels, share price requirements and other rules and regulations of the NYSE Amex. On January 23, 2009, we received notice from the staff of the NYSE Amex indicating that we are not in compliance with the continued listing standards under Section 1003(a)(i) of the NYSE Amex's Company Guide (the "Company Guide") because we reported stockholders' equity of less than $2,000,000 and losses from continuing operations and net losses in two of our three most recent fiscal years; we are not considered to be in compliance with Section 1003(a)(ii) of the Company Guide because we reported stockholders’ equity of less than $4,000,000 and losses from continuing operations and net losses in three of our four most recent fiscal years; we are not considered to be in compliance with Section 1003(a)(iii) of the Company Guide because we reported stockholders’ equity of less than $6,000,000 and losses from continuing operations and net losses in our five most recent fiscal years; and we are not considered to be in compliance with Section 1003(a)(iv) of the Company Guide because we had sustained losses which were so substantial in relation to our overall operations or our existing financial resources, or our financial condition had become so impaired that it appeared questionable, in the opinion of the NYSE Amex, as to whether we would be able to continue operations and/or meet our obligations as they mature. We were required to submit a plan of compliance to the NYSE Amex by February 23, 2009. We submitted such a plan by the deadline, and on April 24, 2009 the NYSE Amex notified us that the plan had been accepted, and granted us an extension until July 23, 2009 to regain compliance with Section 1003(a)(iv) and until July 23, 2010 to regain compliance with Section 1003(a)(i), Section 1003(a)(ii), and Section 1003(a)(iii) of the Company Guide. The NYSE Alternext may seek to suspend or delist our common stock if we are unable to regain compliance with the Company Guide by the applicable deadlines. In addition, the NYSE Amex has advised us that we should consider effecting a reverse stock split to address our low stock price. Failure to effect a reverse split within a reasonable amount of time could result in suspension or delisting of our common stock. If our common stock were suspended or delisted it could materially adversely affect its market value and liquidity.

If we fail to develop or maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential shareholders could lose confidence in our financial reporting, which would harm the value of our shares.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports, effectively prevent fraud and operate as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. We have, in the past, discovered and may, in the future, discover areas of our internal controls over financial reporting that need improvement. As a U.S. public company, we are subject to the reporting requirements of the Sarbanes-Oxley Act of 2002. We are required to annually assess and report on our internal controls over financial reporting. If we are unable to adequately establish or improve our internal controls over financial reporting, we may report that our internal controls are ineffective and our external auditors will not be able to issue an unqualified opinion on the effectiveness of our internal controls. Ineffective internal controls over financial reporting could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our securities or could affect our ability to access the capital markets and which could result in regulatory proceedings against us by, among others, the SEC.

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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

The Modification Agreement also revised certain covenants contained in the original agreement. The terms of the Modification Agreement:

·	prohibit WFC’s ratio of debt to equity from exceeding 3.00 to 1.00;

·	require WFC to maintain working capital of at least $5,000,000;

·	require WFC to make certain quarterly principal reduction payments; and

·	require WFC to maintain cash of not less than $500,000.

·	the spec home limitation covenant until March 31, 2011;

·	the developed lot limitation covenant until March 31, 2011;

·	the land, lots under development and developed lot limitation covenant until March 31, 2011

·	the entitled land and pods limitation covenant until March 31, 2011;

·	the entitled land, pods, lots under development, and developed lots limitation covenant until March 31, 2011; and

·	the land, pods lots under development, developed lots and spec home limitation covenant until March 31, 2011.

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WFC is currently in compliance with the revised covenants of the Modification Agreement.

The above description of the material terms of the Modification is qualified in its entirety by reference to the Fourth Agreement to Modify the Loan Documents filed as an Exhibit 10.6 hereto.

ITEM 6. EXHIBITS

Exhibit No.	Description
10.1	Modification and Forbearance Agreement dated January 12, 2009 by and among Registrant, Wilson Family Communities, Inc. and Graham Mortgage Corporation (filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on January 15, 2009 and incorporated herein by this reference).
10.2	Modification and Forbearance Agreement dated January 12, 2009 by and among Registrant, Wilson Family Communities, Inc. and Graham Mortgage Corporation (filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the SEC on January 15, 2009 and incorporated herein by this reference).
10.3	Form of Construction Loan Agreement (filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on March 17, 2009 and incorporated herein by this reference)
10.4	Form Form of Promissory Note (filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the SEC on March 17, 2009 and incorporated herein by this reference)
10.5	Form of Deed of Trust (filed as Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed with the SEC on March 17, 2009 and incorporated herein by this reference)
10.6	Fourth Agreement to Modify Loan Documents dated May 14, 2009 and among Registrant, Wilson Family Communities, Inc and RBC Bank and IBC Bank
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.

		Green Builders, Inc.

Date: May 15, 2009	By:	/s/ Clark Wilson
		Clark Wilson
		President and Chief Executive Officer (Principal Executive Officer)

Date: May 15, 2009	By:	/s/ Cindy Hammes
		Cindy Hammes
		VP of Finance (Principal Financial Officer)

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Exhibit No.	Description
10.1	Modification and Forbearance Agreement dated January 12, 2009 by and among Registrant, Wilson Family Communities, Inc. and Graham Mortgage Corporation (filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on January 15, 2009 and incorporated herein by this reference).
10.2	Modification and Forbearance Agreement dated January 12, 2009 by and among Registrant, Wilson Family Communities, Inc. and Graham Mortgage Corporation (filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the SEC on January 15, 2009 and incorporated herein by this reference).
10.3	Form of Construction Loan Agreement (filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on March 17, 2009 and incorporated herein by this reference)
10.4	Form Form of Promissory Note (filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the SEC on March 17, 2009 and incorporated herein by this reference)
10.5	Form of Deed of Trust (filed as Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed with the SEC on March 17, 2009 and incorporated herein by this reference)
10.6	Fourth Agreement to Modify Loan Documents dated May 14, 2009 and among Registrant, Wilson Family Communities, Inc and RBC Bank and IBC Bank
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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GREEN BUILDERS, INC 10-Q