|                                                                                                                                                                                                                                                                                                                           |                                     
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------
|U. S. SECURITIES AND EXCHANGE COMMISSION                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                          
|Washington, DC 20549                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                          
|Form 10-QSB                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                          
|/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                          
|For the quarterly period ended September 30, 2007                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                          
|Or                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                          
|/_/ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                          
|For the transition period from _________ to ____________                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                          
|Commission File No. 333-93475                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                          
|CORNERSTONE MINISTRIES INVESTMENTS, INC.                                                                                                                                                                                                                                                                                  
|(Exact name of small business issuer as specified in its charter)                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                          
|Georgia                                                                                                                                                                                                                                                                                                                    | 58-2232313                          
|(State or other jurisdiction                                                                                                                                                                                                                                                                                               | (IRS Employer Identification Number)
|of incorporation or organization)                                                                                                                                                                                                                                                                                          |                                     
|                                                                                                                                                                                                                                                                                                                          
|2450 Atlanta Highway, Suite 904, Cumming, GA                                                                                                                                                                                                                                                                               | 30040                               
|(Address of principal executive office)                                                                                                                                                                                                                                                                                    | (Zip Code)                          
|                                                                                                                                                                                                                                                                                                                          
|Issuers telephone number, including area code: (678)-455-1100                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                          
|Former name, address and former fiscal year, if changed since last report.                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                          
|Check whether the issuer (1) filed all reports required to be filed by the Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for past 90 days.
|                                                                                                                                                                                                                                                                                                                          
|Yes X   No__                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                          
|As of September 30, 2007, there were issued and outstanding 906,426 shares of the common stock of the issuer.                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                          
|Transitional Small Business Disclosure Format (Check one): Yes [  ] No [X]                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                          



1





---





|                                                                    |     
|------------------------------------------------------------------- | ----
|Cornerstone Ministries Investments, Inc.                           
|                                                                   
|Index                                                              
|                                                                   
|                                                                    | Page
|                                                                    |     
|Form 10-QSB Title Page                                              | 1   
|                                                                    | 2   
|Index                                                               |     
|                                                                    |     
|PART I. FINANCIAL INFORMATION                                       |     
|                                                                    |     
|Item 1. Financial Statements                                        |     
|                                                                    |     
|Report of Independent Registered Public Accounting Firm             | F-1 
|                                                                    |     
|Consolidated Balance Sheets as of September 30, 2007 and 2006       | F-2 
|                                                                    |     
|Consolidated Statements of Operations for the three and nine months |     
|ended September 30, 2007 and 2006                                   | F-3 
|                                                                    |     
|Consolidated Statements of Changes in Shareholders Equity          |     
|for the nine months ended September 30, 2007 and 2006               | F-4 
|                                                                    |     
|Consolidated Statements of Cash Flows for the nine months           |     
|ended September 30, 2007 and 2006                                   | F-5 
|                                                                    |     
|Notes to Consolidated Financial Statements                          | F-6 
|                                                                    |     
|Item 2.   Managements Discussion and Analysis of                   |     
|Financial Condition and Results of Operation                        | 3   
|                                                                    |     
|Item 3. Controls and Procedures                                     | 9   
|                                                                    |     
|PART II. OTHER INFORMATION                                          |     
|                                                                    |     
|Item 1. Legal Proceedings                                           | 9   
|                                                                    |     
|Item 2. Changes in Securities and Use of Proceeds                   | 10  
|                                                                    |     
|Item 3. Defaults on Senior Securities                               | 10  
|                                                                    |     
|Item 4. Submission of Matters to a Vote of Security Holders         | 10  
|                                                                    |     
|Item 5. Other Information                                           | 10  
|                                                                    |     
|Item 6. Exhibits and Reports on Form 8-K                            | 10  
|                                                                    |     
|Signatures                                                          | 10  
|                                                                    |     
|Certifications  Exhibits 31 and 32                                 | 11  





2





---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To The Board of Directors

Cornerstone Ministries Investments, Inc.



We have reviewed the accompanying consolidated balance sheets of Cornerstone Ministries Investments, Inc. as of September 30, 2007 and 2006, and the related consolidated statements of operations, changes in shareholders equity, and cash flows for the three-month and nine-month periods then ended. These financial statements are the responsibility of the Companys management.



We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole.  Accordingly, we do not express such an opinion.



Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.





/s/ Berman Hopkins Wright & LaHam, CPAs and Associates, LLP



Winter Park, Florida

November 9, 2007







F-1





---





|                                                            |  |  |  |         |             |             |             |             |             |             |        
|----------------------------------------------------------- |  |  |  | ------- | ----------- | ----------- | ----------- | ----------- | ----------- | ----------- | -------
|CORNERSTONE MINISTRIES INVESTMENTS, INC.                    |  |  |  |         |             |             |            
|CONSOLIDATED BALANCE SHEETS                                 |  |  |  |         |             |             |             |            
|September 30, 2007 and 2006                                 |  |  |  |         |             |             |             |             |            
|                                                            |  |  |  |         |             |             |             |             |             |             |        
|                                                            |  |  |  |         |             |             |             | 2007        |             |             | 2006   
|ASSETS                                                      |  |  |  |         |             |             |             |             |             |             |        
|Cash and cash equivalents                                   |  |  |  |         | $           | 2,033,412   |             | $           | 2,731,880  
|Guarantee receivable from related party (see note 4)        |  |  |  | 35,000  |             |             | -          
|Loans in process                                            |  |  |  |         |             |             | 233,637     |             |             | 488,671    
|Real estate loans, net (including $86,840,326 and           |  |  |  |         |             |             |             |            
|$36,985,260 from related parties - see note 4)              |  |  |  |         | 141,334,727 |             |             | 134,567,995
|Real estate joint venture investments, net                  |  |  |  |         | 17,266,219  |             |             | 18,934,910 
|Consolidated real estate assets                             |  |  |  |         |             | 17,577,389  |             |             | 2,824,061  
|Bond holdings and accrued interest                          |  |  |  |         | 1,980,779   |             |             | 2,144,387  
|Property and equipment, net                                 |  |  |  |         |             | 517,514     |             |             | 805,308    
|Deferred tax asset, net                                     |  |  |  |         |             | 950,888     |             |             | 295,070    
|Goodwill                                                    |  |  |  |         |             |             |             | 450,997     |             |             | 450,997
|Unamortized debt issue costs                                |  |  |  |         |             | 3,128,256   |             |             | 3,208,723  
|Real estate held for investment                             |  |  |  |         |             | 340,000     |             |             | 340,000    
|Other assets                                                |  |  |  |         |             |             | 84,910      |             |             | 51,089     
|                                                            |  |  |  |         |             |             |             |             |             |             |        
|TOTAL ASSETS                                                |  |  |  |         |             | $           | 185,933,728 |             | $           | 166,843,091
|                                                            |  |  |  |         |             |             |             |             |             |             |        
|                                                            |  |  |  |         |             |             |             |             |             |             |        
|LIABILITIES                                                 |  |  |  |         |             |             |             |             |             |            
|Investor bonds and accrued interest                         |  |  |  | $       | 141,165,204 |             | $           | 137,662,332
|Mortgage participations and accrued interest (including     |  |  |  |         |             |             |            
|$7,224,708 and $0 to related party - see note 4)            |  |  |  |         | 8,833,829   |             |             | 4,282,577  
|Loans and mortgages payable and accrued interest (including |  |  |  |         |             |             |            
|$0 and $1,602,019 to related party - see note 4)            |  |  |  |         | 28,559,263  |             |             | 18,131,660 
|Accounts and other payables (including                      |  |  |  |         | -           |             |             | -          
|$252,459 and $301,387 to related party - see note 4)        |  |  |  | 340,691 |             |             | 441,713    
|Consolidated real estate obligations                        |  |  |  |         | 1,266,140   |             |             | -          
|Guarantee obligations (including $35,000 and $0 to          |  |  |  |         |             |             |             |            
|related party - see note 4)                                 |  |  |  |         |             | 574,610     |             |             | 273,610    
|                                                            |  |  |  |         |             |             |             |             |             |             |        
|TOTAL LIABILITIES                                           |  |  |  |         |             |             | 180,739,737 |             |             | 160,791,892
|                                                            |  |  |  |         |             |             |             |             |             |             |        
|SHAREHOLDERS' EQUITY                                        |  |  |  |         |             |             |             |             |            
|Series A Convertible Preferred Stock, no par                |  |  |  |         |             |             |             |            
|value; 235,000 shares authorized, no                        |  |  |  |         |             |             |             |            
|shares issued and outstanding                               |  |  |  |         |             | -           |             |             | -          
|Common Stock, $0.01 par value; 29 million shares            |  |  |  |         |             |             |             |            
|authorized; 906,426 and 878,907 shares                      |  |  |  |         |             |             |             |            
|issued and outstanding                                      |  |  |  |         |             | 9,064       |             |             | 8,789      
|Paid in capital                                             |  |  |  |         |             |             | 5,662,412   |             |             | 5,486,577  
|Retained earnings (deficit)                                 |  |  |  |         |             | (477,485)   |             |             | 555,833    
|                                                            |  |  |  |         |             |             |             |             |             |             |        
|TOTAL SHAREHOLDERS' EQUITY                                  |  |  |  |         | 5,193,991   |             |             | 6,051,199  
|                                                            |  |  |  |         |             |             |             |             |             |             |        
|TOTAL LIABILITIES AND                                       |  |  |  |         |             |             |             |             |            
|SHAREHOLDERS' EQUITY                                        |  |  |  |         | $           | 185,933,728 |             | $           | 166,843,091
|                                                            |  |  |  |         |             |             |             |             |             |             |        
|                                                            |  |  |  |         |             |             |             |             |             |             |        
|                                                            |  |  |  |         |             |             |             |             |             |             |        
|                                                            |  |  |  |         |             |             |             |             |             |             |        
|SEE ACCOMPANYING NOTES                                      |  |  |  |         |             |             |             |             |            



F-2





---



|                                                                 |  |         |           |           |          |           |             |         |            |             |           |            |             |         |            |            
|---------------------------------------------------------------- |  | ------- | --------- | --------- | -------- | --------- | ----------- | ------- | ---------- | ----------- | --------- | ---------- | ----------- | ------- | ---------- | -----------
|CORNERSTONE MINISTRIES INVESTMENTS, INC.                         |  |         |           |          
|CONSOLIDATED STATEMENTS OF OPERATIONS                            |  |         |           |          
|For the three and nine months ended September 30, 2007 and 2006  |  |         |           |          
|                                                                 |  |         |           |           |          |           |             |         |            |             |           |            |             |         |            |            
|                                                                 |  |         |           |           |          |           | 3 Mo. Ended |         |            | 3 Mo. Ended |           |            | 9 Mo. Ended |         |            | 9 Mo. Ended
|                                                                 |  |         |           |           |          |           | 9/30/2007   |         |            | 9/30/2006   |           |            | 9/30/2007   |         |            | 9/30/2006  
|REVENUES                                                         |  |         |           |           |          |           |             |         |            |             |           |            |             |         |           
|Real estate loan and joint venture interest and fees             |  | $       | 1,861,448 |           | $        | 3,263,051 |             | $       | 5,496,418  |             | $         | 9,102,659 
|Real estate loan and joint venture interest and fees             |  |         |           |           |          |           |             |         |            |             |           |           
|from related parties (see note 4)                                |  |         | 2,783,667 |           |          | 1,120,985 |             |         | 8,006,248  |             |           | 3,218,671 
|Total real estate loan and joint venture interest and fees       |  |         | 4,645,115 |           |          | 4,384,036 |             |         | 13,502,666 |             |           | 12,321,330
|Loan participation and other income (including $15,000 for each  |  |         |           |           |          |           |             |         |            |             |           |           
|three month period and $45,000 for each nine month period        |  |         |           |           |          |           |             |         |            |             |           |           
|presented to a related party - see note 4)                       |  |         |           | 146,199   |          |           | 92,701      |         |            | 485,054     |           |            | 477,364    
|TOTAL REVENUES                                                   |  |         |           |           |          | 4,791,314 |             |         | 4,476,737  |             |           | 13,987,720 |             |         | 12,798,694
|                                                                 |  |         |           |           |          |           |             |         |            |             |           |            |             |         |            |            
|EXPENSES                                                         |  |         |           |           |          |           |             |         |            |             |           |            |             |         |           
|Investor and loan interest expense                               |  |         |           | 3,370,687 |          |           | 3,126,825   |         |            | 10,429,522  |           |            | 9,144,533  
|Investor and loan interest expense to related party (see note 4) |  | 178,069 |           |           | -        |           |             | 333,973 |            |             | -        
|Loan loss expense                                                |  |         |           |           |          | 152,000   |             |         | 53,000     |             |           | 347,000    |             |         | 219,000   
|Marketing expenses                                               |  |         |           |           |          | 291,045   |             |         | 303,874    |             |           | 966,863    |             |         | 899,126   
|Payroll expenses                                                 |  |         |           |           |          | 54,147    |             |         | -          |             |           | 163,810    |             |         | -         
|Management and advisory fees to related party (see note 4)       |  |         | 415,543   |           |          | 375,854   |             |         | 1,239,174  |             |           | 1,085,332 
|Operating expenses                                               |  |         |           |           |          | 412,342   |             |         | 196,004    |             |           | 1,176,235  |             |         | 515,303   
|                                                                 |  |         |           |           |          |           |             |         |            |             |           |            |             |         |            |            
|TOTAL EXPENSES                                                   |  |         |           |           |          | 4,873,833 |             |         | 4,055,557  |             |           | 14,656,577 |             |         | 11,863,294
|                                                                 |  |         |           |           |          |           |             |         |            |             |           |            |             |         |            |            
|Income (Loss) Before Provision For Income Taxes                  |  |         | (82,519)  |           |          | 421,180   |             |         | (668,857)  |             |           | 935,400   
|                                                                 |  |         |           |           |          |           |             |         |            |             |           |            |             |         |            |            
|Income Tax Provision (Benefit)                                   |  |         |           |           | (31,096) |           |             | 159,333 |            |             | (251,674) |            |             | 328,742
|                                                                 |  |         |           |           |          |           |             |         |            |             |           |            |             |         |            |            
|NET INCOME (LOSS)                                                |  |         |           | $         | (51,423) |           | $           | 261,847 |            | $           | (417,183) |            | $           | 606,658
|                                                                 |  |         |           |           |          |           |             |         |            |             |           |            |             |         |            |            
|Basic and Diluted Earnings (Loss)                                |  |         |           |           |          |           |             |         |            |             |           |            |            
|per Common Share                                                 |  |         |           |           | $        | (0.05)    |             | $       | 0.29       |             | $         | (0.46)     |             | $       | 0.68      
|                                                                 |  |         |           |           |          |           |             |         |            |             |           |            |             |         |            |            
|                                                                 |  |         |           |           |          |           |             |         |            |             |           |            |             |         |            |            
|                                                                 |  |         |           |           |          |           |             |         |            |             |           |            |             |         |            |            
|                                                                 |  |         |           |           |          |           |             |         |            |             |           |            |             |         |            |            
|SEE ACCOMPANYING NOTES                                           |  |         |           |           |          |           |             |         |            |             |           |            |             |        





F-3





---



|                                                           |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  |           |           |          |           |          
|---------------------------------------------------------- |  | ------- | -------- | - | ------------- | ----- | - | ---------- | -------- | - | --------- |  | - | --------- |  | --------- | --------- | -------- | --------- | ---------
|CORNERSTONE MINISTRIES INVESTMENTS, INC.                   |  |         |          |   |               |       |  
|CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY |  |         |          |   |               |       |  
|For the nine months ended September 30, 2007 and 2006      |  |         |          |   |               |       |  
|                                                           |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  |           |           |          |           |          
|                                                           |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  |           | RETAINED  |          |           |          
|                                                           |  |         |          |   | COMMON STOCK: |       |   | PAID-IN    |          |   | PREFERRED |  |   | EARNINGS  |  |           | TOTAL    
|                                                           |  |         |          |   | SHARES        |       |   | AMOUNT     |          |   | CAPITAL   |  |   | STOCK     |  |           | (DEFICIT) |          |           | EQUITY   
|                                                           |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  |           |           |          |           |          
|BALANCE, DECEMBER 31, 2005                                 |  | 891,914 |          | $ | 8,919         |       | $ | $5,570,992 |          | $ | -         |  | $ | 179,693   |  | $         | 5,759,604
|Net income                                                 |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  | 606,658   |           |          | 606,658  
|Dividends declared                                         |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  | (230,518) |           |          | (230,518)
|Common stock issued                                        |  |         | -        |   |               | -     |   |            | -        |   |           |  |   |           |  |           |           | -       
|Common stock redeemed                                      |  |         | (13,007) |   |               | (130) |   |            | (84,415) |   |           |  |   |           |  |           |           | (84,545)
|                                                           |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  |           |           |          |           |          
|BALANCE, SEPTEMBER 30, 2006                                |  | 878,907 |          | $ | 8,789         |       | $ | 5,486,577  |          | $ | -         |  | $ | 555,833   |  | $         | 6,051,199
|                                                           |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  |           |           |          |           |          
|                                                           |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  |           |           |          |           |          
|BALANCE, DECEMBER 31, 2006                                 |  | 885,096 |          | $ | 8,851         |       | $ | 5,526,483  |          | $ | -         |  | $ | 171,209   |  | $         | 5,706,543
|Net loss                                                   |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  |           | (417,183) |          |           | (417,183)
|Dividends declared                                         |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  | (231,511) |           |          | (231,511)
|Common stock issued                                        |  |         | 32,288   |   |               | 323   |   |            | 209,549  |   |           |  |   |           |  |           |           | 209,872 
|Common stock issuance costs paid                           |  |         |          |   |               |       |   | (2,503)    |          |   |           |  |   |           |  |           | (2,503)  
|Common stock redeemed                                      |  |         | (10,958) |   |               | (110) |   |            | (71,117) |   |           |  |   |           |  |           |           | (71,227)
|                                                           |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  |           |           |          |           |          
|BALANCE, SEPTEMBER 30, 2007                                |  | 906,426 |          | $ | 9,064         |       | $ | 5,662,412  |          | $ | -         |  | $ | (477,485) |  | $         | 5,193,991
|                                                           |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  |           |           |          |           |          
|                                                           |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  |           |           |          |           |          
|SEE ACCOMPANYING NOTES                                     |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  |           |           |         
|                                                           |  |         |          |   |               |       |   |            |          |   |           |  |   |           |  |           |           |          |           |          





F-4





---



|                                                                       |  |  |   |             |              |              |              |              |             |              |            |     
|---------------------------------------------------------------------- |  |  | - | ----------- | ------------ | ------------ | ------------ | ------------ | ----------- | ------------ | ---------- | ----
|CORNERSTONE MINISTRIES INVESTMENTS, INC.                               |  |  |   |             |              |              |              |             
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                  |  |  |   |             |              |              |              |             
|For the nine months ended September 30, 2007 and 2006                  |  |  |   |             |              |              |             
|                                                                       |  |  |   |             |              |              |              |              |             |              |            |     
|                                                                       |  |  |   |             |              |              |              |              | 2007        |              |            | 2006
|CASH FLOWS FROM OPERATING ACTIVITIES:                                  |  |  |   |             |              |              |              |             
|Net income (loss)                                                      |  |  |   |             |              |              | $            | (417,183)    |             | $            | 606,658   
|Adjustments to reconcile net income to cash                            |  |  |   |             |              |              |              |             
|from operations-                                                       |  |  |   |             |              |              |              |              |             |              |           
|Depreciation and amortization                                          |  |  |   |             |              |              | 1,258,505    |              |             | 851,813     
|Gain from sale of property and equipment                               |  |  |   |             |              | (9,640)      |              |              | (51,540)   
|Loan loss expense                                                      |  |  |   |             |              |              |              | 347,000      |             |              | 219,000   
|Changes in-                                                            |  |  |   |             |              |              |              |              |             |              |           
|Loans in process                                                       |  |  |   |             |              |              |              | 220,295      |             |              | (104,409) 
|Accrued bond interest, net                                             |  |  |   |             |              |              | 213,988      |              |             | 202,671     
|Bond holdings principal discount amortization                          |  |  |   |             | (5,687)      |              |              | (5,687)     
|Accrued real estate loan/joint venture interest and deferred loan fees |  |  |   |             |              |             
|(including ($366,832) and ($659,457) from related party loans)         |  |  |   | (2,160,932) |              |              | (3,155,623) 
|Deferred taxes                                                         |  |  |   |             |              |              |              | (468,978)    |             |              | (151,233) 
|Refundable income taxes                                                |  |  |   |             |              |              | 61,799       |              |             | -           
|Investor and mortgage participation interest payable                   |  |  |   |             | (794,083)    |              |              | 2,158,205   
|Guarantee obligations, net of related receivables                      |  |  |   |             | -            |              |              | 39,610      
|Accounts and other payables                                            |  |  |   |             |              |              | 8,742        |              |             | (23,895)    
|Other assets                                                           |  |  |   |             |              |              |              | (33,556)     |             |              | 21,131    
|                                                                       |  |  |   |             |              |              |              |              |             |              |            |     
|NET CASH (USED) PROVIDED BY OPERATIONS                                 |  |  |   |             | (1,779,730)  |              |              | 606,701     
|                                                                       |  |  |   |             |              |              |              |              |             |              |            |     
|CASH FLOWS FROM INVESTING ACTIVITIES:                                  |  |  |   |             |              |              |              |             
|Real estate loans made (including $43,776,274 and                      |  |  |   |             |              |              |              |             
|$12,387,727 to related parties)                                        |  |  |   |             |              |              | (56,403,640) |              |             | (64,709,145)
|Real estate loan principal payments received (including                |  |  |   |             |              |              |             
|$38,688,477 and $14,411,398 from related parties)                      |  |  |   |             | 45,255,877   |              |              | 38,632,408  
|Real estate joint venture investments made                             |  |  |   |             |              | (2,911,906)  |              |              | (3,385,406)
|Real estate joint venture investment principal payments received       |  |  |   | 6,094,475   |              |              | -           
|Consolidated real estate assets purchased                              |  |  |   |             |              | (8,067,143)  |              |              | (2,824,061)
|Bonds redeemed or sold                                                 |  |  |   |             |              |              | -            |              |             | 11,974,400  
|Property and equipment purchased                                       |  |  |   |             |              | (30,528)     |              |              | (5,485)    
|Proceeds from sales of property and equipment                          |  |  |   |             | 9,640        |              |              | 272,362     
|                                                                       |  |  |   |             |              |              |              |              |             |              |            |     
|NET CASH USED BY INVESTING ACTIVITIES                                  |  |  |   |             | (16,053,225) |              |              | (20,044,927)
|                                                                       |  |  |   |             |              |              |              |              |             |              |            |     
|CASH FLOWS FROM FINANCING ACTIVITIES:                                  |  |  |   |             |              |              |              |             
|Investor bonds sold                                                    |  |  |   |             |              |              |              | 9,677,433    |             |              | 1,591,589 
|Investor bonds redeemed                                                |  |  |   |             |              |              | (15,498,883) |              |             | (9,136,761) 
|Mortgage participation agreements sold (including                      |  |  |   |             |              |              |              |             
|$7,165,000 and $0 from related parties)                                |  |  |   |             |              | 8,765,000    |              |              | 1,904,940  
|Mortgage participation agreements redeemed                             |  |  |   |             | (2,654,873)  |              |              | (181,663)   
|Debt issue costs paid                                                  |  |  |   |             |              |              | (899,619)    |              |             | (1,279,512) 
|Loan payable principal proceeds (including $0 and $1,589,000           |  |  |   |             |              |              |             
|from related party)                                                    |  |  |   |             |              |              |              | 8,406,513    |             |              | 17,589,000
|Building mortgage principal payments                                   |  |  |   |             |              | (405,127)    |              |              | (170,352)  
|Capital lease principal payments                                       |  |  |   |             |              | -            |              |              | (1,231)    
|Common stock issued, net of issuance costs                             |  |  |   |             | 207,369      |              |              | -           
|Common stock redeemed                                                  |  |  |   |             |              |              | (71,227)     |              |             | (84,545)    
|Dividends paid                                                         |  |  |   |             |              |              |              | (517,931)    |             |              | (508,552) 
|                                                                       |  |  |   |             |              |              |              |              |             |              |            |     
|NET CASH PROVIDED BY FINANCING ACTIVITIES                              |  |  |   |             | 7,008,655    |              |              | 9,722,913   
|                                                                       |  |  |   |             |              |              |              |              |             |              |            |     
|Net change in cash and cash equivalents                                |  |  |   |             |              | (10,824,300) |              |              | (9,715,313)
|Cash and cash equivalents at beginning of period                       |  |  |   |             | 12,857,712   |              |              | 12,447,193  
|                                                                       |  |  |   |             |              |              |              |              |             |              |            |     
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                             |  |  | $ | 2,033,412   |              | $            | 2,731,880   
|                                                                       |  |  |   |             |              |              |              |              |             |              |            |     
|Supplemental Information-                                              |  |  |   |             |              |              |              |              |             |             
|Interest paid during the period                                        |  |  |   |             |              | $            | 11,613,920   |              | $           | 6,900,836   
|Income taxes paid during the period                                    |  |  |   |             | $            | 125,000      |              | $            | 758,000    
|Non-cash transactions-                                                 |  |  |   |             |              |              |              |              |             |             
|Investor certificates matured and re-invested                          |  |  |   | $           | 15,837,701   |              | $            | 3,243,765   
|Loan interest financed and included in loan principal (including       |  |  | $ | 2,464,458   |              | $            | 3,291,365   
|$1,100,196 and $384,125 on related party loans)                        |  |  |   |             |              |              |              |             
|                                                                       |  |  |   |             |              |              |              |              |             |              |            |     
|SEE ACCOMPANYING NOTES                                                 |  |  |   |             |              |              |              |              |             |             



F-5





---



CORNERSTONE MINISTRIES INVESTMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying Consolidated Financial Statements include the accounts of Cornerstone Ministries Investments, Inc., its majority owned subsidiaries and variable interest entities consolidated under the provisions of FIN46R (collectively the Company).  All material intercompany transactions have been eliminated in these Consolidated Financial Statements.  The Company originates and purchases mortgage loans.  The Company offers specialized loan programs for churches, non-profit or for-profit sponsors of senior housing facilities and non-profit or for-profit sponsors of affordable/low income or age-restricted housing projects.  The Company also invests in other real estate projects for the purpose of selling at a profit or leasing.  Substantially all of the Companys loans and investments are in projects located in the southeastern and southwestern United States.



Cash and cash equivalents include bank accounts and short-term investments with original maturities of 90 days or less.



Real estate loans and senior housing loans classified as real estate joint venture investments include unpaid principal and accrued interest balances net of deferred loan fees and unearned discounts, less an allowance for loan losses.  Interest income is recognized monthly on the accrual basis in accordance with loan terms.  Interest income is recognized on the cash basis for loans with a recorded impairment loss (other than restructured loans) and the possibility of future loss considered remote.  If the possibility of future loss is probable, then interest income is not recognized and interest payments are credited to outstanding loan principal.  Loan origination fees are deferred and amortized as a yield adjustment over the lives of the related loans using the interest method.   Amortization of deferred loan fees is discontinued when a loan is placed on non-accrual status.  Interest income and loan fees recognized from real estate loans and senior housing loans classified as real estate joint venture investments are reported as Real estate loan and joint venture interest and fees in the accompanying Consolidated Statements of Operations.



The Company receives monthly interest payments on its real estate loans and senior housing loans (classified as real estate joint venture investments) except when the terms of a loan allow a borrower to finance interest payments.  Interest is financed in the following circumstances:

•

Family housing loans may finance interest while the project is in the development and pre-sales phase, which normally lasts 12 to 36 months depending on the size of the project.  The Company receives the financed interest as the borrower sells homes in the development.

•

Church construction loans may finance interest while the church building is under construction.  This takes three to nine months, depending on the size of the building.  When the building is operational, the financed interest from the construction phase is included in the loans principal amount and the Company begins receiving monthly interest payments from the borrower.

•

Senior housing loans may finance interest during the construction, renovation and lease-up stages of the borrowers operations.  This takes two to six months if there is an existing building and 12 to 24 months if the financed property is raw land and a new building is being constructed.  When the facility is operational, the financed interest is included in the loans principal amount and the Company begins receiving monthly interest payments from the borrower.



Senior housing loans are classified as real estate joint venture investments if the Company participates in a propertys residual profits and all of the following exist at the inception of the loan:

•

The borrower has title but not a substantial equity investment in the property.

•

The Company does not have recourse to substantial tangible, saleable assets of the borrower other than the underlying collateral of the loan and there is no irrevocable letter of credit for a substantial amount of the loan.

•

There is no take-out commitment for the full amount of the loan from a creditworthy, independent third-party.

•

The facility does not have lease commitments which will provide sufficient cash flow to service normal principal and interest loan amortization.



F-6





---



The Company normally provides all or substantially all of the funding (directly or through loan guarantees) for the acquisition and development of these facilities, which are owned by non-profit entities.  The Company participates in residual profits through loan participation agreements, which enable the Company to receive income from the borrower when the property in which the Company provided financing is sold or refinanced with another lender.  The participation is between 25% and 33% of the borrowers gain.  Loan participation income is recognized when the borrowers sale or refinancing is completed and the Company receives cash from the borrower.



Loans in process are amounts advanced or expended on behalf of borrowers prior to completion of the loan documentation.  Interest is not accrued on these amounts until the loan documentation is complete and the borrower acknowledges the debt and associated interest.  Substantially all of these expenditures are converted to loans within one year or less.



Unamortized debt issue costs include the costs and commissions associated with issuing Investor Certificates, Mortgage Participation Agreements and other loans payable.  These costs are being amortized on a straight-line basis over the term of the associated debt, generally five years.



The allowance for loan losses for real estate loans and senior housing loans classified as real estate joint venture investments is maintained at a level which, in managements judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is determined in accordance with SFAS No. 5 (collective loan losses) and SFAS No. 114 (specific impaired loan losses).  A collective loan loss is recognized when the characteristics of a group of loans indicate that it is probable that a loss exists even though the loss cannot be identified with a specific loan.  The collective loan loss allowance amount is based on observable data that management believes is reflective of the underlying credit losses inherent in the portfolio.  The components of this evaluation include trends in the Companys historical loss experience, changes in credit risk and credit quality, credit concentrations, economic conditions, collateral values, and other risks inherent in the portfolio. Specific impaired loan loss allowances are made when it is determined that a loan is impaired and the loans carrying amount exceeds the present value of estimated future cash flows, or, if the loan is considered collateral dependant, the loans collateral value. A loan is considered impaired if it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Although management uses available information to recognize losses on loans, because of uncertainties associated with local economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that a material change could occur in the allowance for loan losses in the near term. However, the amount of the change that is reasonably possible cannot be estimated. The allowance is increased by a provision for loan loss and reduced by charge-offs, net of recoveries. Changes in the allowance relating to specific impaired loans are charged or credited to loan loss expense.  Loans are charged-off to the extent the loans carrying amount exceeds the net realizable value of the collateral, with the charge-off occurring when it is likely that the loan is uncollectible and foreclosure will occur.



Foreclosed real estate acquired through, or in lieu of, foreclosure are held for sale and initially recorded at the lower of the assets fair value or the loans carrying amount, which establishes a new cost basis for the asset.  Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of the new cost basis or fair value less estimated costs to sell.



The Company uses FIN 46R, Consolidation of Variable Interest Entities to identify variable interest entities (VIE).  A VIE is an entity in which the equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties.  A company that holds a variable interest in a VIE is considered the primary beneficiary and will need to consolidate the entity if the companys interest in the VIE is such that the company will absorb a majority of the VIEs expected losses and/or receive a majority of expected residual gains, if they occur.  Additional disclosures are also required by primary beneficiaries and other significant variable interest holders.



F-7





---



Bond holdings consist of tax-free local government securities and church bonds.  The Company accounts for these investments using SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and classifies the bonds as available for sale securities.  The bonds are initially recorded at cost and if the bonds are purchased for a discount or premium from their par value, the discount or premium is amortized to income over the bonds remaining life as an adjustment to the bonds yield.  The bonds are also adjusted for unrealized holding gains and losses.  Temporary unrealized holding gains and losses are reported, net of deferred taxes, as a separate component of shareholders equity until realized.  If an unrealized holding loss is judged to be other than temporary, the cost basis of the security is written down to fair value and included in earnings and the amortization of the premium or discount is suspended.



Property and equipment are valued at cost when purchased.  Depreciation is provided on the straight-line method over the estimated useful lives of the assets, which are three to five years for furnishings and equipment, and 40 years for office buildings.



Real estate held for investment includes land which the Company owns and intends to hold as an investment for more than one year.  The assets are carried at the lesser of cost or fair value.  Impairment losses are recognized when the carrying amount of a long-lived asset is determined not to be recoverable and the carrying amount exceeds fair value.  Profit from real estate sales is recognized when the collectibility of the sales price is reasonably assured and the Company is not obligated to perform significant activities after the sale to earn the profit.  If either of these conditions exists, all or part of the profit is deferred and recognized using the installment sale method or cost recovery method as prescribed by SFAS No. 66, Accounting for Sales of Real Estate.



Interest on Investor Bonds is accrued from the date of issuance. Bond holders choose, at the time of purchase, to have interest paid semi-annually or upon redemption.  Investors holding five year bonds in multiples of $10,000 may receive interest monthly.  Unpaid interest is compounded semi-annually.  Interest on Mortgage Participation Agreements is accrued from the date of issuance and is paid monthly.



Mortgage Participation Agreements are accounted for as secured borrowings with pledges of collateral because the agreements do not meet the definition of a sale of a financial asset under SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.



The Company is guarantor on certain loans secured by church, senior housing, single family and affordable apartment facilities which are owned by various Company borrowers.  A loan guarantee obligation is recognized based on the loan guarantees estimated fair value.  The Company normally charges the loan guarantees fair value to the respective borrower as compensation for the Companys risk and payment is expected within 30 days of the guarantees origination or modification date.  Unpaid amounts are classified as Loan guarantee receivables in the accompanying Consolidated Balance Sheets.  If the loan guarantees fair value is not charged to the respective borrower, deferred loan fees related to the borrowers loan with the Company are reduced by the guarantees fair value.  The reduced deferred loan fees are amortized to earnings over the life of the loan.  Loan guarantee obligations are analyzed at the end of each quarter and if the fair value of the loan guarantee has declined, the carrying amount of the obligation is reduced and credited to earnings.



Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to the difference between the methods of accounting for depreciation, amortization, start-up costs, allowance for loan losses, and installment sales for financial and tax-reporting purposes.  The deferred taxes represent the estimated future tax consequences of those differences, which will be either taxable or deductible when the assets and liabilities are recovered or settled.  Accelerated depreciation methods and shorter asset lives are used for tax reporting, and straight-line depreciation is used for financial statement reporting.  The Company calculates deferred taxes under the provisions of SFAS No. 109 which provides for deferred tax assets and liabilities to be carried on the balance sheet at current tax rates.



F-8





---

Management uses estimates and assumptions in preparing these Consolidated Financial Statements in accordance with generally accepted accounting principles.  The estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and reported revenues and expenses.  Actual amounts may vary from the estimates that are used.



Basic earnings per common share are calculated by dividing net income by the weighted average number of common shares outstanding during the year.  Diluted earnings per common share are calculated by adjusting weighted average outstanding shares, assuming conversion of all potentially dilutive shares of Series A Convertible Preferred Stock.



New Accounting Pronouncements:

In September 2006, the FASB issued FAS No. 157, Fair Value Measurements, which establishes a framework for reporting fair value and expands disclosure about fair value measurements.  FAS 157 is effective for the Companys 2008 fiscal year.  The Company is currently evaluating the impact of this standard on its financial statements.



In February 2007, the FASB issued FAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115.  FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value.  FAS 159 is effective for fiscal years ending after November 15, 2007.  The Company is evaluating the impact of adopting FAS 159 on its financial statements.



NOTE 2  PROPERTY AND EQUIPMENT

At September 30, property and equipment is composed of:



|                                    |  |      |           |      |   |          
|----------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                    |  | 2007 |           | 2006
|Office Condominiums                 |  | $    | 550,116   |      | $ | 550,116  
|Church Property                     |  |      | -         |      |   | 290,679  
|Office Computers, Furnishings,      |  |      |           |      |   |          
|Software & Equipment                |  |      | 148,364   |      |   | 147,336  
|Vehicles                            |  |      | 29,500    |      |   | 30,351   
|Less: Accumulated depreciation      |  |      | (210,466) |      |   | (213,174)
|Property and equipment, net         |  | $    | 517,514   |      | $ | 805,308  
|                                    |  |      |           |      |   |          
|Depreciation expense  three months |  | $    | 7,957     |      | $ | 10,887   
|Depreciation expense  nine months  |  | $    | 22,380    |      | $ | 32,170   



In February 2006, the Company sold its office condominiums which were being leased to a third party.  The net proceeds received at closing were $272,362.  The carrying value of the property sold was $220,822; therefore, a $51,540 gain was recognized from this sale.  With the closing proceeds, the Company paid off the $160,332 in outstanding principal on the mortgage loan that secured the property.



In December 2005, the Company foreclosed on a church loan in Dade City, FL and repossessed the land and building.  The foreclosed asset was initially recorded at the loans carrying value of $290,679 because the Companys management estimated the assets fair value to be greater than the loans carrying value.  In December 2006, the Company sold the land and building and financed the $275,000 purchase price.  A loss of $34,442 was recognized from this sale in the fourth quarter of 2006.



NOTE 3  COMMITMENTS AND CONTINGENCIES

Loan Commitments

The Company makes loan commitments in connection with certain real estate loans and joint venture investments that include funding for project development, building construction, renovations, lease-up operations, financed interest and other amounts that the borrower may draw upon in accordance with the loan agreement.  For existing loans, the Company has $38,024,000 in approved, unused loan commitments for real estate loans and $3,109,000 for real estate joint venture investments as of September 30, 2007.  The Company has three new approved real estate loan commitments totaling $5,600,000 as of September 30, 2007 which the Company expects to fund in 2008.



F-9





---

Legal Proceedings

The Company occasionally becomes involved in various claims and legal actions arising from the ordinary course of its business.  It is the opinion of the Companys management that the ultimate disposition of these items will not have a material effect upon the Companys financial position or results of operations.



NOTE 4  RELATED PARTY TRANSACTIONS

Cornerstone Capital Advisors, Inc.  Management and Advisory Service Agreement

The Company has a Management and Advisory Services Agreement with Cornerstone Capital Advisors, Inc. (CCA) to provide loan management, administration, and accounting; investor relations; marketing; computer and management information systems administration; record maintenance; executive management; and bookkeeping and accounting services.  The agreement is for renewable one year terms and it may be terminated by either party upon 60 days written notice.  The Companys only employee is its president.  CCA is subject to the supervision of the Companys board of directors.  One former Company executive officer and director serves on CCAs parent companys board of directors and the Companys Chief Financial Officer is employed by CCA.  The agreement obligates the Company to pay CCA the following fees:



•

Management Fee  equal to 10% of the Companys revenues from all sources other than loan fees, loan participations and revenue received from CCA plus 30% of loan participation revenue.  This fee is payable monthly.

•

Loan Origination Fee  equal to 30% of the total loan fee charged by the Company to its borrowers.  The fee is generally paid from loan proceeds and reduces deferred loan fees.



For the three and nine months ended September 30, the Company paid CCA as follows:



|                      |  |              |         |             |   |         |  |      |           |  |   |          
|--------------------- |  | ------------ | ------- | ----------- | - | ------- |  | ---- | --------- |  | - | ---------
|                      |  | Three Months |         | Nine Months
|                      |  | 2007         |         | 2006        |   | 2007    |  | 2006
|Management Fees       |  | $            | 415,543 |             | $ | 375,854 |  | $    | 1,239,174 |  | $ | 1,085,332
|Loan Origination Fees |  |              | 85,976  |             |   | 512,100 |  |      | 624,529   |  |   | 1,219,425
|                      |  | $            | 501,519 |             | $ | 887,954 |  | $    | 1,863,703 |  | $ | 2,304,757



As of September 30, 2007 and 2006, the Company owed CCA $252,459 and $301,387, respectively under this agreement.



Cornerstone Capital Advisors, Inc.  Office Lease

Effective August 1, 2004, the Company and CCA entered into a lease agreement whereby CCA is leasing the Companys corporate office building and office/computer equipment in Cumming, GA.  The lease payment is $5,000 per month.  The initial lease term ended on August 31, 2005, after which time the lease converted to a month-to-month lease.  The Companys cost basis in the office building and office/computer equipment is approximately $631,000.  The Company received $15,000 and $45,000 from CCA under the terms of this lease during each of the three and nine month periods ending September 30, 2007 and 2006, respectively.



F-10





---



Loans made to subsidiaries of Cornerstone Group Holdings, Inc./Church Growth Foundation, Inc.

Nine loans have been made to wholly-owned subsidiaries of Cornerstone Group Holdings, Inc (CGH).  At the time that these loans were originated, two of the Companys directors served as directors of CGH.    These loans were made at similar terms to that of the Companys third-party loans.  All of the loans accrue interest at 10% per annum and mature at various dates in 2008.  A summary of all loans to CGH subsidiaries as of September 30, 2007 is as follows:



|                            |  |           |            |         |                                                              | 
|--------------------------- |  | --------- | ---------- | ------- | ------------------------------------------------------------ | 
|                            |  | Principal |            | Purpose
|Cushman Apartments, LP      |  | $         | 2,271,881  |         | Acquisition/renovation of affordable apartments/condos      
|Meridian Housing, LLC       |  |           | 1,341,980  |         | Acquisition/development of affordable apartments/housing    
|Lauren Ridge Apartments, LP |  |           | 1,914,031  |         | Acquisition/construction of market rate apartments          
|Preston Ridge, LLC          |  |           | 1,229,886  |         | Acquisition/construction of affordable single family housing
|Ashton Park Apartments, LP  |  |           | 626,298    |         | Acquisition of land for low income tax credit apartments    
|River Run Apartments, LLC   |  |           | 1,850,134  |         | Acquisition/construction of market rate apartments          
|Cambridge Place, LLC        |  |           | 629,862    |         | Acquisition/construction of affordable single family housing
|San Marcos Apartments, LP   |  |           | 770,000    |         | Acquisition/construction of low income tax credit apartments
|Madison Pointe, LLC         |  |           | 695,492    |         | Acquisition/construction of affordable single family housing
|Total                       |  | $         | 11,329,564 |         |                                                             



During the third quarter of 2006, both of the Company directors who also served as directors of CGH resigned their positions on the CGH board.  Also, in late 2006, CGH was dissolved by its parent company, Church Growth Foundation, Inc. (CGF); therefore, CGHs ownership interest in the above entities was transferred to CGF.



Loan to Wellstone Retirement Communities I, LLC

In December 2005, the Companys two largest borrowers sold eight senior housing properties to Wellstone Retirement Communities I, LLC (WRC) which is managed by Cornerstone Capital Advisors, Inc. (CCA), which also serves as the Companys manager.  As a result of this transaction, the Company received $60,677,668 in loan principal and $2,512,500 in bond holdings principal.  The Company immediately supplied subordinated financing of $37,901,607 at 9.5% interest and a two year maturity to WRC to purchase the property.    Approximately $10,151,000 in equity was contributed to WRC by independent accredited investors with the remaining $64,077,000 needed to purchase the properties supplied by third-party first mortgage financing.



On January 31, 2006, an additional senior housing property was sold by Sage Living Centers, Inc. to WRC.   The Company received $11,974,400 in bond holdings principal and immediately supplied an additional $1,548,796 in subordinated financing to WRC.  WRC also received an additional $10,922,801 in third party financing at this time.



WRC received additional senior debt financing and equity contributions that allowed WRC to decrease the Companys loan principal by approximately $25,570,000 during 2006.  In January 2007, WRC refinanced its senior debt and was able to completely pay off the Companys remaining loan amount of $12,331,338 with proceeds from the refinance and from additional equity contributions.



Loan to Castleberry Properties, LLC

In March 2006, the Company originated a loan to Castleberry Properties, LLC (Castleberry) for the acquisition of land that is being developed into an office park.  Cornerstone Capital Advisors, Inc. (CCA), the Companys manager, owns 50% of Castleberry.  As of September 30, 2007, the loan principal outstanding is $932,301.  The loans maximum commitment is $950,000.  CCA has contributed $243,000 in equity to Castleberry.



F-11





---



Loans to Wellstone, LLC

In September 2006, two Company officers and two CCA officers each acquired an 18.75% ownership interest in Wellstone LLC, the Companys largest borrower.  All of the loans accrue interest at 10% per annum and mature at various dates during 2008.  All of the loans were originated at terms similar to that of the Companys third-party loans.  As of September 30, 2007, principal outstanding on the 10 project loans to Wellstone LLC totaled $76,258,017.  Seven of the 10 project loans were outstanding prior to September, 2006.  Three loans, with total principal outstanding of $6,574,991, were added after Wellstone LLC became a related party.  Effective March 31, 2007, one of the Company officers mentioned above resigned his position and is now working for Wellstone LLC.  The other Company officer placed his Wellstone LLC ownership interest in a trust and surrendered his voting rights.



Mortgage Participation Agreements purchased by Wellstone Retirement Communities I, LLC

In April 2007, Wellstone Retirement Communities I, LLC (WRC) purchased $6,215,000 in mortgage participations which are collateralized by a real estate joint venture investment loan with property located in Chattanooga, TN.  In July 2007, WRC purchased $950,000 in mortgage participations which are collateralized by a real estate loan with property located in Sevierville, TN.  The participations pay interest monthly at 10% per annum.  Please see Note 16 for additional information about the Companys Mortgage Participation Agreements.  During the first nine months of 2007, the Company accrued $333,973 in interest expense related to these agreements and paid $274,265 in interest to WRC.  $59,708 in accrued interest is currently owed to WRC by the Company.  As of September 30, 2007, the total principal and accrued interest due to WRC under these agreements is $7,224,708 and is included in Mortgage participations and accrued interest on the accompanying Consolidated Balance Sheets.



Wellstone Retirement Communities I, LLC  Company Indemnity Guarantee

In April 2007, the Company provided a guarantee to Wellstone Retirement Communities I, LLC (WRC) as part of a WRC asset sale.  In connection with the sale, WRC made customary representations and warranties and agreed to indemnify the purchaser for a breach of these representations and warranties for a period of one year following the date of sale.  The Company agreed to guarantee the indemnity obligations of WRC and another obligor up to a maximum of $3,500,000.  The Company is to receive a fee of $35,000 for providing the guarantee which is recorded as a guarantee receivable in the accompanying Consolidated Balance Sheets.



Loan Payable to Wellstone Investment Fund, LLC

In August 2006, the Company borrowed $1,589,000 from Wellstone Investment Fund, LLC (WIF) under a revolving line of credit agreement.  Cornerstone Capital Advisors, Inc., the Companys manager, is also the manager for WIF.  As of September 30, 2006 the loan principal and interest due to WIF was $1,602,019.  See Note 17 for additional information on this loan payable.



NOTE 5 - REAL ESTATE LOANS

At September 30, the Company had Real Estate Loans outstanding as follows:



|                                 |  |   |             |  |   |            
|-------------------------------- |  | - | ----------- |  | - | -----------
|                                 |  |   | 2007        |  |   | 2006       
|Family housing development loans |  | $ | 132,743,811 |  | $ | 104,107,521
|Church mortgage loans            |  |   | 10,460,951  |  |   | 6,471,164  
|Senior housing mortgage loans    |  |   | 1,093,054   |  |   | 27,112,962 
|Total principal                  |  |   | 144,297,816 |  |   | 137,691,647
|Accrued Interest                 |  |   | 1,424,589   |  |   | 902,249    
|Unearned Loan Fees               |  |   | (2,787,678) |  |   | (3,074,901)
|Allowance for loan losses        |  |   | (1,600,000) |  |   | (951,000)  
|Total Real Estate Loans          |  | $ | 141,334,727 |  | $ | 134,567,995



These loans mature as follow: 2007 - $16,580,449; 2008 - $120,403,408; 2009 - $2,657,900; 2010 - $0; 2011 and beyond - $4,656,059.  Loan maturity may be accelerated in accordance with loan terms, generally upon certain events of default such as non-payment of scheduled payments or bankruptcy.



F-12





---

Based on the terms of the loans, the Company allows borrowers with loans related to certain family housing and church properties to finance interest payments while the properties are in the development and construction phase of operations.  For the nine months ended September 30, the net interest payments financed were:



|                                           |  |   |             |  |   |            
|------------------------------------------ |  | - | ----------- |  | - | -----------
|                                           |  |   | 2007        |  |   | 2006       
|Current year interest financed             |  | $ | 4,158,705   |  | $ | 3,481,243  
|Previous years financed interest received |  |   | (1,941,810) |  |   | (1,162,841)
|Net financed interest                      |  | $ | 2,216,895   |  | $ | 2,318,402  



On September 30, 2007, the Company had significant credit risk concentrations in the following states:



|                  |            
|----------------- | -----------
|Georgia -         | $35,777,787
|Texas   -         | $62,142,180
|South Carolina  - | $31,162,588



Impaired loan disclosures for the nine months ended September 30:



|                                             |  |   |            |  |   |        
|-------------------------------------------- |  | - | ---------- |  | - | -------
|                                             |  |   | 2007       |  |   | 2006   
|Number of impaired loans                     |  |   | 12         |  |   | 1      
|Carrying amount                              |  | $ | 32,033,224 |  | $ | 288,523
|Weighted average investment  year-to-date   |  | $ | 30,314,835 |  | $ | 283,950
|Impaired loan interest income  three months |  | $ | 687,719    |  | $ | 6,825  
|Impaired loan interest income  nine months  |  | $ | 2,060,098  |  | $ | 22,463 



Approximately $790,000 in allowance for specific impaired loan loss has been re-classified from the current credit risk assessment loan loss allowance because the total carrying amount of the impaired loans as of September 30, 2007 is greater than the present value of their expected future cash flows.  The total expected future cash flows of the impaired loans is estimated by the Company to be approximately $31,243,000.  The estimated future cash flows from the impaired loans includes estimated cash flows from the projects that borrowed the funds plus the following additional items:



•

Guarantees from Wellstone LLC and Cornerstone Capital Advisors, Inc. (CCA) (both are related parties  see note 4) to two borrowers.  These guarantees have an estimated present value of approximately $7,243,000.  The guarantees are needed due to losses realized by the borrowers on projects in which we originated real estate mortgage loans.

•

One of the borrowers with impaired loans has a preferred ownership interest in Wellstone LLC with an estimated fair value of $8,393,000 which will be used by the borrower to pay principal on its impaired loans when it receives cash from Wellstone LLC for this asset.



Wellstone LLC and CCAs ability to perform under their respective guarantees and obligations (mentioned above) is dependant on their ability to recognize profits on their current project portfolios and/or replace the impaired loan borrowers equity with new third-party equity.  The Companys management has determined that it is likely that Wellstone LLC and CCA will be able to perform under there respective guarantees and obligations.  Without these guarantees and the preferred ownership interest fair value, the Company would have to record an additional loan loss provision of up to approximately $15.6 million.  As of September 30, 2006, no specific impaired loan loss allowance had been recorded.



F-13





---



NOTE 6  REAL ESTATE JOINT VENTURE INVESTMENTS

As of September 30, certain of the Companys mortgage loans on senior housing facilities are classified as real estate joint venture investments, as follows:



|                                           |  |   |            |  |   |            | 
|------------------------------------------ |  | - | ---------- |  | - | ---------- | 
|Location                                   |  |   | 2007       |  |   | 2006      
|St. Petersburg, FL                         |  |   | 10,676,151 |  |   | 6,891,521 
|Lewisville, TX                             |  |   | -0-        |  |   | 545,000   
|Chattanooga, TN                            |  |   | 6,284,487  |  |   | 6,212,187 
|San Antonio, TX                            |  |   | -0-        |  |   | 3,442,502 
|Edmond, OK                                 |  |   | -0-        |  |   | 1,693,115 
|Total principal outstanding                |  |   | 16,960,638 |  |   | 18,784,325
|Accrued interest                           |  |   | 305,581    |  |   | 150,585   
|Unearned loan fees                         |  |   | -0-        |  |   | -0-       
|Allowance for loan losses                  |  |   | -0-        |  |   | -0-       
|Real estate joint venture investments, net |  | $ | 17,266,219 |  | $ | 18,934,910





All of these loans mature in 2008.  Loan maturity may be accelerated in accordance with loan terms, generally upon certain events of default such as non-payment of scheduled payments or bankruptcy.



The Company participates in the residual profits of the real estate joint venture investments through loan participation agreements, which enable the Company to receive income from a borrower when a property for which the Company provided financing is sold or refinanced with another lender.  The participation percentage for each property varies between 25% and 33% of the borrowers gain.



All loans accrue interest at 10% per year and, except as noted below, interest-only payments are received monthly.  The original loan terms are for one year with either one or two, one year extensions at the Companys option.  The Company charges a 10% loan origination fee which is financed and included in the loans principal balance.



In accordance with loan terms, the Company allows certain borrowers to finance interest payments while their facilities are in the construction or renovation phase of operations.  For the nine months ended September 30, the net interest payments financed were as follows:



|                                           |  |   |           |  |   |         
|------------------------------------------ |  | - | --------- |  | - | --------
|                                           |  |   | 2007      |  |   | 2006    
|Current year interest financed             |  | $ | 746,679   |  | $ | 996,109 
|Previous years financed interest received |  |   | (499,116) |  |   | (23,146)
|Net financed interest                      |  | $ | 247,563   |  | $ | 972,963 



The Company analyzes the underlying operations and collateral of each facility in which there is an outstanding loan by requiring independent appraisals every 12 to 24 months, reviewing loan balances and comparing them to the established loan budgets, and by analyzing income and cash flow statements that are submitted by the borrowers.  If it is determined that it is probable that the Company will be unable to collect all amounts due according to the contractual terms of a loan, the loan is considered impaired and a loan loss will be recognized to the extent the collaterals fair value is less than the current loan carrying amount.



One real estate joint venture investment loan was considered impaired as of September 30, 2007 and 2006. The impaired loans carrying amount as of September 30, 2007 and 2006 was $6,499,581 and $6,263,207, respectively.  The loans average carrying amount for the first nine months of 2007 and 2006 was $6,450,962 and $6,189,189, respectively.  A total of $466,897 and $438,365 in interest was earned in the nine months ended September 30, 2007 and 2006, respectively from this loan.  The loans collateral is appraised at $7,400,000; therefore, no loan loss allowance has been established.



F-14





---



NOTE 7  LOANS TO VARIABLE INTEREST ENTITIES (VIE)

Loans to VIEs  Company not considered the primary beneficiary:



In 2005, the Company originated a loan with a for-profit entity that did not have enough equity at risk to absorb all of its estimated expected losses.  The Company is not considered the primary beneficiary since the entitys equity guarantees were estimated to be sufficient to absorb the majority of its estimated expected losses, if they occur.  The loans carrying amount on September 30, 2007 was $1,353,424.



In September 2006, Senior Housing Services, Inc. (a non-profit entity) and its subsidiaries sold its ownership interests in seven family housing projects to Wellstone LLC, a for-profit entity formed by the projects third-party management group.  As part of the purchase agreement, Wellstone LLC assumed all of the Companys outstanding real estate loans on these projects.  Wellstone LLC is considered a variable interest entity because it does not have enough equity investment at risk to absorb all of its estimated expected losses.  The Company is not considered the primary beneficiary since Wellstone LLCs subordinated financial instruments are expected to be sufficient to absorb the majority of its estimated expected losses, if they occur.  The Companys seven original project loans to Wellstone LLC plus three new project loans originated after September 2006, had a total carrying amount of $74,460,151 as of September 30, 2007.



During 2006 and 2007, the Company originated seven loans to borrowers who are considered variable interest entities because they do not have enough equity at risk to absorb all of their estimated expected losses.  Wellstone Retirement Communities I, LLC (WRC) has provided guarantees to six of these entities which, if needed, will be adequate to absorb the majority of each borrowers estimated expected losses, if they occur; therefore, the Company is not considered the primary beneficiary.  WRC is a related party because Cornerstone Capital Advisors, Inc. manages both entities (see Note 4).  The seventh loan has a general partner who is considered the primary beneficiary.  As of September 30, 2007, the seven loans have a total carrying amount of $7,731,031.  The borrowers are developing real estate for use as market rate apartments, low-income apartments and affordable single family homes.



As of September 30, 2007, the Company has 18 loans with a total carrying amount of $83,544,606 to VIEs in which the Company is not the primary beneficiary.  These loans are classified as Real estate loans, net in the accompanying Consolidated Balance Sheet.



Loans to VIEs  Company considered primary beneficiary:



The Company originated one loan in 2006 and one loan in 2007 in which the Company is considered the primary beneficiary.  The borrowing entities are developing real estate for use as low-income apartment facilities.  These two loans have a total carrying amount of $6,168,286 as of September 30, 2007 and they have been eliminated in consolidation.  Please see Note 9 for additional information on these investments.



NOTE 8  ALLOWANCE FOR LOAN LOSSES

For the nine months ended September 30, 2007 and 2006, a summary of changes in the allowance for loan losses by loan type is as follows:



|                   |  |   |        |  |   |           |  |   |         |  |   |               |  |   |          
|------------------ |  | - | ------ |  | - | --------- |  | - | ------- |  | - | ------------- |  | - | ---------
|                   |  |   |        |  |   |           |  |   |         |  |   | Real Estate   |  |   |          
|                   |  |   |        |  |   | Family    |  |   | Senior  |  |   | Joint Venture |  |   |          
|                   |  |   | Church |  |   | Housing   |  |   | Housing |  |   | Investments   |  |   | Total    
|Balance  12/31/05 |  | $ | -0-    |  | $ | 732,000   |  | $ | -0-     |  | $ | -0-           |  | $ | 732,000  
|Loan loss expense  |  |   | -0-    |  |   | 219,000   |  |   | -0-     |  |   | -0-           |  |   | 219,000  
|Charge-offs        |  |   | -0-    |  |   | -0-       |  |   | -0-     |  |   | -0-           |  |   | -0-      
|Recoveries         |  |   | -0-    |  |   | -0-       |  |   | -0-     |  |   | -0-           |  |   | -0-      
|Balance 9/30/06   |  | $ | -0-    |  | $ | 951,000   |  | $ | -0-     |  | $ | -0-           |  | $ | 951,000  
|                   |  |   |        |  |   |           |  |   |         |  |   |               |  |   |          
|Balance  12/31/06 |  |   | -0-    |  | $ | 1,253,000 |  | $ | -0-     |  | $ | -0-           |  | $ | 1,253,000
|Loan loss expense  |  |   | -0-    |  |   | 347,000   |  |   | -0-     |  |   | -0-           |  |   | 347,000  
|Charge-offs        |  |   | -0-    |  |   | -0-       |  |   | -0-     |  |   | -0-           |  |   | -0-      
|Recoveries         |  |   | -0-    |  |   | -0-       |  |   | -0-     |  |   | -0-           |  |   | -0-      
|Balance 9/30/07   |  | $ | -0-    |  | $ | 1,600,000 |  | $ | -0-     |  | $ | -0-           |  | $ | 1,600,000



F-15





---



Components of allowance for loan losses at September 30:



|                                |  |   |           |  |   |        
|------------------------------- |  | - | --------- |  | - | -------
|                                |  |   | 2007      |  |   | 2006   
|Collective loan losses-         |  |   |           |  |   |        
|Historical experience           |  | $ | -0-       |  | $ | -0-    
|Current credit risk assessment  |  |   | 810,000   |  |   | 951,000
|Total collective loan losses    |  |   | 810,000   |  |   | 951,000
|Specific impaired loan losses   |  |   | 790,000   |  |   | -0-    
|Total allowance for loan losses |  | $ | 1,600,000 |  | $ | 951,000



The Company incurred its first loss from a loan in 2006 when the Company sold a foreclosed church property at a loss of $34,000.  Due to the immaterial amount of recognized losses from loans during the Companys operating history, there is no collective loan loss allowance related to the Companys historical experience.



NOTE 9  CONSOLIDATED REAL ESTATE ASSETS AND OBLIGATIONS

Consolidated real estate assets and obligations include the assets and liabilities of majority-owned subsidiaries and variable interest entities (VIE) in which the Company is considered the primary beneficiary.  As of September 30, 2007, one majority-owned subsidiary (Heron Lake, LLC) and two VIEs in which the Company is considered the primary beneficiary (Preston Pointe Apartments, LP and Bear Place Village, LP) have been consolidated.  As of September 30, 2007, the following assets and liabilities are included in the Companys Consolidated Financial Statements:



|                           |  |            |            |       |   |           |  |   |           
|-------------------------- |  | ---------- | ---------- | ----- | - | --------- |  | - | ----------
|                           |  | Subsidiary |            | VIEs |   | Total    
|Assets:                    |  |            |            |       |   |           |  |   |           
|Land                       |  | $          | 2,554,646  |       | $ | 1,572,400 |  | $ | 4,127,046 
|Buildings and improvements |  |            | -0-        |       |   | 4,092,629 |  |   | 4,092,629 
|Construction in Progress   |  |            | 7,551,954  |       |   | 46,233    |  |   | 7,598,187 
|Loan issue costs           |  |            | 795,255    |       |   | 22,561    |  |   | 817,816   
|Working capital escrows    |  |            | 925,669    |       |   | -0-       |  |   | 925,669   
|Other assets               |  |            | -0-        |       |   | 16,042    |  |   | 16,042    
|Total assets               |  | $          | 11,827,524 |       | $ | 5,749,865 |  | $ | 17,577,389
|                           |  |            |            |       |   |           |  |   |           
|Liabilities:               |  |            |            |       |   |           |  |   |           
|Current liabilities        |  | $          | 964,733 -  |       | $ | 98,907    |  | $ | 1,063,640 
|Long-term debt             |  |            | -          |       |   | 202,500   |  |   | 202,500   
|Total liabilities          |  | $          | 964,733    |       | $ | 301,407   |  | $ | 1,266,140 





The Company acquired its subsidiary in 2006 by purchasing an 89% ownership interest in an entity which is developing real estate for use as market-rate apartments.  Construction began in the spring of 2007.  A United States Department of Housing and Urban Development backed loan is being used for construction and permanent financing.  Please see Note 17 for additional information about this loan.



F-16





---



The VIE investments were acquired in 2006 and 2007.  Bear Place Village, LP is in the construction stage of operations.  Preston Pointe Apartments, LP completed construction in December 2006 and lease-up operations are in progress.  The operating results from the subsidiary and VIE investments that are included in the Companys Consolidated Statement of Operations for the three and nine months ending September 30, 2007 are as follows:



|                           |  |   |              |  |   |             |  |                           
|-------------------------- |  | - | ------------ |  | - | ----------- |  | --------------------------
|                           |  |   | Three
Months |  |   | Nine
Months |  |                           
|Rental and related revenue |  | $ | 23,264       |  | $ | 35,375      |  | (included in other income)
|Interest income  other    |  |   | 36,352       |  |   | 36,352      |  | (included in other income)
|Operating expenses         |  |   | (81,411)     |  |   | (267,815)   |  |                           
|Net loss                   |  | $ | ($21,795)    |  | $ | (196,088)   |  |                           



NOTE 10 - GOODWILL

Goodwill associated with the Companys fiscal year 2000 acquisition of Presbyterian Investors Fund, Inc. is carried at $450,997.  Goodwill is tested for impairment at the end of each year using the present value of expected future cash flows to determine its fair value.  At December 31, 2006 and 2005, Goodwills fair value exceeded its carrying value; therefore, no provision for impairment loss has been recorded.  No goodwill was acquired or sold in either of the periods presented in these Consolidated Financial Statements.



NOTE 11 - UNAMORTIZED DEBT ISSUE COSTS

Unamortized debt issue costs consist of legal, accounting, and filing costs incurred to register the Companys debt securities, commissions paid or accrued on the sale of debt securities, and loan fees and costs associated with the Companys loan from Bernard National.  These costs are amortized on a straight-line basis over the period the associated securities/loan are outstanding, generally five years for bonds and three years for the Bernard National loan (See Note 17).  At September 30, 2007, unamortized debt issue costs consist of:



|                                                |  |   |            
|----------------------------------------------- |  | - | -----------
|Costs incurred to obtain Bernard National loan  |  | $ | 1,061,889  
|Costs incurred to register debt securities      |  |   | 1,004,640  
|Commissions paid on the sale of debt securities |  |   | 6,238,237  
|Less: Accumulated Amortization                  |  |   | (5,176,510)
|                                                |  | $ | 3,128,256  



Amortization expense was $364,500 and $305,624 for the three months and $1,091,253 and $848,749 for the nine months ended September 30, 2007 and 2006, respectively.  Estimated amortization expense for the next five years:



|                             |                            |                           
|---------------------------- | -------------------------- | --------------------------
|10/2007  9/2008: $1,264,233 | 10/2009  9/2010: $419,559 | 10/2011  9/2012: $107,601
|10/2008  9/2009: $1,036,007 | 10/2010  9/2011: $300,856 |                           



NOTE 12 - BOND HOLDINGS



|                                          |  |   |           |  |   |          
|----------------------------------------- |  | - | --------- |  | - | ---------
|Bond holdings at September 30 consist of- |  |   | 2007      |  |   | 2006     
|Local Church Bonds, maturing 2013         |  |   | 1,969,089 |  | $ | 1,961,507
|Accrued interest receivable               |  |   | 11,690    |  |   | 182,880  
|                                          |  | $ | 1,980,779 |  | $ | 2,144,387



The bonds are not traded on an exchange; however, management estimates, based on the fair value of the bonds collateral that the fair value of the individual securities is greater than or equal to their carrying amount.  Accordingly, no unrealized holding gains or losses have been recorded in 2007 or 2006.



F-17





---



The local church bonds were considered impaired by the Company last quarter due to non-payment of interest.  In the third quarter of 2007, all past due and currently due bond interest was received by the Company.  The church property which collateralizes the bonds is currently unoccupied and held for sale.  The Company is working closely with the owners/borrowers to properly resolve this situation.  As stated above, no unrealized holding loss has been recorded because the Company estimates that the bonds collateral value exceeds its current carrying amount.



The local church bonds are recorded net of $44,911 and $52,493 in unamortized bond discounts as of September 30, 2007 and 2006, respectively.  The face amount of the bonds is $2,014,000.  During the three and nine months ended September 30, 2007 and 2006, $1,896 and $5,687 in bond discounts, respectively, were credited to interest income.



Proceeds from the sale or maturity of bonds were $0 and $11,974,400 for the nine months ended September 30, 2007 and 2006, respectively. No realized gains or losses were recognized in either period.  The Company uses the specific identification method to determine realized gains and losses.



Tax-free interest income was $0 and $75,359 for the nine month periods ending September 30, 2007 and 2006, respectively.



NOTE 13 - INCOME TAXES

The net deferred tax asset in the accompanying Consolidated Balance Sheets includes the following components as of September 30:



|                         |  |  |   |           |  |   |           | 
|------------------------ |  |  | - | --------- |  | - | --------- | 
|                         |  |  |   | 2007      |  |   | 2006      | 
|Deferred tax assets      |  |  | $ | 1,085,440 |  | $ | 446,497   | 
|Deferred tax liabilities |  |  |   | (134,552) |  |   | (151,427) | 
|Net deferred tax asset   |  |  | $ | 950,888   |  | $ | 295,070   | 



The deferred tax liabilities result from the use of accelerated depreciation methods for property and equipment and from using the installment method for tax accounting.  The deferred tax assets result from tax versus financial reporting differences in accounting for allowance for loan losses, amortization of debt issue and start-up costs, and variable interest entities.  The Company estimates that future taxable income will be sufficient to realize the net deferred tax assets; therefore, no valuation allowance was provided for as of September 30, 2007 and 2006.



Components of the Companys income tax provision (benefit) for the three and nine months ended September 30:



|          |  |         |  |              |           |             |   |          |  |      |           |  |   |          
|--------- |  | ------- |  | ------------ | --------- | ----------- | - | -------- |  | ---- | --------- |  | - | ---------
|          |  |         |  | Three Months |           | Nine Months
|          |  |         |  | 2007         |           | 2006        |   | 2007     |  | 2006
|Current:  |  | Federal |  | $            | 99,680    |             | $ | 183,340  |  | $    | 194,396   |  | $ | 429,921  
|          |  | State   |  |              | 10,953    |             |   | 20,145   |  |      | 22,908    |  |   | 50,054   
|Deferred: |  | Federal |  |              | (127,697) |             |   | (39,781) |  |      | (422,549) |  |   | (136,314)
|          |  | State   |  |              | (14,032)  |             |   | (4,371)  |  |      | (46,429)  |  |   | (14,919) 
|          |  |         |  | $            | (31,096)  |             | $ | 159,333  |  | $    | (251,674) |  | $ | 328,742  





Reconciliation of the Companys income tax provision (benefit) rate to the statutory federal rate for the three and nine months ended September 30:



|                                        |  |              |  |        |             |  |         |  |       
|--------------------------------------- |  | ------------ |  | ------ | ----------- |  | ------- |  | ------
|                                        |  | Three Months |  |        | Nine Months
|                                        |  | 2007         |  | 2006   |             |  | 2007    |  | 2006  
|Statutory federal rate                  |  | (35.0%)      |  | 35.0%  |             |  | (35.0%) |  | 35.0% 
|Effect of graduated federal rates       |  | 1.0%         |  | (1.0%) |             |  | 1.0%    |  | (1.0%)
|State taxes, net of federal benefit     |  | (3.7%)       |  | 3.7%   |             |  | (3.7%)  |  | 3.7%  
|Effect of tax-free bond interest income |  | -            |  | -      |             |  | -       |  | (2.7%)
|Other, net                              |  | 0.0%         |  | .1%    |             |  | .1%     |  | .1%   
|Effective tax provision (benefit) rate  |  | (37.7%)      |  | 37.8%  |             |  | (37.6%) |  | 35.1% 





F-18





---



Current income taxes payable were $31,755 and $90,263 as of September 30, 2007 and 2006, respectively, and are included in accounts and other payables in the accompanying Consolidated Balance Sheets.



NOTE 14 - CASH CONCENTRATION RISK

A cash concentration risk arises when the Company has more cash in a financial institution than is covered by federal deposit insurance. At September 30, 2007, the Company had cash in excess of insured limits totaling $1,860,353.  The Companys policy is to place its cash investments with high quality financial institutions and has never experienced any loss on holdings in excess of insured limits.



NOTE 15 - INVESTOR BONDS

The Company has three types of bonds outstanding:



Access bonds have no stated maturity and are due on demand.  The minimum investment amount is $100.  The interest rate is determined by the Board of Directors each quarter.  The directors may change the rate between quarters if market conditions warrant such a change.  The current interest rate is 5%.

Graduated rate bonds can be redeemed yearly and have a five year maximum maturity.  The minimum investment amount is $500.  The interest rate increases based on the length of time that the bond is outstanding.  For bonds sold prior to 2004 the rate starts at 7% and increases .5% for each year the bond is outstanding with a 9% maximum rate.  Bonds (Series E & F) sold in 2004 and 2005 have an initial interest rate of 6.25% and increase .5% for each year the bond is outstanding with an 8.25% maximum rate.  Series G bonds do not include graduated rate bonds.

Five year bonds have a five year maturity and a $500 minimum investment.  The interest rate is 9% for bonds sold prior to 2004 and 8.25% for bonds (Series E, F & G) sold in 2004 and thereafter.  Effective October 1, 2007, the interest rate on all Series G bonds was increased to 9%.



The bonds are not collateralized and no sinking fund is required to fund redemptions at maturity.  All of the bonds have been registered with the Securities and Exchange Commission under the Securities Act of 1933.

Five year schedule of principal maturities for bonds outstanding at September 30:



|                                                              |  |                                                                           |  |                                                                              |  | 
|------------------------------------------------------------- |  | ------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------- |  | 
|Years to Maturity
On demand & 1 year
2
3
4
5+
Total Principal |  | 2007
$ 33,133,687
29,651,856
20,395,360
3,089,662
40,323,684
$126,594,249 |  | 2006
$   45,458,555
18,005,845
35,528,488
17,933,696
4,835,354
$ 121,761,938 |  | 



At September 30, 2007 and 2006, accrued interest payable was $14,570,955 and $15,900,394, respectively.  Interest rates for bonds outstanding at September 30, 2007 are:



|      |                |                  |            
|----- | -------------- | ---------------- | -----------
|5.00% | $578,473
7.25% | $1,160,190
8.25% | $93,460,562
|6.75% | $565,682
7.75% | $2,251,697
9.00% | $28,577,645



The Company filed a Form SB-2 Registration Statement with the Securities and Exchange Commission in February 2006 with $60,000,000 in Series G Investor Bonds and $32,500,000 in Common Stock available for issuance.  The terms of the Series G Investor Bonds are similar to the Series E and F bonds.  After a review by the Securities and Exchange Commission, the registration statement became effective on September 11, 2006 and the Company began to sell securities on September 25, 2006.  For the nine months ended September 30, 2007, the Company sold $9,677,433 in bonds and $209,872 in Common Stock (32,288 shares at $6.50 per share).  Also, $15,837,701 in maturing bonds was reinvested into Series G bonds during the nine months ended September 30, 2007.



F-19





---



NOTE 16  MORTGAGE PARTICIPATION AGREEMENTS

Mortgage Participation (MP) Agreements are debt instruments that are collateralized by specific loans owned by the Company and they entitle the investor to a proportionate share of the interest earned on the collateral.  The MP Agreements have not been registered and therefore, are only available to accredited investors.  Interest is paid monthly to the MP investor after the Company receives interest payments on the related collateralized loans.  The agreements have no stated maturity date.  Principal payments are made when the Company receives principal payments on the collateralized loans.  Losses that the Company may incur on the collateralized loans are shared pro-rata with the MP Agreement holders.  The Company has the right but not the obligation to redeem the MP Agreements at any time.  The MP Agreement investors do not have the right to sell or repledge their interest in the underlying collateral.  Interest expense related to MP Agreements was $213,132 and $106,859 for the three months and $430,673 and $277,536 for the nine months ended September 30, 2007 and 2006, respectively.  MP Agreement principal and interest outstanding and related collateral as of September 30, 2007:



|                                                     |  |             |           |                  |   |          
|---------------------------------------------------- |  | ----------- | --------- | ---------------- | - | ---------
|                                                     |  | MP Amount   |           | Total Collateral
|                                                     |  | Outstanding |           | Carrying Amount 
|Bluffton, SC family housing loan; matures 9/01/08    |  |             |           |                  |   |          
|with one available extension                         |  | $           | 1,600,000 |                  | $ | 8,508,498
|Chattanooga, TN senior housing loan; matures 6/30/08 |  |             |           |                  |   |          
|with no available extensions                         |  |             | 6,215,000 |                  | $ | 6,499,581
|Sevierville, TN family housing loan; matures 6/15/08 |  |             | 950,000   |                  | $ | 3,243,040
|with one available extension                         |  |             |           |                  |   |          
|Accrued interest payable                             |  |             | 68,829    |                  |   |          
|                                                     |  | $           | 8,833,829 |                  |   |          



The Bluffton and Sevierville loans which collateralize the MP Agreements are classified as real estate loans and the Chattanooga loan is classified as a real estate joint venture investment in the accompanying Consolidated Balance Sheets.  The total carrying amounts are equal to the loans principal plus accrued interest less deferred loan fees.



NOTE 17  LOANS & MORTGAGES PAYABLE



|                                           |  |   |            |  |   |           
|------------------------------------------ |  | - | ---------- |  | - | ----------
|Outstanding at September 30:               |  |   |            |  |   |           
|                                           |  |   | 2007       |  |   | 2006      
|Bernard National Senior Funding, Ltd       |  |   |            |  |   |           
|Interest rate equal to the greater of 8.5% |  |   |            |  |   |           
|or LIBOR + 3.5%  currently 9.16%          |  |   |            |  |   |           
|Matures August 2009                        |  | $ | 20,000,000 |  | $ | 16,000,000
|Prudential Huntoon Paige                   |  |   |            |  |   |           
|Interest rate  5.75%                      |  |   |            |  |   |           
|Matures June 2048                          |  |   | 5,406,513  |  |   | -0-       
|First United Bank                          |  |   |            |  |   |           
|Interest rate  8.75%                      |  |   |            |  |   |           
|Matures November 30, 2007                  |  |   | 3,000,000  |  |   | -0-       
|Wellstone Investment Fund, LLC             |  |   |            |  |   |           
|Interest rate  10%; matured 12/31/06      |  |   | -0-        |  |   | 1,589,000 
|Fidelity Bank                              |  |   |            |  |   |           
|Interest rate  9.75%                      |  |   |            |  |   |           
|Matures September 2009                     |  |   | -0-        |  |   | 407,957   
|Principal outstanding                      |  |   | 28,406,513 |  |   | 17,996,957
|Interest payable                           |  |   | 152,750    |  |   | 134,703   
|Total principal & interest outstanding     |  | $ | 28,559,263 |  | $ | 18,131,660
|                                           |  |   |            |  |   |           
|Interest expense  three months            |  | $ | 476,036    |  | $ | 148,575   
|Interest expense  nine months             |  | $ | 1,384,244  |  | $ | 169,625   



F-20





---



For the three and nine months ended September 30, 2007, $55,118 and $80,546 in interest expense, respectively, was capitalized because the Prudential Huntoon Paige loan principal proceeds are being used to fund a facility that is currently under construction.



Loan maturity amounts by year: 2007 - $3,000,000; 2008 - $0; 2009 - $20,113,945; 2010 - $120,672; 2011 and thereafter - $5,171,896.



The Bernard National Senior Funding, Ltd. (Bernard National) loan is a $40,000,000 revolving credit facility.  The loan is secured by 20 of the Companys first mortgage real estate loans which had principal outstanding of $40,775,737 at September 30, 2007.  Interest-only payments are due monthly.  No principal payments are due until the maturity date unless certain loan to value ratio minimums (as defined in the agreement) are not met.  If these ratio minimums are not met, the Company is required to make a payment which would decrease the loan amount outstanding to an amount which would then allow the Company to meet the loan to value ratio minimums.  As of September 30, 2007 the loan to value ratio minimums have been met.



As part of the Bernard National transaction, the Company formed a wholly-owned subsidiary, CMI Asset Pool I, LLC (CAP), and contributed the 19 first mortgage loans to CAP.  These loans were then pledged as collateral to Bernard National as security for the revolving credit facility.  The assets, liabilities and results of operations for CAP are included in these Consolidated Financial Statements.



The Prudential Huntoon Paige (Prudential) loan is a $17,214,400 construction loan which will convert into a permanent loan once construction is complete.  The loan is being used by the Companys Heron Lake, LLC subsidiary to construct market-rate apartments in Spartanburg, SC.  During the construction period, monthly interest-only payments are being financed by Prudential and added to the loans principal.  After construction is completed, a principal and interest payment of $91,733 will be due monthly.  The underlying land and improvements collateralize the loan.



The First United Bank loan is a short-term loan with a $3,000,000 maximum commitment.  The loan is secured by the Companys second mortgage loans to Wellstone, LLC on four projects located in McKinney, TX.  Interest-only payments are due monthly until the loan matures in November 2007.



The Wellstone Investment Fund, LLC loan was a short-term uncollateralized revolving line of credit loan.  Interest-only payments were due monthly.  The loan was paid in full in December 2006.



The Fidelity Bank loan was originally used to finance the Companys office building.  In June 2007, the loan was paid in full.



NOTE 18  GUARANTEE OBLIGATIONS

The Company is guarantor on 10 loans secured by senior housing, low income housing, affordable family housing and church facilities.  Certain real estate joint venture investments and real estate acquisition and development loans in which the borrower chooses to secure outside financing may require the Company to guarantee the loan as a condition of the extension of the loan by the financial institution.  The loan guarantees are solely limited to amounts drawn under credit facilities and cover outstanding principal and accrued interest and terminates upon maturity and principal repayment or at project stabilization (as defined by the agreement).  Only upon an uncured payment default and upon demand by the financial institution would the Company be required to perform under its guarantee obligations.  The Companys recourse would be limited to repossession of the underlying collateral and subsequent resale of the facilities.  As of September 30, 2007, all loans which had a guarantee were current based on their loan terms.



F-21





---



In April 2007, the Company provided an indemnification guarantee to Wellstone Retirement Communities I, LLC (WRC).  In connection with a major asset sale, WRC made customary representations and warranties and agreed to indemnify the purchaser for a breach of these representations and warranties for one year from the date of sale.  The Company guaranteed the indemnity obligations of WRC and another obligor up to a maximum of $3,500,000.  The agreed upon fee for this obligation is $35,000, which is outstanding at September 30, 2007 and included in guarantee receivables on the accompanying Consolidated Balance Sheets



Guarantee obligations as of September 30, 2007:



|                    |  |             |  |          |  |           |            |             |         |            |      |   |        
|------------------- |  | ----------- |  | -------- |  | --------- | ---------- | ----------- | ------- | ---------- | ---- | - | -------
|                    |  | Renewal/    |  |          |  |           |            |             | Current |            | Loan
|                    |  | Origination |  | Maturity |  | Maximum   |            | Principal   |         | Guarantee 
|Location/Type       |  | Date        |  | Date     |  | Guarantee |            | Outstanding |         | Obligation
|Charleston, SC      |  | 12/30/05    |  | 4/1/08   |  | $         | 11,500,000 |             | $       | 11,500,000 |      | $ | 100,000
|Beaufort, SC        |  | 12/30/05    |  | 4/1/08   |  |           | 8,850,000  |             |         | 8,850,000  |      |   | 150,000
|Blythewood, SC      |  | 8/25/06     |  | 8/25/08  |  |           | 250,000    |             |         | 250,000    |      |   | 3,750  
|Seneca, SC          |  | 9/08/06     |  | 9/8/08   |  |           | 860,000    |             |         | 860,000    |      |   | 12,900 
|Spartanburg, SC     |  | 9/26/06     |  | 9/26/08  |  |           | 17,660,000 |             |         | 6,007,881  |      |   | 101,875
|Lexington, SC       |  | 12/29/06    |  | 12/29/08 |  |           | 18,250,000 |             |         | 7,389,851  |      |   | 91,000 
|Dallas, TX (church) |  | 5/16/06     |  | 5/16/09  |  |           | 219,000    |             |         | 219,000    |      |   | 2,153  
|Dallas, TX (church) |  | 6/9/06      |  | 6/9/09   |  |           | 331,661    |             |         | 331,661    |      |   | 3,215  
|Dallas, TX (church) |  | 8/24/06     |  | 8/24/09  |  |           | 371,700    |             |         | 371,700    |      |   | 3,717  
|St. Petersburg, FL  |  | 12/18/04    |  | 8/15/08  |  |           | 7,331,300  |             |         | 6,753,240  |      |   | 71,000 
|Indemnification     |  | 4/13/07     |  | 4/13/08  |  |           | 3,500,000  |             |         | n/a        |      |   | 35,000 
|                    |  |             |  |          |  | $         | 69,123,661 |             | $       | 42,533,333 |      | $ | 574,610



The guarantees related to the Charleston, SC and Beaufort, SC low income housing facilities also include a construction cost guarantee and various operational performance guarantees as defined by the agreements.  The non-profit owner of these facilities is a co-guarantor with the Company.  Also, the developer of these projects has agreed to defer the collection of approximately $2,950,000 in developer fees and costs from the projects construction budgets until after the Companys guarantee obligations have been released.  Any operating or construction cost shortfalls will reduce the deferred developer fees paid by the borrower and will be used to reimburse the Company and the non-profit owner for any amounts paid under the guarantee agreements.



NOTE 19 - SERIES A CONVERTIBLE PREFERRED STOCK

In 2001, the Company amended its Articles of Incorporation to provide for the issuance of up to 235,000 shares of Series A Convertible Preferred Stock.  The shares do not accrue dividends unless such dividends are declared by the Board of Directors.  The shares entitle the preferred shareholder to have one vote per share, presently equal to the voting rights of Common shareholders.  Each share is convertible, after 3 years, into shares of Common Stock based on a formula.  No Series A Convertible Preferred Stock was outstanding on September 30, 2007 and 2006.



NOTE 20 - EARNINGS PER SHARE

Basic earnings (loss) per share for the three and nine months ended September 30, 2007 and 2006 have been calculated as follows:



|     |  |                                   |  |              |          |             |   |          
|---- |  | --------------------------------- |  | ------------ | -------- | ----------- | - | ---------
|     |  |                                   |  | Three Months |          | Nine Months
|2006 |  | Net Income                        |  | $            | 261,847  |             | $ | 606,658  
|     |  | Average Common Shares Outstanding |  |              | 884,682  |             |   | 886,437  
|     |  | Earnings per Common Share         |  | $            | 0.29     |             | $ | 0.68     
|2007 |  | Net Loss                          |  | $            | (51,423) |             | $ | (417,183)
|     |  | Average Common Shares Outstanding |  |              | 906,312  |             |   | 899,178  
|     |  | Loss per Common Share             |  | $            | (0.05)   |             | $ | (0.46)   





F-22





---



Diluted earnings (loss) per share are the same as basic earnings (loss) per share because there are no shares of Series A Convertible Preferred Stock outstanding.  Other than the Series A Convertible Preferred Stock, there are no other potentially dilutive securities, stock options or warrants outstanding.



NOTE 21  MAJOR CUSTOMERS

The Company received more than 10% of its total revenue for the nine months ended September 30, 2007 from the following customers:



|                                               |  |        |           |   |       |                                 |                                                                                   
|---------------------------------------------- |  | ------ | --------- | - | ----- | ------------------------------- | ----------------------------------------------------------------------------------
|                                               |  | Amount |           | % |       | Description of Revenue Received
|Wellstone, LLC                                 |  | $      | 6,894,977 |   | 49.3% |                                 | Interest and fees from real estate loans                                          
|                                               |  |        |           |   |       |                                 |                                                                                   
|Senior Housing Services, Inc  and subsidiaries |  | $      | 2,723,469 |   | 19.5% |                                 | Interest and fees from real estate joint venture investments and real estate loans
|                                               |  | $      | 9,618,446 |   | 68.8% |                                 |                                                                                   



Wellstone, LLC is considered a related party of the Company  please refer to Note 4 for additional information about the relationship.



Senior Housing Services, Inc. and subsidiaries (SHS) is not a related party.  SHS neither directly or indirectly controls, is controlled by, nor is under common control of the Company.  There is not common ownership interest, officers, or directors and the Company does not have the power to direct or significantly influence the management or operating policies of SHS.



NOTE 22  FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:



Cash and cash equivalents  Fair value approximates their carrying amount due to the initial maturities of the instruments being three months or less.



Bond holdings  These bonds are not traded on an exchange; therefore, fair value is estimated based on the present value of expected future cash flows, which approximates their carrying amount.



Investor bonds and mortgage participations  Fair value is estimated based on the present value of expected future cash flows, which approximates their carrying amount.



Loans and mortgages payable  Fair value approximates carrying value since stated rates are similar to rates currently available to the Company for debt with similar terms and remaining maturities.



Loan guarantee obligations  Fair value approximates the risk-factored net present value of possible future cash flows related to the specific loan guarantee obligation.



The estimated fair values of the Companys financial instruments at September 30, 2007 are:



|                            |  |                 |             |            |   |            
|--------------------------- |  | --------------- | ----------- | ---------- | - | -----------
|                            |  | Carrying Amount |             | Fair Value
|Financial assets:           |  |                 |             |            |   |            
|Cash and cash equivalents   |  | $               | 2,033,412   |            | $ | 2,033,412  
|Bond holdings               |  | $               | 1,980,779   |            | $ | 1,980,779  
|Financial liabilities:      |  |                 |             |            |   |            
|Investor bonds              |  | $               | 126,594,249 |            | $ | 126,594,249
|Mortgage participations     |  | $               | 8,765,000   |            | $ | 8,765,000  
|Loans and mortgages payable |  | $               | 28,406,513  |            | $ | 28,406,513 
|Loan guarantee obligations  |  | $               | 574,610     |            | $ | 574,610    





F-23





---



Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation.



Selected financial data.

Please read the following selected financial data in conjunction with the rest of this Managements Discussion and Analysis or Plan of Operation and with our financial statements and related notes in this filing.



|                               |  |                                 |            |      |   |           
|------------------------------ |  | ------------------------------- | ---------- | ---- | - | ----------
|                               |  | Nine months ended
September 30,
|                               | 
|                               |  | 2007                            |            | 2006
|Revenues                       |  | $                               | 13,987,720 |      | $ | 12,798,694
|                               |  |                                 |            |      |   |           
|Investor/loan interest expense |  |                                 | 10,763,495 |      |   | 9,144,533 
|Loan loss expense              |  |                                 | 347,000    |      |   | 219,000   
|Marketing expenses             |  |                                 | 966,863    |      |   | 899,126   
|Management/advisory fees       |  |                                 | 1,239,174  |      |   | 1,085,332 
|Payroll and related costs      |  |                                 | 163,810    |      |   | -0-       
|Operating expenses             |  |                                 | 1,176,235  |      |   | 515,303   
|Total expenses                 |  |                                 | 14,656,577 |      |   | 11,863,294
|Operating income (loss)        |  |                                 | (668,857)  |      |   | 935,400   
|Income tax provision (benefit) |  |                                 | (251,674)  |      |   | 328,742   
|Net income (loss)              |  | $                               | (417,183)  |      | $ | 606,658   



Overview of operations.

We have always focused on serving non-profit organizations.  We offer specialized programs for church and other non-profit sponsors of senior housing and affordable/moderate income and age-restricted housing programs.  Nearly all of our earnings prior to 2001 came from financing church facilities.  During the last quarter of 2000, we began to realize revenues from investment in senior and affordable/moderate income housing projects. During the last quarter of 2004, we began to make loans to for-profit sponsors of affordable and low-income housing projects and in 2005 we began making loans to for-profit owners of senior housing facilities and age restricted for-sale housing projects.  We generate revenue from:

•

interest on loans

•

origination and renewal fees on loans

•

loan participation income

•

interest on securities



We currently charge a 5% to 10% fee on new loans, based upon expected terms, and renewal fees of as much as 5% of the outstanding balance of the renewing loan.  Our interest rate on all new loans is currently from 9% to 10.5%. Our interest rate and fees are higher than a standard bank would charge because we are willing to lend money to borrowers who lack the capital or operating histories necessary to use traditional bank loans.  Also, the great majority of our loans are second mortgages which have a higher degree of risk than first mortgages.  Therefore, we charge higher rates and fees.  Some loans are participating loans, which enable us to receive income from the borrower when the borrower sells or refinances (with a third-party lender) the property for which we provided the financing.  The participation percentage varies between 25% and 33% of the borrowers gain.



Participating loans are classified as real estate joint venture investments if all of the following exist at the loans inception:

•

The borrower does not have a substantial equity investment in the property.

•

The Company does not have recourse to substantial tangible, saleable assets of the borrower other than the underlying collateral of the loan and there is no irrevocable letter of credit for a substantial amount of the loan.

•

There is no take-out commitment for the full amount of the loan from a creditworthy, independent third-party.

•

The facility does not have lease commitments which will provide sufficient cash flow to service normal principal and interest loan amortization.



3





---



Comparison of Periods Ended September 30, 2006 and September 30, 2007

General. Assets increased from $166,843,091 at September 30, 2006 to $185,933,728 at September 30, 2007 for an increase of $19,090,637 or 11%.  The increase is due to an increase of 10,835,000 in loans payable and an increase in outstanding Investor Bonds and Mortgage Participation Agreements.  With the cash generated from these increases and with cash already on hand, we invested in real estate loans and joint venture investments, net of principal payments received, of $5,098,041.  We also invested in one subsidiary and two consolidated variable interest entities totaling $14,753,328. Total revenue increased for the nine months ended September 30, 2007 by $1,189,026 (9.3%) to $13,987,720.  Net income (loss) for the nine months ended September 30, 2007 was ($417,183) compared to $606,658 for the same period ended September 30, 2006.  The main reason for the decrease in earnings is the consolidation of one subsidiary and two variable interest entities into our financial statements which resulted in operating losses of $196,000 charged to earnings and the elimination of approximately $851,000 in interest income on loans and investments to these projects.

Total real estate loans and joint venture investments outstanding on September 30, 2007 was $158,600,946 compared to $153,502,905 on September 30, 2006 for an increase of $5,098,041 or 3.3%.  This increase is due to the additional cash received from the Bernard National loan and an increase in Investor Bonds and Mortgage Participation Agreements and the subsequent origination or refinancing of real estate loans and joint venture investments, as follows:



|                                                           |  |   |             
|---------------------------------------------------------- |  | - | ------------
|New real estate loan originations                          |  | $ | 23,051,240  
|Decrease in existing loans, net of principal received      |  |   | (16,284,508)
|New real estate joint venture investments made             |  |   | -0-         
|Increase in existing real estate joint venture investments |  |   | (1,668,691) 
|                                                           |  | $ | 5,098,041   



Consolidated real estate assets increased due to our investment in one subsidiary (Heron Lakes, LLC) and two variable interest entities in which we are the primary beneficiary.  Heron Lakes, LLC is constructing a market rate apartment facility in South Carolina.  We currently own 89% of this entity.  The two variable interest entities are building low income apartments in South Carolina.  Please refer to Note 9 of the Notes to Consolidated Financial Statements for additional information about these investments.  We are actively pursuing the sale of our ownership in Heron Lakes, LLC and the investment of additional capital into the two variable interest entities so that we will not have to continue to consolidate these entities into our financial statements.



All other assets composed primarily of cash, bond holdings, property and equipment, and unamortized debt issue costs were $9,755,393 as of September 30, 2007.



During the second quarter of 2006, we determined that our church bond holdings, with a current carrying value of $1,980,779 were impaired due to the non-payment of interest by the borrower.  Our initial and subsequent evaluations of the underlying collateral showed that the collateral is worth more than the current carrying value of the bonds; therefore, we have not charged earnings with an unrealized loss and we have continued to recognize interest from this investment on the accrual basis.  In the third quarter of 2007, we received all of the past due and currently due interest that was owed to us; therefore, we no longer consider this investment to be impaired.  Since the church property that collateralizes the bonds is currently unoccupied, we are working diligently with the borrower and the other bond holders to ensure that the bond interest will continue to be paid and that our financial investment is preserved.



Our cash balance decreased $698,468 from $2,731,880 on September 30, 2006 to $2,033,412 on September 30, 2007.  The decrease is due to: 1) higher than average redemption of maturing bonds compared to prior years  in 2007 over $15 million in maturing bonds have been redeemed; 2) a decrease in bond sales in the last six months as compared to prior bond issues, 3) an operating cash deficit in 2007 of $1.8 million  due to an increase in interest paid to investors as a result of two large bond redemptions in 2007, and 4) an increase in the length of time that it is taking some of our borrowers to refinance portions of their CMI loans.  These items, combined with our current loan funding requests, have caused a decrease in our cash levels at the end of the quarter to an amount that is below what we need to be able to fund our current loan funding requests and other cash needs.



In October and November of 2007 we have continued to experience cash shortfalls.  As of November 12, 2007 we have approximately $8.5 million in real estate loan draw requests which we have not been able to fund and $300,000 in bond redemption commitments from October that we are holding pending receipt of cash.



The shortfall in cash is a result of several events that were expected to occur in the third quarter that have been delayed and should happen in the fourth quarter, as follows: 1) refinancing on a senior housing property that is expected to generate $6.2 million in cash flow; 2) re-financing on two multi-family housing complexes that should bring in $4 million, and 3) re-financings on several single family projects with $7.9 million in expected cash proceeds.



4





---



If these re-financings are realized it will decrease our monthly loan draw requests on Wellstone LLCs projects and bring in cash to fund our other loan commitments and future bond redemptions.  We are also working with two other major borrowers to refinance large portions of their current loan balances.  If we are unable to refinance these loans or bring in new financings, it will be difficult for us to fund our current loan draw commitments which in turn could cause the projects we have funded to fall behind their construction schedules and incur losses.  Our management team believes that the current cash shortfall situation will be resolved and that the refinancing opportunities will be finalized by the end of 2007.



Principal and interest payable on Investor Bonds and Mortgage Participation (MP) Agreements increased $8,054,124 or 6% from $141,944,909 as of September 30, 2006 to $149,999,033 as of September 30, 2007.  We have sold approximately $19 million in new Series G bonds since October 2006; however, this increase has been offset by approximately $16 million in bond redemptions from maturing bonds.  Our MP Agreement principal has also increased approximately $4.5 million in the last year.

In August 2006 we entered into a revolving credit agreement with Bernard National Funding, Ltd.  This agreement provides up to $40,000,000 in financing to us and it is secured by 19 of our first mortgage real estate loans.  As of September 30, 2007 and 2006 the loans principal balance outstanding was $20 million and $16 million, respectively.  These funds were used to fund new real estate mortgage loan commitments.  We pursued this financing because management believes that we need alternative financing programs available to us outside of our traditional Investor Bond program.  By adding to our financing options we can continue to grow our loan portfolio as we find suitable projects even if the timing of a new Investor Bond series is delayed.



Real estate loan and joint venture interest and fees earned. Interest income and fees from real estate loans and joint venture investments for the three and nine months ended September 30 is as follows:



|             |  |   |            |  |   |            |  |   |           |  |     
|------------ |  | - | ---------- |  | - | ---------- |  | - | --------- |  | ----
|             |  |   | 2007       |  |   | 2006       |  |   | Increase  |  | %   
|Three Months |  | $ | 4,645,115  |  | $ | 4,384,036  |  | $ | 261,079   |  | 6.0%
|Nine Months  |  | $ | 13,502,666 |  | $ | 12,321,330 |  | $ | 1,181,336 |  | 9.6%



|                                                         |  |              |          |             |   |          
|-------------------------------------------------------- |  | ------------ | -------- | ----------- | - | ---------
|                                                         |  | Three Months |          | Nine Months
|The increases were due to the following                  |  |              |          |             |   |          
|Increase in average outstanding principal                |  | $            | 257,428  |             | $ | 1,042,127
|(Three months: $158,606,003  2007; $148,401,531  2006) |  |              |          |             |   |          
|(Nine Months: $156,977,668  2007; $142,025,320  2006)  |  |              |          |             |   |          
|Change in weighted average interest rate                 |  |              | (31,277) |             |   | (10,623) 
|(Three months: 9.76% - 2007; 9.84% - 2006)               |  |              |          |             |   |          
|(Nine months: 9.80% - 2007; 9.81% - 2006)                |  |              |          |             |   |          
|                                                         |  |              |          |             |   |          
|Change in loan fees recognized                           |  |              | 34,928   |             |   | 149,832  
|                                                         |  | $            | 261,079  |             | $ | 1,181,336



The increase in average outstanding principal is due to the addition of 20 new real estate loans in the last 12 months.



Loan participation and other income.  For the three and nine months ended September 30, 2007 loan participation and other income increased $53,498 and $7,690, respectively as compared to the same periods ended September 30, 2006. These changes are due to the following:



|                                          |  |              |         |             |   |         
|----------------------------------------- |  | ------------ | ------- | ----------- | - | --------
|                                          |  | Three Months |         | Nine Months
|Investment interest                       |  | $            | 1,461   |             | $ | 3,428   
|Rental income                             |  |              | (7,500) |             |   | (19,600)
|Gains  fixed asset sales                 |  |              | -0-     |             |   | (41,900)
|Revenue  consolidated real estate assets |  |              | 59,616  |             |   | 71,727  
|Other                                     |  |              | (79)    |             |   | (5,965) 
|                                          |  | $            | 53,498  |             | $ | 7,690   



Rental income decreased in both periods because we were leasing the foreclosed church property during most of 2006.  In late 2007 we sold the property; therefore, we have no rental income this year.  Gains from fixed asset sales decreased for the nine month period ended September 30, 2007 due to a gain from the sale of our rental condo office in the first quarter of 2006.  Revenue from consolidated real estate assets increased in both periods due to rental income from one of our consolidated variable interest entities and interest income from our real estate subsidiary (Heron Lakes, LLC).



5





---





Investor and loan interest expense. Investor interest expense for the three and nine months ended September 30, 2007 was $3,548,756 and $10,763,495, respectively which is an increase of $421,931 (13.5%) and $1,618,962 (17.7%), respectively compared to the same periods in 2006.  The increases are due to:



|                                                                 |  |              |          |             |   |          
|---------------------------------------------------------------- |  | ------------ | -------- | ----------- | - | ---------
|                                                                 |  | Three Months |          | Nine Months
|Increase in average outstanding bond principal, including        |  | $            | 89,350   |             | $ | 383,081  
|interest payable subject to compounding                          |  |              |          |             |   |          
|(Three Months: $136,230,525  2007; $132,078,105  2006)         |  |              |          |             |   |          
|(Nine Months: $140,083,685  2007; $134,169,158  2006)          |  |              |          |             |   |          
|Change in weighted average interest percentage                   |  |              | (95,756) |             |   | (80,501) 
|(Three Months: 8.51% - 2007; 8.80% - 2006)                       |  |              |          |             |   |          
|(Nine Months: 8.62% - 2007; 8.70% - 2006)                        |  |              |          |             |   |          
|Increase in average outstanding Mortgage Participation principal |  |              | 106,273  |             |   | 153,138  
|(Three Months: $8,525,240  2007; $4,274,360  2006)             |  |              |          |             |   |          
|(Nine Months: $5,742,307  2007; $3,700,480  2006)              |  |              |          |             |   |          
|Bernard National loan                                            |  |              | 334,865  |             |   | 1,221,862
|Construction period interest capitalization  rental properties  |  |              | (12,801) |             |   | (58,618) 
|                                                                 |  | $            | 421,931  |             | $ | 1,618,962



The construction period interest capitalization relates to the consolidated real estate assets that we obtained when we acquired our 89% ownership interest in Heron Lakes, LLC and from our investment in one consolidated variable interest entity which had property under construction during the first nine months of 2007.  During the construction of an asset, accrued interest which relates to the assets under construction can be capitalized and included in the cost of the asset.



Loan loss expense and allowance for loan losses.  We charged $152,000 and $53,000 for the three months and $347,000 and $219,000 for the nine months ended September 30, 2007 and 2006, respectively to loan loss expense.  The charges in 2006 were due to increases in the family housing development loan portfolios outstanding principal.  The 2007 charges are due to an increase in our family housing development loan portfolio and due to an increase in risk related to current market conditions and an increase in the number of impaired or other below average loans.  Our allowance for loan losses is reviewed quarterly and increases or decreases are made based on the results of these reviews.



In 2007, we re-classified $790,000 of our loan loss allowance to impaired loan loss with the remaining $810,000 classified as a collective loan loss allowance.  A collective loan loss allowance is recognized when the characteristics of a group of loans indicate that it is probable that a loss exists even though the loss cannot be identified with a specific loan.  An impaired loan loss allowance is recognized when a loan is considered impaired and the present value of expected future cash flows from the loan is less than the current carrying value of the loan.



As of September 30, 2007, two church loans and 10 family housing loans were considered impaired because they are at least six months behind on their interest payments or because we do not believe it is likely that we will receive all of our interest and principal according to the loans original terms.  Our management team has evaluated the underlying assets and related guarantees that collateralize the impaired loans and they have determined that the estimated net present value of expected future cash flows from these loans is, in aggregate, approximately $790,000 less than the $32,033,224 in total carrying amounts of the impaired loans.  Therefore, as stated above, we have transferred $790,000 from our general collective loan loss allowance to our impaired loan loss allowance.  Going forward, we will be tracking these two components of our loan loss allowance separately and we will re-evaluate them at the end of each quarter.  Included in the expected future cash flows of eight of the family housing loans, are guarantees from Wellstone LLC and Cornerstone Capital Advisors, Inc. (CCA), both of whom are considered related parties.  These guarantees have an estimated present value of $7.2 million and will be used by the borrowers to pay impaired loan principal and interest to us.  Wellstone LLC and CCA entered into these guarantee agreements with the borrowers because their management teams were previously involved in managing and/or advising the borrowers on these projects and the respective boards of Wellstone LLC and CCA believe it is their responsibility to be involved in the eventual financial disposition of the projects.  Please see Note 5 of the Notes to Consolidated Financial Statements for additional information about the impaired loans and estimated losses if Wellstone LLC and CCA are unable to perform under their guarantee agreements and obligations.





6





---



One real estate joint venture investment loan, with a carrying amount of $6,499,581 and $6,263,207 on September 30, 2007 and 2006, respectively was considered impaired.  We have received an appraisal on the real estate joint venture investment loans collateral and it is estimated to be worth approximately $900,000 more than the loans carrying amount; therefore, we have not recognized an impairment loss on this loan.  We will continue to monitor the operating progress of this borrower, and we are actively involved in a possible re-financing opportunity for the property, which is expected to occur before the end of 2007.



As of September 30, 2007, allowance for loan losses as a percent of outstanding loan principal by loan type:



|                                      |  |                     |           |                       |   |             |  |     
|------------------------------------- |  | ------------------- | --------- | --------------------- | - | ----------- |  | ----
|                                      |  | Loan Loss
Allowance |           | Outstanding Principal |   | %          
|Family Housing Development Loans      |  | $                   | 1,600,000 |                       | $ | 132,743,811 |  | 1.2%
|Church Mortgage Loans                 |  |                     | -0-       |                       |   | 10,460,951  |  | 0%  
|Senior Housing Mortgage Loans         |  |                     | -0-       |                       |   | 1,093,054   |  | 0%  
|Real Estate Joint Venture Investments |  |                     | -0-       |                       |   | 16,960,638  |  | 0%  
|Total                                 |  | $                   | 1,600,000 |                       | $ | 161,258,454 |  | 1.0%



Marketing expenses. Total expenses for the marketing of Investor Bonds for the three and nine months ended September 30, 2007 were $291,045 and $966,863, respectively, compared to $303,874 and $899,126 for the same periods in 2006.  The decrease for the three months ended September 30, 2007 is due to a decrease in miscellaneous marketing expenses.  The increase for the nine months ended September 30, 2007 is due to a settlement with Virginia related to our indemnification of a broker/dealer over the sale of CMI securities in that state.



Selling commissions paid to brokers for selling Investor Bonds and Mortgage Participations, costs incurred to register Investor Bonds and loan fees related to the Bernard National loan are initially charged to Unamortized debt issue costs, which is classified as an asset on our balance sheet.  These costs are then amortized to expense over the term of the related debt.  The Unamortized debt issue cost balance was $3,128,256 and $3,208,723 as of September 30, 2007 and 2006, respectively.



Operating, management and payroll expenses. Management and advisory expenses for the three and nine months ended September 30, 2007 increased $39,689 (10.6%) and $153,842 (14.2%), respectively from $375,854 and $1,085,332 in 2006 to $415,543 and $1,239,174 in 2007.  These increases are due to an increase in revenues.



Our management and advisory agreement with CCA obligates us to pay CCA the following fees:

•

A monthly management fee equal to 10% of our revenues from all sources other than loan fees, loan participation revenue, and revenue received from CCA plus 30% of loan participation revenue.

•

A loan origination fee equal to 30% of the total loan fees charged by the Company to its borrowers.  The fee is generally paid from loan proceeds and reduces deferred loan fees that we will recognize over the life of the loan.



Please see Note 4 of the Notes to Consolidated Financial Statements for additional information about our agreement with CCA and for amounts that we have paid to CCA during the three and nine months ended September 30, 2007 and 2006.



For the three and nine months ended September 30, 2007 operating expenses were $412,342 and $1,176,235, respectively which is a $216,338 and $660,932 increase over 2006s operating expenses for the same time periods.  The increases are due to the following:



|                                               |  |              |         |             |   |        
|---------------------------------------------- |  | ------------ | ------- | ----------- | - | -------
|                                               |  | Three Months |         | Nine Months
|Loan issue cost amortization                   |  | $            | 57,885  |             | $ | 236,367
|Consolidated real estate asset operating costs |  |              | 72,407  |             |   | 258,811
|Legal fees                                     |  |              | 30,594  |             |   | 80,485 
|Travel and promotion                           |  |              | 13,372  |             |   | 32,789 
|Board of Directors  meeting costs             |  |              | 32,079  |             |   | 23,507 
|Other                                          |  |              | 10,001  |             |   | 28,973 
|                                               |  | $            | 216,338 |             | $ | 660,932



Loan issue cost amortization increased due to the Bernard National loan (discussed in previous paragraphs) which was added in the third quarter of last year.



7





---



The increases in consolidated real estate asset operating costs resulted from the purchase of Heron Lakes, LLC and our investment in two variable interest entities in which are considered the primary beneficiary.  One of the variable interest entities is an operating apartment facility and its year-to-date operating expenses of $239,743 have been included in our financial statements.  Start-up and administrative costs from the two under construction properties, which totaled $28,072, also contributed to this increase in expense.  There is a concerted effort to re-finance the operating apartment facility so that the consolidation of its operations as a variable interest entity can be eliminated from our financial statements.  Management believes that this re-financing can be accomplished by the end of 2007.  If this does not happen, our earnings will continue to be negatively impacted.



Legal fees increased for the three month period due to loans payable modification and bond legal costs.  Legal fees increased for the nine month period due to loans payable modifications, bond and Chicago Stock Exchange issue (see Legal Proceedings section for more information on this issue) legal costs.



Travel and promotion costs increased due to our efforts in 2007 to market our church loan programs.    Board of Directors meeting costs increased because we have had two out-of-town meetings in 2007 compared to one out-of-town meeting in 2006.



Effective October 2006, our president is now employed directly by us instead of by Cornerstone Capital Advisors.  Therefore, payroll costs increased for the three and nine months ended September 30, 2007 by $54,147 and $163,810, respectively.  These amounts include wages and related taxes, benefits and administrative costs.



Income tax provision (benefit). The income tax provision (benefit) for the three and nine months ended September 30, 2007 was ($31,096) and ($251,674), respectively compared to $159,333 and $328,742 for the same periods ended September 30, 2006.  The decrease in income taxes is due to a decrease in pre-tax income.  The Companys effective tax provision (benefit) rate was (37.7%) and 37.8% for the three months and (37.6%) and 35.1% for the nine months ended September 30, 2007 and 2006, respectively.  A reconciliation of the Companys effective tax provision rate to the federal statutory rate is included in the attached Notes to Consolidated Financial Statements (Note 13).



Dividends.  Dividends of $231,511 and $230,518 were declared on June 30, 2007 and 2006, respectively.



Liquidity and Capital Resources

Cash flows from operations.  Net cash provided (used) by the Companys operations for the nine months ended September 30, 2007 and 2006 was ($1,779,730) and $606,701, respectively.  The increase in cash used by operations in 2007 of $2,386,431 was due to a decrease in net income, and a $2,952,288 decrease in investor interest payable partially offset by an increase in depreciation/amortization, loan fees received and other accounts payable.



The decrease in investor interest payable is due to interest payments which were made as a result of bond maturities in March and July of 2007.  Some of our investors had previously elected to reinvest the interest due to them until maturity.  At maturity we then paid five years of interest to these investors which increased our cash used by operations.



Included in the 2007 and 2006 changes in accrued real estate loan and joint venture interest and deferred loan fee amounts is $2,464,458 and  $3,291,365 in interest which was financed as part of loan principal.  We receive monthly interest payments on our loans except when the terms of certain loans allow borrowers to finance interest payments while the collateralized property is under development or construction.  A summary (by loan type) of the amount of net financed interest for the nine months ended September 30, 2007 and 2006 is as follows:



|                           |  |      |           |      |   |          
|-------------------------- |  | ---- | --------- | ---- | - | ---------
|                           |  | 2007 |           | 2006
|Family Housing Development |  | $    | 1,964,642 |      | $ | 2,645,299
|Church Construction        |  |      | 252,253   |      |   | (103,210)
|Senior Housing             |  |      | 247,563   |      |   | 749,276  
|                           |  | $    | 2,464,458 |      | $ | 3,291,365



The amount for 2007 represents interest accrued and financed in 2007, net of payments received in 2007 that were financed in previous years.  2006s amount represents interest accrued and financed in 2006, net of payments received in 2006 that were financed in previous years.



8





---



The decrease in the family housing net financed interest in 2007 compared to 2006 is due to large pay downs on three loans in 2007.  These pay downs, which included $1.6 million in previous financed interest received by the Company were offset by the addition of 7 new projects which are in their development phase of operation and are financing their interest.



In the first nine months of 2006, we received $103,210 in previously financed church loan interest due to significant pay downs on four church loans.  In late 2006 and early 2007 we originated 11 new church construction loans which financed $252,253 in interest in the first nine months of 2007.



Senior housing financed interest decreased because in the second quarter of 2007 we received loan pay-offs from two projects in which we had financed interest in previous years.



Cash flows from investing activities.    For the nine months ended September 30, 2007, the Company used $16,053,225 in cash from investing activities which is a decrease of $3,991,702 from $20,044,927 for the nine months ended September 30, 2006.  The decrease is due to a net decrease in real estate loan, real estate joint venture investment and consolidated real estate asset investments made in 2007 as compared to 2006.



Cash flows from financing activities.  During the nine month period ended September 30, 2007, cash flows provided by financing activities was $7,008,655 compared to $9,722,913 in 2006.  This decrease is due to:



|                                                      |  |   |            
|----------------------------------------------------- |  | - | -----------
|Increase in bond and mortgage participations sold     |  | $ | 14,945,904 
|Increase in bond and mortgage participations redeemed |  |   | (8,835,332)
|Loan payable principal proceeds received              |  |   | (9,182,487)
|All others                                            |  |   | 357,657    
|Total decrease                                        |  | $ | (2,714,258)



The increase in bond and mortgage participations sold is due to our being able to sell Series G bonds during all of 2007 and due to two new mortgage participation agreements being issued in 2007 versus one in 2006.  The increase in bond and mortgage participation redemptions is due to large bond maturities in March and July of 2007.  The decrease in loan principal proceeds received is due to the Bernard National loan being funded in September 2006 in the amount of $16 million offset by loan proceeds received in 2007 from our First United Bank loan and the Prudential Huntoon Paige loan which is funding construction of an apartment facility for one of our subsidiaries  please see Note 17 of the Notes to Consolidated Financial Statements for additional information about our loans payable.



Dividends of $517,931 and $508,552 were paid in the first nine months of 2007 and 2006, respectively.



We have $33,133,687 in Investor Bonds coming due or redeemable upon demand in the next 12 months.  $6,617,970 of this amount is for graduated certificates, which allow an investor to redeem their certificate each year on the anniversary date of the purchase.  Based on our past experience, we expect that less than 25% of the graduated certificates will be redeemed for cash during the next 12 months.



Our historical experience indicates that more than 75% of the Five-Year Investor Bond maturities will be reinvested into new Investor Bonds; however, with fewer states available for selling our bonds we estimate that this percentage will drop to around 55-60%.   As discussed on page four, we are currently experiencing a cash shortfall and are working with a number of our borrowers to refinance some of our real estate loans with other lenders.  It is also possible that we will replace our maturing bonds with bank debt which will be secured by specific real estate loan collateral.



Management expects that a new bond series filing will be made with the Securities and Exchange Commission in early 2008.  If approved, this new series will provide us with new dollars to fund our loan portfolio and replacement bonds for our current investors that want to reinvest maturing bonds.



We believe that cash on hand, cash generated by operations and expected refinancing and pay-offs of existing loans, will be sufficient to meet our financing and capital needs for the coming year.  The amount and timing of our future capital requirements will depend on factors such as the origination and funding of new investments and loans, any opportunities for acquisitions of related businesses and the overall success of our marketing efforts for bonds, shares and other securities.



9





---



Item 3. Controls and Procedures



The principal executive officer and the principal financial officer of the small business issuer, Cornerstone Ministries Investments, Inc., have, as of September 30, 2007, evaluated the small business issuers disclosure controls and procedures, as defined by Sections 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934. Based on their evaluation, they have concluded that those disclosure controls and procedures are designed and implemented effectively to ensure that information required to be disclosed by the small business issuer in the reports that it files or submits under that Act is recorded, processed, summarized and reported, within the time periods specified in the Commissions rules and forms.



Part II. Other Information



Item 1. Legal Proceedings



We have become subject to administrative proceedings with various state securities regulators that stem from statements we made in our filings with the Securities and Exchange Commission.  These proceedings relate to allegedly false statements we made in prospectuses and Exchange Act reports that our securities were approved for listing on the Chicago Stock Exchange.  The states allege that we failed to register securities that we offered and sold in these jurisdictions and that we misrepresented the fact that these securities were approved for listing on the Chicago Stock Exchange.  Our defense to these allegations is that we qualified for an exemption from registration in these states because the securities were in fact approved for listing on the Chicago Stock Exchange.  In addition to the existing administrative proceedings, we may become subject to similar administrative proceedings in states that have not yet contacted us.

As of the date of this filing, several states have prohibited us from selling securities in their jurisdictions.  Specifically, New Jersey has prohibited us from selling our Series F bonds to its residents.  Minnesota has ordered us to cease and desist from offering and selling securities to its residents until we are compliant with its laws and until its further order.  Ohio has ordered us to refrain from offering unregistered securities to its residents unless a proper exemption from registration is available.  We have also paid civil fines and made rescission offers, an option we chose in order to avoid excessive litigation costs.  We may also become subject to similar administrative proceedings with states that have not yet contacted us.

In November 2005, Affordable Housing Partnerships, Inc. (AHP), a CMI borrower, became aware that McLennan Community College (MCC), whose property is adjacent to AHPs Waco, TX property, was interested in purchasing its property.  AHP made a sales offer to MCC for $4,650,000.  MCC counter offered with a $1,800,000 purchase price, which was rejected by AHP.  In 2006, AHP was sued by MCC in an effort by MCC to condemn the property and take control of the property under Texas eminent domain laws.  The condemnation hearings are currently underway with the first Commissioner Court Hearing set to take place on November 28, 2007.  AHP has advised us of its intent to vigorously defend its rights in this case.  Since CMI is the first mortgage holder on the property, we have a contractual obligation to defend our borrowers interest in the property.  As such, our legal counsel is working closing with AHP on this case.  As of September 30, the current principal balance of the CMI loan to AHP is $1,739,411.



10





---



As of November 10, 2007, we are not a party to any other pending legal proceeding.  We are not aware that any of the properties covered by our mortgage loans is subject to any pending legal proceeding or that any governmental authority is contemplating any legal proceeding involving us or any of those properties, other than as described above.

Item 2. Changes in Securities



Not Applicable



Item 3. Defaults upon Senior Securities



Not Applicable



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



Not Applicable



Item 5. Other Information



Not Applicable



Item 6. Exhibits and Reports on Form 8-K



(a)

(1)  Exhibits 31 and 32, Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



(b)  No Form 8-K was filed in the first nine months of 2007.



Signatures



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



Dated: November 12, 2007

Cornerstone Ministries Investments, Inc. (Registrant)





By: S/Jack Wehmiller

Jack Wehmiller

President and acting Chief Financial Officer







11