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, 2004

                                       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, 2004,  there were issued and  outstanding  853,123 shares of
the common stock of the issuer.

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]

                                                                               1

<PAGE>

                    Cornerstone Ministries Investments, Inc.

                                      Index

                                                                            Page
                                                                            ----

Form 10-QSB Title Page                                                         1

Index                                                                          2

PART I. FINANCIAL INFORMATION

         Item 1. Financial Statements

                  Accountant's Review Report                                 F-1

                  Balance Sheets as of September 30, 2004 and 2003           F-2

                  Statements of Operations for the Three and
                  Nine Months ended September 30, 2004 and 2003              F-3

                  Statements of Changes in Shareholders' Equity
                  for the Nine Months ended September 30, 2004 and 2003      F-4

                  Statements of Cash Flows
                  for the Nine Months ended September 30, 2004 and 2003      F-5

                  Notes to 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                     9

         Item 3. Defaults on Senior Securities                                 9

         Item 4. Submission of Matters to a Vote of Security Holders           9

         Item 5. Other Information                                             9

         Item 6. Exhibits and Reports on Form 8-K                              9

Signatures                                                                     9

Certifications                                                                10


                                                                               2
<PAGE>

                           ROBERT N. CLEMONS, CPA, PA
                                   PO BOX 1670
                           DELAND, FLORIDA 32721-1670


To The Board of Directors
Cornerstone Ministries Investments, Inc.

We have  reviewed the  accompanying  balance  sheets of  Cornerstone  Ministries
Investments,  Inc. as of September 30, 2004 and 2003 and the related  statements
of  operations,  changes  in  shareholder's  equity,  and  cash  flows  for  the
three-month  and  nine-month   periods  then  ended.   These  interim  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,  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 U.S. generally accepted accounting principles.

The financial  statements  for the year ended  December 31, 2003,  including the
balance  sheet as of December  31, 2003 was  audited by us and we  expressed  an
unqualified  opinion on them in our report dated March 18, 2004, but we have not
performed any auditing procedures since that date.


/s/ Robert N. Clemons, CPA, PA

DeLand, Florida
October 27, 2004

                                                                             F-1
<PAGE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
BALANCE SHEETS
As of September 30, 2004, September 30, 2003 and December 31, 2003
(Unaudited)
<TABLE>
<CAPTION>
                                                                                                     (Consolidated - See Note 18)
                                                                                  Unaudited          Unaudited            Audited
                                                                                  9/30/2004          9/30/2003          12/31/2003
                                                                                ------------       ------------        ------------
<S>                                                                             <C>                <C>                 <C>
ASSETS
Cash and cash equivalents                                                       $  9,257,555       $  5,566,854        $  4,389,851
Loans in process                                                                     194,755            881,996             118,504
Real estate loans, net                                                            50,443,720         46,894,107          47,877,277
Real estate joint venture investments, net                                        59,470,960         32,461,754          34,846,223
Bond holdings and accrued interest                                                 3,985,667          5,197,333           4,001,333
Property and equipment, net                                                          828,241            887,381             873,101
Refundable income taxes                                                                5,673            286,953              42,617
Goodwill                                                                             450,997            450,997             450,997
Unamortized debt issue costs                                                       2,621,638          1,853,470           1,772,631
Real estate held for investment                                                      340,000            340,000             340,000
Other assets                                                                          57,957            118,746              15,813
                                                                                ------------       ------------        ------------
TOTAL ASSETS                                                                    $127,657,163       $ 94,939,591        $ 94,728,347
                                                                                ============       ============        ============

LIABILITIES
Investor certificates and accrued interest                                      $115,051,868       $ 84,122,059        $ 84,562,645
Mortgage participations and accrued interest                                       6,212,142          6,512,197           6,132,809
Accounts and other payables                                                          115,894            235,762             267,806
Loan guarantee obligation                                                            104,000               --                  --
Common dividends payable                                                                --                 --               169,087
Building mortgages                                                                   608,540            182,450             180,194
Capital lease obligation                                                               9,453             14,915              13,632
Deferred taxes payable                                                               150,729            292,545             171,443
                                                                                ------------       ------------        ------------

TOTAL LIABILITIES                                                                122,252,626         91,359,928          91,497,616
                                                                                ------------       ------------        ------------

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; 10 million shares authorized;
  853,123, 531,532 and 531,532 shares issued and outstanding                           8,531              5,315               5,315
Paid in capital                                                                    5,337,749          3,297,435           3,297,435
Retained earnings                                                                     58,257            350,161               1,229
Treasury stock                                                                          --              (73,248)            (73,248)
                                                                                ------------       ------------        ------------

TOTAL SHAREHOLDERS' EQUITY                                                         5,404,537          3,579,663           3,230,731
                                                                                ------------       ------------        ------------

TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY                                                           $127,657,163       $ 94,939,591        $ 94,728,347
                                                                                ============       ============        ============

<FN>
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REVIEW REPORT                                                                            F-2
</FN>
</TABLE>

<PAGE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
STATEMENTS OF OPERATIONS
For the three and nine months ended September 30, 2004 and 2003
(Unaudited)
<TABLE>
<CAPTION>
                                                                                    (Consolidated -                  (Consolidated -
                                                                                      See Note 18)                      See Note 18)
                                                                    3 Mo. Ended       3 Mo. Ended      9 Mo. Ended      9 Mo. Ended
                                                                     9/30/2004         9/30/2003        9/30/2004         9/30/2003
                                                                    -----------       -----------      -----------       -----------
<S>                                                                 <C>               <C>              <C>               <C>
REVENUES
Real estate loan and joint venture interest and fees                $ 3,165,898       $ 2,711,757      $ 8,764,245       $ 6,619,794
Loan participation and other income                                     135,706         1,306,658          346,674         1,480,891
                                                                    -----------       -----------      -----------       -----------

TOTAL REVENUES                                                        3,301,604         4,018,415        9,110,919         8,100,685
                                                                    -----------       -----------      -----------       -----------

EXPENSES
Investor interest expense                                             2,502,518         1,930,656        6,627,673         5,285,031
Loan loss expense                                                        20,000              --             50,000              --
Marketing expenses                                                      274,995           161,370          735,709           448,595
Salaries, payroll taxes, and benefits                                   269,575           225,504          898,671           696,719
Operating expenses                                                      198,284           287,151          588,332           743,537
                                                                    -----------       -----------      -----------       -----------

TOTAL EXPENSES                                                        3,265,372         2,604,681        8,900,385         7,173,882
                                                                    -----------       -----------      -----------       -----------

Income Before Provision For Income Taxes                                 36,232         1,413,734          210,534           926,803

Income Tax (Benefit) Provision                                          (13,123)          489,829           (1,560)          268,078
                                                                    -----------       -----------      -----------       -----------

NET INCOME                                                          $    49,355       $   923,905      $   212,094       $   658,725
                                                                    ===========       ===========      ===========       ===========

Basic and Diluted Earnings
 per Common Share                                                   $      0.06       $      1.78      $      0.31       $      1.26

<FN>
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REVIEW REPORT                                                                            F-3
</FN>
</TABLE>
<PAGE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the nine months ended September 30, 2004 and 2003
(Unaudited)

The  statement  for the  nine  months  ended  September  30,  2003 was part of a
consolidated financial statement - see Note 18.

<TABLE>
<CAPTION>
                                                                                  RETAINED
                                   COMMON STOCK:        PAID-IN       PREFERRED   EARNINGS       TREASURY STOCK:          TOTAL
                                 SHARES    AMOUNT       CAPITAL         STOCK     (DEFICIT)     SHARES       STOCK         EQUITY
                                --------  ---------   ------------   -----------  ----------  ----------   ----------    -----------
<S>                             <C>       <C>         <C>            <C>          <C>         <C>           <C>          <C>
BALANCE, DECEMBER 31, 2002      530,947   $  5,309    $ 3,293,641    $       --   $(139,479)                $    --      $3,159,471
Net income                                                                          658,725                                 658,725
Common stock issued                 585          6          3,794                                                             3,800
Dividend declared                                                                  (169,085)                               (169,085)
Treasury stock acquired                                                                         (11,269)     (73,248)       (73,248)
                                --------  ---------   ------------   -----------  ----------  ----------   ----------    -----------

BALANCE, SEPT. 30, 2003         531,532   $  5,315    $ 3,297,435    $       --   $ 350,161     (11,269)   $ (73,248)    $3,579,663
                                ========  =========   ============   ===========  ==========  ==========   ==========    ===========

BALANCE, DECEMBER 31, 2003      531,532   $  5,315    $ 3,297,435    $       --   $   1,229     (11,269)   $ (73,248)    $3,230,731
Net income                                                                          212,094                                 212,094
Common stock issued             321,591      3,216      2,087,125                                                         2,090,341
Common stock issuance costs                               (46,811)                                                          (46,811)
Dividend declared                                                                  (155,066)                               (155,066)
Treasury stock sold                                                                              11,269       73,248         73,248
                                --------  ---------   ------------   -----------  ----------  ----------   ----------    -----------

BALANCE, SEPT. 30, 2004         853,123   $  8,531    $ 5,337,749    $       --   $  58,257          --    $      --     $5,404,537
                                ========  =========   ============   ===========  ==========  ==========   ==========    ===========



<FN>
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REVIEW REPORT                                                                            F-4
</FN>
</TABLE>


<PAGE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2004 and 2003
(Unaudited)
<TABLE>
<CAPTION>
                                                                                                                     (Consolidated -
                                                                                                                       See Note 18)
                                                                                                     2004                  2003
                                                                                                 ------------          ------------
<S>                                                                                              <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                                       $    212,094          $    658,725
Adjustments to reconcile net income to
 cash from operations-
Depreciation and amortization                                                                         640,656               378,938
Loss on sale of fixed assets                                                                            2,534                  --
Changes in-
Loans in process                                                                                      (76,251)             (522,976)
Accrued bond interest, net                                                                             15,666               (21,921)
Accrued real estate loan/joint venture interest and deferred loan fees                             (3,205,309)             (928,472)
Allowance for loan losses                                                                              50,000                  --
Refundable income taxes                                                                                36,944              (286,953)
Deferred taxes                                                                                        (20,714)              566,778
Investor and mortgage participation interest payable                                                2,726,187             1,687,786
Accounts and other payables                                                                           (47,912)              (46,358)
Other assets                                                                                          (42,144)              (80,558)
                                                                                                 ------------          ------------

NET CASH PROVIDED BY OPERATIONS                                                                       291,751             1,404,989
                                                                                                 ------------          ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate loans made                                                                             (9,100,510)          (13,763,820)
Real estate loan principal payments received                                                        7,504,692             7,059,214
Real estate joint venture investments made                                                        (22,443,378)          (12,521,106)
Real estate joint venture payments received                                                             3,325             5,553,021
Bonds purchased                                                                                          --              (2,500,000)
Bonds redeemed or sold                                                                                   --                  58,750
Proceeds from sale of fixed assets                                                                      1,400                  --
Property and equipment purchased                                                                       (9,915)             (589,413)
                                                                                                 ------------          ------------

NET CASH USED BY INVESTING ACTIVITIES                                                             (24,044,386)          (16,703,354)
                                                                                                 ------------          ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Investor certificates sold                                                                         31,100,364            18,163,253
Investor certificates redeemed                                                                     (3,336,245)           (3,449,495)
Mortgage participation agreements sold                                                                 78,250             6,255,330
Debt issue costs paid                                                                              (1,438,822)           (1,187,624)
Building mortgage proceeds                                                                            440,000                  --
Building mortgage principal payments                                                                  (11,654)               (6,776)
Capital lease principal payments                                                                       (4,179)               (2,795)
Common stock issued, net of issuance costs                                                          2,043,530                 3,800
Dividends paid                                                                                       (324,153)             (337,725)
Treasury stock sold (acquired)                                                                         73,248               (73,248)
                                                                                                 ------------          ------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                                          28,620,339            19,364,720
                                                                                                 ------------          ------------

Net change in cash and cash equivalents                                                             4,867,704             4,066,355
Cash and cash equivalents at beginning of period                                                    4,389,851             1,500,499
                                                                                                 ------------          ------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                       $  9,257,555          $  5,566,854
                                                                                                 ============          ============

Supplemental Information-
  Interest paid during the period                                                                $  3,916,963          $  3,604,215
  Income taxes paid during the period                                                            $     62,500          $       --
Non-cash transactions-
  Investor certificates matured or redeemed early and re-invested                                $  3,309,314          $  3,793,364
  Loan interest financed and included in loan principal                                          $  1,186,383          $    446,471
  Fixed asset lease financing                                                                    $       --            $     17,710

<FN>
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REVIEW REPORT                                                                            F-5
</FN>
</TABLE>
<PAGE>
                    CORNERSTONE MINISTRIES INVESTMENTS, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The  accompanying  financial  statements  include the  accounts  of  Cornerstone
Ministries Investments, Inc (the "Company"). Previously, the Company's financial
statements  included the accounts of two  wholly-owned  subsidiaries,  Wellstone
Communities,  Inc. and Wellstone Financial Group, LLC. In June 2004, the Company
dissolved both subsidiaries. See Note 18 for additional disclosures.

The  Company  originates  and  purchases  mortgage  loans  made  to  faith-based
organizations.  The Company  offers  specialized  programs  for churches and for
non-profit  sponsors of senior  housing and  affordable  housing  programs.  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 Southeast and Southwestern United States.

Cash and cash  equivalents  include bank accounts and 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 is  considered  remote.  If the  possibility  of future loss is not
remote,  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 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:

o     Family  housing  loans may  finance  interest  while the project is in the
      development  and pre-sales  phase,  which  normally  lasts 12 to 24 months
      depending  on the size of the project.  The Company  receives the financed
      interest as the borrower sells homes in the development.
o     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.
o     Senior    housing    loans    may    finance     interest    during    the
      construction/renovation stage 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  from  the
      construction/renovation  stage 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:

o    The  borrower  has title but not a  substantial  equity  investment  in the
     property.
o    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.
o    There is no  take-out  commitment  for the full  amount  of the loan from a
     creditworthy,  independent third-party.
o    The facility does not have lease commitments which will provide  sufficient
     cash flow to service normal principal and interest loan amortization.

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 earn income from the borrower when the property in which the Company provided
financing  is sold or  refinanced  with another  lender.

                                                                             F-6
<PAGE>
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 payment 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 and Mortgage Participation Agreements. These costs
are amortized on a  straight-line  basis over the term of the  associated  debt,
principally 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.

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 recorded at cost and 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.

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 as  required  by SFAS No.  144,  "Accounting  for
Impairment or Disposal of Long-Lived  Assets".  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  Certificates  is  accrued  from  the  date of  issuance.
Certificate  holders  choose,  at the time of purchase,  to have  interest  paid
semi-annually or upon redemption.  Investors  holding five year  certificates in

                                                                             F-7
<PAGE>

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 senior  housing  facilities
which are owned by non-profit entities. Loan guarantees that originated prior to
January 1, 2003 have no obligation recognized in the financial  statements.  For
loan  guarantees that were originated or modified on or after January 1, 2003, a
loan guarantee obligation is recognized based on the loan guarantee's  estimated
fair  value.  The  Company  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 loan  guarantee's  origination  or  modification
date.  Unpaid  amounts are  classified as "Loan  guarantee  receivables"  in the
accompanying balance sheets. Loan guarantee  obligations are analyzed at the end
of each fiscal year and if the fair value of a loan guarantee has declined,  the
carrying  amount of the loan  guarantee  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.

Basic earnings  (loss) per common share are calculated by dividing net income or
net loss 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.

Management   uses  estimates  and   assumptions  in  preparing  these  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 the reported revenues
and expenses. Actual results could vary from the estimates that are used.

Certain report classifications used in prior year financial statements have been
reclassified to conform to current year presentation.

New Accounting Pronouncements:

In January 2003, the FASB issued  Interpretation No. 46 (FIN 46),  Consolidation
of Variable Interest  Entities,  an  interpretation of ARB (Accounting  Research
Bulletin) No. 51. This interpretation  requires the consolidation of entities in
which an enterprise absorbs a majority of the entities expected losses, receives
a majority of the expected  residual  gains,  or both, as a result of ownership,
contractual  or other  financial  interests in the entity.  In October 2003, the
FASB delayed the effective date of FIN 46 for variable interest entities (VIE's)
or potential VIE's created before February 2003. In December,  the FASB issued a
revised  version of FIN 46, which delayed the  effective  date of FIN 46 for all
VIE's until March 2004. FIN 46 and its various  interpretations are not expected
to have a material  impact on the  Company's  financial  position  or results of
operations.

In December  2002,  the FASB issued SFAS No.  148,  Accounting  for  Stock-Based
Compensation  -  Transition  and  Disclosure.  This  standard,  which amends the
transition and disclosure  issues associated with SFAS No. 123, became effective
for the years ending after December 31, 2002. The  requirements of this standard
do not impact the Company's financial position or results of operations.

                                                                             F-8

<PAGE>

During  the  last  three  years,  the FASB has  issued  a number  of  accounting
pronouncements   with  various   effective   dates:   SFAS  No.  141,   Business
Combinations;  SFAS No. 142, Goodwill and Other Intangible Assets; SFAS No. 143,
Accounting for Asset Retirement  Obligations;  SFAS No. 144,  Accounting for the
Impairment or Disposal of Long-Lived  Assets;  SFAS No. 145,  Rescission of SFAS
No. 4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections; SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities;  SFAS No.
147, Acquisition of Certain Financial Institutions - an Amendment of SFAS No. 72
and 144 and FASB  Interpretation  No. 9; SFAS No. 149, Amendment of SFAS No. 133
on Derivative  Instruments and Hedging Activities;  SFAS No. 150, Accounting for
Certain  Financial  Instruments  with  Characteristics  of both  Liabilities and
Equity;  and  Interpretation  No.  45,  Guarantor's  Accounting  and  Disclosure
Requirements for Guarantees,  Including  Indirect  Guarantees of Indebtedness of
Others.  These  pronouncements  do not have a material  effect of the  Company's
financial statements.

NOTE 2 - PROPERTY AND EQUIPMENT

At September 30, property and equipment is composed of:

                                                       2004              2003
                                                    ---------         ---------
Office Condominiums                                 $ 795,034         $ 792,659
Office Computers, Furnishings,
   Software & Equipment                               122,037           118,141
Vehicles                                               30,351            37,730
Capital lease - phone system                           17,710            17,710
Less: Accumulated Depreciation                       (136,891)          (78,859)
                                                    ---------         ---------
Property and equipment, net                         $ 828,241         $ 887,381

Depreciation expense-
       Current Quarter                              $  18,558         $  15,704
       Year-to-Date                                 $  50,840         $  40,079

NOTE 3 - COMMITMENTS AND RELATED PARTY TRANSACTIONS

Leases:

During 2003, the Company entered into a capital lease for a new telephone system
at the Company's headquarters.  The lease was recorded at the asset's fair value
and is being amortized over three years using the straight-line method. Interest
expense is calculated based on the implied interest rate in the lease. The lease
payment,  including  principal,  interest  and  sales  tax,  is $672 per  month.
Amortization  expense was $1,476 and $1,476 for the three months, and $4,427 and
$3,444 for the nine months  ended  September  30,  2004 and 2003,  respectively.
Interest  expense was $432 and $652 for the three months,  and $1,469 and $1,598
for the nine months  ended  September  30, 2004 and 2003,  respectively.  Future
yearly minimum lease payments as of September 30, 2004:

Year                                  Amount
----                                  ------
2004                                  $ 1,883
2005                                    7,531
2006                                    1,256
                                      -------
 Total                                 10,670
Less interest portion                  (1,217)
                                      -------
Capital lease obligation              $ 9,453

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.  As of September  30, 2004,  the Company has  $9,185,140 in approved,
unused loan  commitments  for real estate loans and  $6,461,334  for real estate
joint venture  investments.  In addition,  the Company has new loan  commitments
awaiting Loan Committee approval totaling $11,325,000.

                                                                             F-9
<PAGE>
Related Party Transactions:

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

Effective  July 1, 2003,  the Company  entered  into 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  after June 30, 2003. The
agreement is for  renewable  one-year  terms and it may be  terminated by either
party upon 60 days' written  notice.  The Company does not have any employees of
its own  and  CCA is  subject  to the  supervision  of the  Company's  board  of
directors. Two of the Company's directors serve on CCA's board of directors.

From July 1, 2003 until July 31, 2004,  the  agreement  obligated the Company to
reimburse  actual  expenses  incurred  by CCA.  Also,  CCA was  eligible to earn
incentive compensation of up to 10% of the actual expenses billed to the Company
for the prior 12 months. The base for the incentive  compensation includes being
current on all bond  interest and other  obligations,  and that the common stock
shareholders have received  dividends equal to an annual rate of at least 10% on
the  price  paid  in a  public  offering  for  all  the  time  the  shares  were
outstanding.   Factors  above  the  base  and  the  exact  amount  of  incentive
compensation  were determined by the Board of Director's  judgment on the extent
to which CCA's services contributed to the results.

Effective  August 1, 2004,  the  original  agreement  was  modified  so that the
Company  will  pay  CCA as  follows:

o    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.
o    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, 2004 and 2003,  the Company
paid CCA as follows:

                                      Three Months              Nine Months
                                -----------------------   ----------------------
                                   2004         2003         2004         2003
                                ----------   ----------   ----------   ---------
Management Fees                 $  324,988   $  157,114   $  984,481   $ 157,114
Loan Origination Fees              433,500          -0-      433,500         -0-
Incentive Compensation Fees            -0-          -0-          -0-         -0-
                                ----------   ----------   ----------   ---------
                                $  758,488   $  157,114   $1,417,981   $ 157,114

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 ends on August  31,  2005,  after  which time the lease
converts to a month-to-month lease unless CCA notifies the Company of its intent
not to  renew  within  30 days  from  the end of the  initial  lease  term.  The
Company's  cost basis in the office  building and  office/computer  equipment is
approximately  $626,000. For the three and nine months ended September 30, 2004,
the Company received $10,000 from CCA under the lease agreement.

Cornerstone Direct Public Offerings, LLC

The Company contracts with Cornerstone Direct Public Offerings,  LLC ("CDPO") to
provide legal and  administrative  services for the filing of SB-2  Registration
Statements  with the  Securities and Exchange  Commission.  Two of the Company's
directors serve on the board of directors of CDPO's majority owner,  Cornerstone
Group  Holdings,  Inc.  The  service  fee  is  $75,000  per  filing  payable  in
installments during the filing process.

During 2003, the Company and Wellstone Communities,  Inc. (a formerly 100%-owned
subsidiary)  each entered into a service  agreement  with CDPO for the filing of
SB-2 Registration Statements. The $150,000 fee for these two agreements was paid
in the third and fourth quarters of 2003. In January,  2004, the Company amended
its service agreement and paid an additional  $25,000 to CDPO for cost over-runs
related to the length of time needed for their registration  statement to become
effective.

                                                                            F-10
<PAGE>

In July,  2004, the Company  entered into a service  agreement with CDPO for the
filing of a new SB-2  Registration  Statement.  $50,000  was paid to CDPO in the
third quarter of 2004. The Company expects to pay the remaining  $25,000 service
fee to CDPO during the fourth quarter of 2004.

See Note 12 for additional disclosures on the Company's registration  statements
and  Note  18  for  additional  disclosures  on  Wellstone  Communities,  Inc.'s
registration statement.

NOTE 4 - REAL ESTATE LOANS

At  September  30,  the  Company  had Real  Estate  Loans on  church  and  other
non-profit properties as follows:

                                                    2004               2003
                                                ------------       ------------
Family housing development loans                $ 31,648,258       $ 24,033,592
Church mortgage loans                              9,481,638         13,977,012
Senior housing mortgage loans                      9,286,352          9,093,501
                                                ------------       ------------
   Total principal                                50,416,248         47,104,105
   Accrued Interest                                  560,959            247,600
   Unearned Loan Fees                               (108,487)          (457,598)
   Allowance for loan losses                        (425,000)               -0-
                                                ------------       ------------
   Total Real Estate Loans                      $ 50,443,720       $ 46,894,107

These loans mature as follow: 2004 - $15,825,147; 2005 - $31,634,089; 2006 - $0;
2007 - $0; 2008 - $0; beyond 2008 - $2,957,012. 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.

On September 30, 2004, the Company had significant credit risk concentrations in
the following states:

Georgia       $26,619,380
Florida       $ 9,531,034
Texas         $ 9,398,511

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:

                                                          2004           2003
                                                       ---------      ---------
Current year interest financed                         $ 868,926      $ 558,259
Previous years' financed interest received               (27,706)      (456,861)
                                                       ---------      ---------
Net financed interest                                  $ 841,220      $ 101,398

Impaired loan disclosures for the nine months ended September 30 are as follows:

                                                           2004          2003
                                                        ----------    ----------
Number of impaired loans                                         2             2
Carrying amount at September 30                         $1,933,751    $  627,875
Weighted average investment - year-to-date              $1,880,867    $  632,274
Impaired loan interest income - current quarter         $   45,443    $    5,539
Impaired loan interest income - year-to-date            $  135,118    $   15,203

No  allowance  for specific  impaired  loan loss has been  recorded  because the
carrying amount of the impaired loans as of September 30, 2004 and 2003 was less
than the present value of the loan's expected future cash flows.

NOTE 5 - 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:

                                                                            F-11
<PAGE>

Location                                               2004             2003
                                                  ------------     ------------
McKinney, TX                                      $  3,981,794     $  3,033,191
Edmund, OK                                          13,098,142              -0-
St. Petersburg, FL                                   4,402,891        3,609,620
Lewisville, TX                                      10,656,804       10,091,529
Garland, TX                                          6,385,256        5,471,827
Chattanooga, TN                                      4,883,131        3,448,256
Winter Haven, FL                                     5,551,751              -0-
San Antonio, TX                                     11,551,897        8,314,718
                                                  ------------     ------------
Total principal outstanding                         60,511,666       33,969,141
Accrued interest                                       494,783          254,483
Unearned loan fees                                  (1,535,489)      (1,761,870)
Allowance for loan losses                                  -0-              -0-
                                                  ------------     ------------
Real estate joint venture investments, net        $ 59,470,960     $ 32,461,754

The  loans  mature as  follows:  2004 -  $4,179,891;  2005 -  $56,331,775.  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 these  properties  through
loan participation agreements, which enable the Company to receive income from a
borrower  when a property in 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 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:
                                                            2004          2003
                                                          --------      --------
Current year interest financed                            $345,163      $345,073
Previous years' financed interest received                     -0-           -0-
                                                          --------      --------
Net financed interest                                     $345,163      $345,073

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.  No real estate joint venture  investments were considered
impaired as of September 30, 2004 and 2003.

NOTE 6 - ALLOWANCE FOR LOAN LOSSES

For the nine  months  ended  September  30,  2004,  a summary  of changes in the
allowance for loan losses by loan type:
<TABLE>
<CAPTION>
                                                                       Real Estate
                                             Family      Senior       Joint Venture
                                Church       Housing     Housing       Investments       Total
                              ----------    ---------   ----------      ----------     ---------
<S>                           <C>           <C>         <C>             <C>            <C>
Balance - beginning of year   $      -0-    $ 375,000   $      -0-      $      -0-     $ 375,000
Loan loss expense                    -0-       50,000          -0-             -0-        50,000
Charge-offs                          -0-          -0-          -0-             -0-           -0-
Recoveries                           -0-          -0-          -0-             -0-           -0-
                              ----------    ---------   ----------      ----------     ---------
Balance - end of quarter      $      -0-    $ 425,000   $      -0-      $      -0-     $ 425,000
</TABLE>

                                                                            F-12
<PAGE>

Components of allowance for loan losses at September 30, 2004:

Collective loan losses-
  Historical experience              $     -0-
  Current credit risk assessment       425,000
                                      --------
  Total collective loan losses         425,000
Specific impaired loan losses              -0-
                                      ---------
Total allowance for loan losses      $ 425,000

Prior to 2003,  the  Company had no  allowance  for loan loss  activity.  In the
fourth  quarter of 2003, as part of the Company's  regular loan grading and risk
assessment  process,  it was determined that the family housing loan portfolio's
credit risk had increased over  historical  levels.  This increase was caused by
slower than  expected new home sales.  The slow down in new home sales is due to
slower than expected  growth in the U.S.  economy.  This increase in credit risk
resulted  in a $375,000  charge to loan loss  expense  in the fourth  quarter of
2003. For the three and nine month periods ended September 30, 2004, the Company
charged an additional  $20,000 and $50,000,  respectively  to loan loss expense.
These  charges were due to an increase in the family  housing  loan  portfolio's
outstanding  loan principal.  The Company has never incurred a loan  charge-off;
therefore,  there is no collective loan loss allowance  related to the Company's
historical experience.

NOTE 7 - GOODWILL

The Company  uses SFAS 142  "Goodwill  and Other  Intangible  Assets".  Goodwill
associated with the Company's acquisition of Presbyterian  Investor's Fund, Inc.
during the fourth  quarter of 2000, is carried at $450,997 and is not subject to
further amortization.  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,  2003 and 2002,  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  quarters  presented in these
financial statements.

NOTE 8 - UNAMORTIZED DEBT ISSUE COSTS

Unamortized  debt issue costs  consist of legal,  accounting,  and filing  costs
incurred to register the  Company's  debt  securities  and  commissions  paid or
accrued  on the  sale  of  debt  securities.  These  costs  are  amortized  on a
straight-line  basis  over  the  period  the  associated  debt  is  outstanding,
generally  five years.  At  September  30,  2004,  unamortized  debt issue costs
consist of:

Costs incurred to register debt securities           $   664,055
Commissions paid on the sale of debt securities        3,599,848
Less: Accumulated Amortization                        (1,642,265)
                                                     -----------
                                                      $2,621,638

Amortization  expense  was  $223,454  and  $135,535  for the three  months,  and
$589,815 and $338,859  for the nine months  ended  September  30, 2004 and 2003,
respectively,  and  is  included  in  marketing  expenses  in  the  accompanying
Statements of Operations.

Estimated amortization expense for the next five years:

10/2004 - 9/2005   $793,213             10/2007 - 9/2008   $336,632
10/2005 - 9/2006   $676,260             10/2008 - 9/2009   $194,501
10/2006 - 9/2007   $621,032

NOTE 9 - BOND HOLDINGS

Bond holdings at September 30 consist of-               2004            2003
                                                     ----------      ----------
St. Lucie Co., FL Subordinated Revenue Bonds:
         Maturity  7/1/2036                          $2,325,000      $2,325,000
         Maturity 10/1/2036                           2,700,000       2,700,000
Undivided 50% interest sold to investor              (2,512,500)     (2,512,500)
                                                     ----------      ----------
Net investment in St.Lucie Co., FL bonds              2,512,500       2,512,500
                                                     ----------      ----------
Largo, FL Subordinated Revenue bonds:
            Matures 10/1/2033                         2,500,000       2,500,000
Undivided interest sold to investors                 (1,225,000)            -0-
                                                     ----------      ----------
Net investment in Largo, FL bonds                     1,275,000       2,500,000
                                                     ----------      ----------
Cost and fair value of bond holdings                  3,787,500       5,012,500
Accrued interest receivable                             198,167         184,833
                                                     ----------      ----------
                                                     $3,985,667      $5,197,333

                                                                            F-13
<PAGE>

The bonds are not traded on an exchange; however, management estimates, based on
discounted expected cash flows, that the fair value of the individual securities
approximates  their original cost.  Accordingly,  no unrealized holding gains or
losses have been recorded in 2004 or 2003.

Proceeds  from the  maturity  of bonds were $0 and  $58,750  for the nine months
ended  September 30, 2004 and 2003,  respectively.  No realized  gains or losses
were  recognized  in either year.  The Company uses the specific  identification
method to determine realized gains and losses.

Tax-free  interest  income was $82,500 and  $60,334  for the three  months,  and
$248,056 and $175,372  for the nine months  ended  September  30, 2004 and 2003,
respectively.

NOTE 10 - INCOME TAXES

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

                                                        2004             2003
                                                     ---------        ---------
Deferred tax assets                                  $ 217,033        $  69,219
Deferred tax liabilities                              (367,762)        (361,764)
                                                     ---------        ---------
Net deferred tax (liability) asset                   ($150,729)       ($292,545)

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 and from  differences in
the  amortization of debt issue and start-up costs.  The Company  estimates that
future  taxable  income will be  sufficient  to realize the deferred tax assets;
therefore,  no valuation allowance was provided for as of September 30, 2004 and
2003.

During the third quarter of 2003,  the Company's  request with the Department of
the Treasury to change its tax  accounting  method for loan fees to  approximate
its book treatment  under SFAS Nos. 65 and 91 was approved.  As a result of this
change, the Company was able to amend and request refunds from its 2000 and 2001
federal  and state tax returns  totaling  $286,953.  $244,336  of the  requested
refunds was received in the fourth quarter of 2003 and the remaining $42,617 was
received in the second  quarter of 2004.  In  addition,  the amended tax returns
created a $481,154 federal net operating loss  carryforward and an $82,025 state
net operating loss  carryforward that the Company used to reduce its 2003 income
tax liability.

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

                               Three Months                  Nine Months
                         ------------------------      ------------------------
                            2004          2003            2004           2003
                         ---------      ---------      ---------      ---------
Current:   Federal       ($  4,689)     ($310,296)     $   8,987      ($274,206)
            State            2,538        (30,863)        10,167        (24,494)

Deferred:  Federal          (9,911)       738,428        (18,741)       513,850
            State           (1,061)        92,560         (1,973)        52,928
                         ---------      ---------      ---------      ---------
                         ($ 13,123)     $ 489,829      ($  1,560)     $ 268,078

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

                                            Three Months         Nine Months
                                          ----------------     -----------------
                                           2004      2003       2004      2003
                                          ------    ------     ------    ------
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   (77.4%)    (1.5%)    (40.0%)    (6.4%)
Other, net                                  3.5%     (1.6%)      1.6%     (2.4%)
                                          ------    ------     ------    ------
Effective tax provision (benefit) rate    (36.2%)    34.6%      (0.7%)    28.9%


                                                                            F-14
<PAGE>
NOTE 11 - CASH CONCENTRATION

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, 2004,
the Company's cash in excess of insured limits was $8,799,307.

NOTE 12 - INVESTOR CERTIFICATES

The Company has three types of certificates outstanding:

Access  certificates 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 4%.

Graduated  certificates  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  certificate  is  outstanding.   For
certificates sold prior to 2004 the rate starts at 7% and increases .5% for each
year the certificate is outstanding with a 9% maximum rate. Certificates (Series
E) sold in 2004 have an initial interest rate of 6.25% and increase .5% for each
year the certificate is outstanding with an 8.25% maximum rate.

Five year certificates have a five year maturity and a $500 minimum  investment.
The  interest  rate is 9% for  certificates  sold  prior to 2004 and  8.25%  for
certificates (Series E) sold in 2004.

The certificates are not  collateralized and no sinking fund is required to fund
redemptions at maturity.  All of the certificates  have been registered with the
Securities and Exchange  Commission  under the Securities Act of 1933. Five year
schedule of principal maturities for certificates outstanding at September 30:

Years to Maturity                            2004                       2003
-----------------                        ------------               ------------
On demand & 1 year                       $ 12,102,147               $ 10,744,701
2                                          10,803,667                 10,291,648
3                                          27,329,873                 22,713,141
4                                          26,425,074                 17,765,879
5                                          30,983,200                 18,198,729
                                         ------------               ------------
Total Principal                          $107,643,961               $ 79,714,098


At September 30, 2004 and 2003,  accrued  interest  payable was  $7,407,907  and
$4,407,961,   respectively.  Interest  rates  for  certificates  outstanding  at
September 30, 2004 are:

4.0%   - $2,027,030                   8.0%   - $ 3,218,818
6.25%  - $3,521,003                   8.25%  - $30,983,200
7.0%   - $  327,953                   9.0%   - $64,558,614
7.5%   - $3,007,343

On April 29, 2003 the Company filed a Form SB-2 Registration Statement under the
Securities Act of 1933 with the Securities and Exchange Commission to sell up to
$40,000,000 of its Series E Certificates of Indebtedness  along with $11,375,000
of its Common Stock. The  Registration  Statement was approved by the Securities
and Exchange  Commission on March 26, 2004. Since the approval date, the Company
has issued  $34,514,203  in new Investor  Certificates  and $2,090,341 in Common
Stock (321,591 shares).

On August 27, 2004 the Company filed a Form SB-2  Registration  Statement  under
the Securities  Act of 1933 with the Securities and Exchange  Commission to sell
up to $20,000,000 of Series F Certificates of Indebtedness along with $9,750,000
of its Common Stock. The Securities and Exchange Commission notified the Company
that it would not complete a full review of the new  registration  statement and
that they would declare the new registration  statement effective on November 1,
2004.  The  Company  has not  finalized  its  plans  as to when  the sale of new
certificates and shares will begin.

NOTE 13 - MORTGAGE PARTICIPATION AGREEMENTS

In the second quarter of 2003, the Company began selling Mortgage  Participation
("MP") Agreements. The MP Agreements have not been registered and therefore, are
only available to accredited  investors.  The agreements are  collateralized  by
specific senior housing loans owned by the Company and entitle the investor to a
proportionate  share of the interest earned on the collateral.  Interest is paid
monthly to the MP investor after the Company receives  interest  payments on the

                                                                            F-15
<PAGE>
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 for the MP Agreements was $154,063
and  $134,688 for the three months and $461,880 and $161,748 for the nine months
ended September 30, 2004.

MP Agreement  principal and interest  outstanding  and related  collateral as of
September 30, 2004:
<TABLE>
<CAPTION>
                                                             MP Amount       Total Collateral
                                                            Outstanding       Carrying Amount
                                                            -----------       ---------------
<S>                                                          <C>               <C>
Lewisville, TX senior housing loan; matures 10/1/05
   with a one year extension at the Company's option         $3,766,000        $10,694,727
Garland, TX senior housing loan; matures 12/1/04
   with a one year extension at the Company's option          2,396,500        $ 6,303,158
                                                             ----------
Total principal outstanding                                   6,162,500
Accrued interest payable                                         49,642
                                                             ----------
                                                             $6,212,142
</TABLE>

The loans which  collateralize  the MP agreements  are classified as real estate
joint venture investments in the accompanying Balance Sheets. The total carrying
amount is equal to the loan's outstanding principal, plus accrued interest, less
deferred loan fees.

NOTE 14 - LOAN GUARANTEES

The Company is  guarantor  on four loans  secured by senior  housing  facilities
owned by  unrelated  non-profit  entities.  Certain  real estate  joint  venture
investments  and real  estate  acquisition  and  development  loans in which the
borrower chooses to secure outside  financing may require a Company guarantee as
a condition  of the  extension  of the loan by the  financial  institution.  The
guarantee is solely  limited to amounts drawn under credit  facilities  and only
covers  outstanding  principal and accrued interest and terminates upon maturity
and principal repayment. 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, 2004,  all loans which had a guarantee were current based on their
loan terms. Loan guarantees as of September 30, 2004:
<TABLE>
<CAPTION>
                                Renewal/                                             Current            Loan
                              Origination        Maturity          Maximum          Principal        Guarantee
Location                          Date             Date           Guarantee        Outstanding       Obligation
--------                       ---------         --------        -----------       -----------       ----------
<S>                             <C>              <C>             <C>               <C>                <C>
Fort Pierce, FL                  5/31/04          4/15/05        $ 6,000,000       $ 6,000,000        $  60,000
Fort Pierce, FL                  8/15/04          2/15/05          4,445,000         4,445,000           44,000
Palm Bay, FL                    12/31/02         12/31/05         13,800,000        12,360,965              -0-
St. Petersburg, FL              12/18/01         12/18/04          7,347,300         7,154,690              -0-
                                                                 -----------       -----------        ---------
                                                                 $31,592,300       $29,960,655        $ 104,000
</TABLE>

NOTE 15 - PROFIT SHARING PLAN

During 2001,  the Company  established a profit  sharing plan for its employees.
The plan allows for entry into the plan after one year of service, and immediate
vesting  of  contributed  amounts.  All  contributions  are  to be  made  at the
discretion  of  the  Company  after  approval  by the  Board  of  Directors.  No
additional  contributions  are expected as all of the Company's  employees  were
hired by Cornerstone Capital Advisors in 2003.

                                                                            F-16
<PAGE>
NOTE 16 - BUILDING MORTGAGES
<TABLE>
<CAPTION>
                                                                                          2004            2003
                                                                                          ----            ----
<S>                                                                                      <C>            <C>
Fidelity Bank - collateralized by rental office space                                    $173,073       $182,450
   Interest rate equal to "prime + 1.5%", currently 6%; monthly
   principal & interest payment of $1,723; matures March 1, 2006,
   at which time a balloon payment of  $158,824 is due.
Fidelity Bank - collateralized by corporate office building                               435,467            -0-
                                                                                          -------       --------
   Interest rate equal to "prime + 1.5%", currently 6%; monthly
   principal & interest payment of $3,617; matures Sept. 1, 2009,
   at which time a balloon payment of $338,876 is due.
Total principal outstanding at September 30:                                             $608,540       $182,450
</TABLE>

Estimated  annual  principal  payments:  2004 - $6,927;  2005 - $28,766;  2006 -
$178,887; 2007 - $20,319; 2008 - $21,572; 2009 - $352,069.

NOTE 17 - 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 an
adjustable formula.

During 2001, as part of the Company's  formation and initial  capitalization  of
Wellstone  Financial  Group,  LLC ("WFG"),  500 preferred shares with a value of
$500,000 were issued to WFG in return for a 100%  ownership  interest in WFG. In
June 2004,  WFG was  dissolved and all of the  outstanding  Series A Convertible
Preferred  Stock was redeemed from WFG in exchange for the  Company's  ownership
interest in WFG. See Note 18 for additional disclosures on this transaction.

NOTE 18 - DISSOLUTION OF SUBSIDIARIES

In June 2004, the Company's Board of Directors approved an agreement to dissolve
Wellstone Financial Group, LLC ("WFG"), a 100%-owned subsidiary. In exchange for
the  Company's  ownership  interest  in WFG,  the  Company  redeemed  all of the
Company's Series A Preferred Stock owned by WFG. The fair value of the Preferred
Stock  and the  Company's  ownership  interest  in WFG were  both  estimated  at
$500,000;  therefore,  no cash was  exchanged.  As of June 30,  2004,  WFG is no
longer included in the Company's  financial  statements.  The transaction had no
effect on the Company's assets, liabilities, net income and earning per share of
common stock.  WFG was  dissolved  because the Company has been unable to retain
the type of specialized  employees  necessary to develop WFG's operations into a
long-term profitable venture.

In June 2004, the Company's Board of Directors approved an agreement to dissolve
Wellstone  Communities,  Inc.  ("WCI"),  a  100%-owned  subsidiary.  The Company
received all of WCI's  assets in exchange  for its 136,250  shares of WCI Common
Stock. The fair value of this transaction was $1,265,268.  WCI's assets included
$1,046,340  in cash and a real estate  mortgage  loan with a carrying  amount of
$218,928.  The transaction had no effect on the Company's  assets,  liabilities,
net income,  and earnings per common share.  WCI filed a Form SB-2  Registration
Statement in 2003 and planned to issue preferred stock to expand its specialized
loan operations and possibly purchase a bank. The Company determined that it was
not feasible to go forward with the  registration  statement  given the proposed
financial structure; therefore, WCI was dissolved.

NOTE 19 - EARNINGS PER SHARE

Basic  earnings per share for the three and nine month periods  ended  September
30:
<TABLE>
<CAPTION>
                                                                   Three Months           Nine Months
                                                                   ------------           -----------
<S>                                                                 <C>                     <C>
2004              Net Income                                        $ 49,355                $212,094
----
                  Average Common Shares Outstanding                  846,114                 678,455
                  Earnings per Common Share                         $   0.06                $   0.31

2003              Net Income                                        $923,905                $658,725
----
                  Average Common Shares Outstanding                  520,260                  522,240
                  Earnings per Common Share                         $   1.78                $    1.26
</TABLE>

                                                                            F-17
<PAGE>

Diluted  earnings  per share are the same as basic  earnings  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 20 - MAJOR CUSTOMERS

The Company  received  more than 10% of its total revenue for the three and nine
months ended September 30, 2004 from the following customers:
<TABLE>
<CAPTION>
                                       Three Months          Nine Months
                                    ------------------    -------------------
                                      Amount       %        Amount       %      Description of Revenue Received
                                    ----------   -----    ----------    -----   -------------------------------
<S>                                 <C>          <C>      <C>           <C>     <C>
Senior Housing Services, Inc.       $1,454,662   44.1%    $4,120,293    45.2%   Interest and fees from real estate joint
                                                                                  venture investments
Wellstone Housing Corp.                591,481   17.9%     1,643,028    18.0%   Interest and fees from family housing
                                                                                  development loans
Sage Living Centers, Inc.              502,159   15.2%     1,020,578    11.2%   Interest and fees from real estate
                                    ----------   ----     ----------    ----      loans and joint venture investments
                                    $2,548,302   77.2%    $6,783,899    74.4%
</TABLE>

The major customers are not related parties.  Neither  organization  directly or
indirectly  controls,  is  controlled  by,  or is under  common  control  of the
Company.  There is no 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 these customers.

NOTE 21 - 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  certificates  and  mortgage  participations  - Fair value is estimated
based on the present  value of expected  future cash flows,  which  approximates
their carrying amount.

Building  mortgage  and  capital  lease  obligation  - 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.

The estimated  fair values of the Company's  financial  instruments at September
30, 2004:

                                               Carrying Amount       Fair Value
                                               ---------------       ----------
Financial assets:
  Cash and cash equivalents                      $  9,257,555       $  9,257,555
  Bond holdings                                  $  3,787,500       $  3,787,500
Financial liabilities:
  Investor certificates                          $107,643,961       $107,643,961
  Mortgage participations                        $  6,162,500       $  6,162,500
  Building mortgages                             $    608,540       $    608,540
  Capital lease obligation                       $      9,453       $      9,453
  Loan guarantee obligations                     $    104,000       $    104,000


                                                                            F-18





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,
                                                  ------------------------------
                                                     2004               2003
                                                  -----------        -----------
Revenues                                          $ 9,110,919        $ 8,100,685
                                                  -----------        -----------

Investor interest expense                           6,627,673          5,285,031
Loan loss expense                                      50,000                -0-
Marketing expenses                                    735,709            448,595
Salaries, payroll taxes, benefits                     898,671            696,719
Operating expenses                                    588,332            743,537
                                                  -----------        -----------
   Total expenses                                   8,900,385          7,173,882
                                                  -----------        -----------
Operating income                                      210,534            926,803
Income tax provision (benefit)                         (1,560)           268,078
                                                  -----------        -----------
   Net income                                     $   212,094        $   658,725

Overview of operations.

We have  always  focused  on  serving  only  faith-based  organizations,  mostly
churches  and their  related  schools.  We also offer  specialized  programs for
church and other non-profit  sponsors of senior housing and  affordable/moderate
income  housing  programs.  Nearly  all of our  earnings  in the past  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.  We generate  revenue from:

o    interest on loans
o    origination and renewal fees on loans
o    loan participation income
o    interest on securities
o    consulting fees

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%. Some loans are
participating  loans,  which enable us to receive  income from the borrower when
the borrower sells or refinances  (with another lender) the property in which we
provided the financing.  The participation percentage varies between 25% and 33%
of the borrower's gain.

Participating loans (all related to senior housing facilities) are classified as
real estate  joint  venture  investments  if all of the  following  exist at the
inception  of the  loan:

o    The borrower does not have a substantial equity investment in the property.
o    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.
o    There is no  take-out  commitment  for the full  amount  of the loan from a
     creditworthy, independent third-party.
o    The facility does not have lease commitments which will provide  sufficient
     cash flow to service normal principal and interest loan amortization.

Comparison of Periods Ended September 30, 2003 and September 30, 2004

General. Assets increased from $94,939,591 at September 30, 2003 to $127,657,163
at September 30, 2004 for an increase of  $32,717,572 or 34%. This increase is a
result of the sale of Investor Certificates and Mortgage Participations,  net of
redemptions of $30,929,809  and new common stock  issuances of $2,043,530.  With
the  additional  net cash from these  items and from cash  already  on hand,  we
invested in real estate loans and joint  venture  investments,  net of principal
payments received, of $30,558,819.  Total revenue decreased for the three months
ended  September  30,  2004  by  $716,811  or 18%  from  $4,018,415  in  2003 to
$3,301,604 in 2004. Total revenue  increased for the nine months ended September
30, 2004 by $1,010,234 or 12% from $8,100,685 in 2003 to $9,110,919 in 2004. Net
income for the three and nine months  ended  September  30, 2004 was $49,355 and
$212,094  compared to $923,905 and $658,725 for the same periods ended September
30, 2003.

Total real estate loans and joint venture  investments  outstanding on September
30, 2004 was  $109,914,680  compared to $79,355,861 on September 30, 2003 for an
increase  of  $30,558,819  or 39%.  This  increase  is due to sales of  Investor
Certificates   and  Mortgage   Participation   Agreements   and  the  subsequent
origination or  refinancing of real estate loans and joint venture  investments,
as follows:

                                                                               3
<PAGE>

New real estate loan originations                                    $ 1,378,506
Increase in existing loans, net of principal received                  2,171,107
New real estate joint venture investments made                        18,649,894
Increase in existing real estate joint venture investments             8,359,312
                                                                     -----------
                                                                     $30,558,819

All other  assets  composed  primarily  of cash,  bond  holdings,  property  and
equipment, and unamortized debt issue costs were $17,742,483 as of September 30,
2004.

Our cash balance  increased  $3,690,701 from $5,566,854 on September 30, 2003 to
$9,257,555  on September  30, 2004.  This increase is due to the large amount of
Investor  Certificates  sold from May to September of 2004.  There is normally a
lag of two to four  months  between the receipt of cash from these sales and the
investment in new real estate loans and joint venture investments. We expect our
cash on hand to decrease  from its current  level  before the end of the current
year as we are  able to find  suitable  real  estate  loans  and  joint  venture
investments to invest our cash.

Principal   and  interest   payable  on  Investor   Certificates   and  Mortgage
Participation ("MP") Agreements increased $30,629,754 or 34% from $90,634,256 as
of September 30, 2003 to  $121,264,010  as of September  30, 2004. In 2003,  the
Company  filed  a  registration  statement  with  the  Securities  and  Exchange
Commission to sell up to $40,000,000  in additional  Investor  Certificates  and
$11,375,000 in Common Stock.  The  registration  statement was approved on March
26, 2004 which  allowed us to start  selling new  Investor  Certificates  in the
second  quarter of 2004 and continue  the  substantial  increase in  outstanding
certificates  and the  subsequent  investment in new real estate loans and joint
venture investments.

On May 31 and August 15, 2004,  two loans that we guaranteed on a senior housing
facility in Fort Pierce,  FL were modified and the maturity dates were extended.
These modifications  triggered the recognition of a loan guarantee obligation on
our balance sheet.  The loan guarantee  obligation is carried at the guarantee's
estimated fair value of $104,000. We billed the loan guarantee obligation to the
borrower as  compensation  for our risk and  received  payment  during the third
quarter of 2004. We have one additional  loan guarantee that may be modified and
extended  prior to the end of the current  fiscal year. If this occurs,  we will
recognize  an  additional  loan  guarantee  obligation  and we  will  bill  this
obligation to the respective  borrower as compensation for the risk that we have
taken  on  related  to the  guarantees.  Please  see  Note 14 of the  "Notes  to
Financial Statements" for additional information related to loan guarantees.

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:

                                 2004          2003         Increase         %
                              ----------    ----------     ----------    -------
Three months ended            $3,165,898    $2,711,757     $  454,141       17%
Nine months ended             $8,764,245    $6,619,794     $2,144,451       32%


The increases were due to the following:
<TABLE>
<CAPTION>
                                                             Three months   Nine months
                                                             ------------   -----------
<S>                                                          <C>            <C>
Increase in average outstanding principal                    $   492,056    $ 1,316,517
   (Three months: $101,418,710 - 2004; $81,460,370 - 2003)
   (Nine months: $91,891,257 - 2004; $74,001,974 - 2003)
Increase in weighted average interest rate                        78,023        211,341
   (Three months: 9.91% - 2004; 9.53% - 2003)
   (Nine months: 9.86% - 2004; 9.49% - 2003)
Change in loan fees recognized                                  (115,938)       616,593
                                                             -----------    -----------
                                                             $   454,141    $ 2,144,451
</TABLE>

The  increase in average  outstanding  principal is due to the addition of 4 new
real estate loans and joint venture  investments with  outstanding  principal of
$20,028,400.

Loan  participation  and  other  income.  For the three  and nine  months  ended
September 30, 2004, loan participation and other income increased (decreased) as
follows:
<TABLE>
<CAPTION>
                                       Three Months Ended                           Nine Months Ended
                             ---------------------------------------    ---------------------------------------
                                2004          2003          Change         2004          2003          Change
                             -----------   -----------   -----------    -----------   -----------   -----------
<S>                          <C>           <C>           <C>            <C>           <C>           <C>
Investment income            $   120,815   $    79,340   $    41,475    $   317,071   $   239,137   $    77,934
Loan participation & other        14,891     1,227,318    (1,212,427)        29,603     1,241,754    (1,212,151)
                             -----------   -----------   -----------    -----------   -----------   -----------
   Total                     $   135,706   $ 1,306,658   ($1,170,952)   $   346,674   $ 1,480,891   ($1,134,217)
</TABLE>

The Company's  investment  income is from the purchase of tax-free bonds used as
permanent financing for projects the Company funded during their development and
initial operations and from interest income on the Company's excess cash.


                                                                               4
<PAGE>

The increase in investment income is due to the September,  2003 purchase of new
tax-free bonds, which increased the balance in our bond holdings portfolio.

Loan  participation  and  other  income  decreased  in  both  periods  due  to a
$1,220,277 loan participation gain recorded in September, 2003. We have received
no loan participation revenue in 2004.

Investor interest expense.  Investor interest expense for the three months ended
September  30, 2004 was  $2,502,518,  an increase of $571,862 or 30% compared to
2003. Investor interest expense for the nine months ended September 30, 2004 was
$6,627,673, an increase of $1,342,642 or 25% compared to 2003.

The increases are due to:
<TABLE>
<CAPTION>
                                                                                  Three Months      Nine Months
                                                                                  ------------      -----------
<S>                                                                                <C>             <C>
Increase in average outstanding certificate principal, including                   $  550,477      $1,032,806
 interest payable subject to compounding
   (Three Months: $106,559,739 - 2004; $81,992,771 - 2003)
   (Nine Months: $93,218,234 - 2004; $78,358,925 - 2003)
Change in weighted average interest percentage                                          2,050           9,704
   (Three Months: 8.82% - 2004; 8.81% - 2003)
   (Nine Months: 8.82% - 2004; 8.80% - 2003)
Increase in average outstanding Mortgage Participation principal
   (Three Months: $6,162,500 - 2004; $5,345,187 - 2003)
   (Nine Months: $6,158,400 - 2004; $2,162,565 - 2003)                                 19,335         300,132
                                                                                   ----------      ----------
                                                                                   $  571,862      $1,342,642
</TABLE>

Loan loss expense and allowance for loan losses.  In the fourth quarter of 2003,
as part of our regular  loan  grading and risk  assessment  process,  we charged
$375,000 to loan loss expense and  increased  our allowance for real estate loan
losses to  $375,000  from $0 as of  December  31,  2002.  For the three and nine
months ended  September 30, 2004, we charged an additional  $20,000 and $50,000,
respectively  to loan loss expense.  Prior to the fourth quarter of 2003, we had
never  recognized an allowance for loan loss. Even though we have not incurred a
loan  write-off,  we increased our loan loss  allowance in the fourth quarter of
2003 because of an increase in our family housing  development  loan portfolio's
relative  credit  risk.  The  increased  credit  risk was caused by slower  than
expected  new home  sales in the fourth  quarter  of 2003,  which is a result of
slower than expected growth in the U.S.  economy.  The loan loss expense in 2004
was due to an  increase  in the  family  housing  development  loan  portfolio's
outstanding principal.

The  allowance  for  loan  loss  increases  that we made in 2003  and  2004  are
classified as collective loan loss allowances.  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. The allowance for loan losses is reviewed quarterly and increases
or decreases will be made based on the results of these reviews.

As of September 30, 2004, two church loans with a carrying  amount of $1,933,751
were  considered  impaired.  As of September  30, 2003,  two church loans with a
carrying amount of $627,875 were considered impaired.  No specific impaired loan
loss  allowance was recorded  because the carrying  amount of the loans are less
than the loan's  collateral or the present value of the loan's  expected  future
cash flows.

As of September 30, 2004,  allowance for loan losses as a percent of outstanding
loan principal by loan type:

                                          Loan Loss       Outstanding
                                          Allowance        Principal        %
                                          ---------       ------------   -------
Family Housing Development Loans          $ 425,000       $ 31,648,258     1.4%
Church Mortgage Loans                           -0-          9,481,638       0%
Senior Housing Mortgage Loans                   -0-          9,286,352       0%
Real Estate Joint Venture Investments           -0-         60,511,666       0%
                                          ---------       ------------   -----
  Total                                   $ 425,000       $110,927,914      .4%

Marketing  expenses.  Total expenses for the marketing of investor  certificates
for the three and nine  months  ended  September  30,  2004  were  $274,995  and
$735,709  compared to $161,370 and  $448,595  for the same periods in 2003.  The
increases are due to:
<TABLE>
<CAPTION>
                                          Three Months                         Nine Months
                               ---------------------------------   ---------------------------------
                                  2004        2003      Change        2004        2003       Change
                               ---------   ---------   ---------   ---------   ---------   ---------
<S>                            <C>         <C>         <C>         <C>         <C>         <C>
Debt issue cost amortization   $ 223,454   $ 135,535   $  87,919   $ 589,815   $ 338,859   $ 250,956
Management & Consulting           30,696      16,455      14,241      70,194      24,436      45,758
Printing                           5,631       3,175       2,456      21,277       9,923      11,354
Other marketing costs             15,214       6,205       9,009      54,423      75,377     (20,954)
                               ---------   ---------   ---------   ---------   ---------   ---------
       Total                   $ 274,995   $ 161,370   $ 113,625   $ 735,709   $ 448,595   $ 287,114
</TABLE>


                                                                               5
<PAGE>

Debt issue cost amortization expense increased due to Investor  Certificates and
Mortgage  Participations sold since June 30, 2003. This expense will continue to
increase as new  Investor  Certificates  and Mortgage  Participations  are sold.
Consulting expense is up due to the hiring of a full-time  marketing manager who
is  designing  and  implementing  new  marketing  strategies  for  our  Investor
Certificates, new investments and general corporate programs. Printing costs are
up due to the  printing of  prospectuses  and  marketing  brochures  for our new
certificates,  which we began to sell in the  second  quarter  of 2004.  For the
three  months ended  September  30, 2004,  other  marketing  costs are up due to
increased  promotions  and travel to our  various  broker-dealers.  For the nine
months ended September 30, 2004, other marketing costs are down because be spent
the following  non-recurring  costs in the second  quarter of 2003: 1) $9,966 in
compliance  and  registration  costs  while  registering  our  Series E Investor
Certificates;  2)  $14,770  to  consultants  to  examine  the  viability  of our
investing in new loan programs;  and 3) $5,000 to set-up and market the Mortgage
Participation Agreements.

Selling  commissions  paid to brokers  for  selling  Investor  Certificates  and
Mortgage Participations and costs incurred to register Investor Certificates are
paid in cash and charged as an expense  over the term of the related  debt.  The
unamortized  balance  is  classified  as  an  asset  on  the  Balance  Sheet  as
"Unamortized debt issue costs".  The balance was $2,621,638 and $1,853,470 as of
September 30, 2004 and 2003, respectively.

Operating and personnel expenses.  Personnel expenses (salaries,  payroll taxes,
and benefits) for the three months ended  September 30 increased  $44,071 or 20%
from $225,504 in 2003 to $269,575 in 2004.  For the nine months ended  September
30,  personnel  expenses  increased  $201,952  or 29% from  $696,719  in 2003 to
$898,671 in 2004.  The increase is due to additional  employees  hired to handle
the Company's  growth in  operations.  Prior to July 1, 2003, the employees were
paid  directly by the Company.  On July 1, 2003,  Cornerstone  Capital  Advisors
("CCA") hired all of our employees and has billed us according to the management
agreement that is now in place.

Starting  in  July  2003,  the  Company  contracted  with  CCA  to  provide  all
administrative and executive  personnel  services.  From July 1, 2003 until July
31, 2004, the agreement  obligated us to reimburse  actual expenses  incurred by
CCA. Also, CCA was eligible to receive  incentive  compensation  of up to 10% of
actual expenses billed to us for the prior 12 months.  Effective August 1, 2004,
the original agreement was modified so that we will pay CCA as follows:

o    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.
o    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  3 of the  "Notes  to  Financial  Statements"  for  additional
information  about our  agreement  with CCA and for amounts that we have paid to
CCA for the three and none month periods ended September 30, 2004 and 2003.

For the  three and nine months  ended  September  30,  2004 and 2003,  operating
expenses were as follows:
<TABLE>
<CAPTION>

                                                                Three Months                               Nine  Months
                                                   -------------------------------------      -------------------------------------
                                                     2004          2003         Change          2004          2003          Change
                                                   ---------     ---------     ---------      ---------     ---------     ---------
<S>                                                <C>           <C>           <C>            <C>           <C>           <C>
a) Trust service/paying agent fees                 $  38,063     $  49,610     ($ 11,547)     $ 112,256     $ 119,291     ($  7,035)
b) Consulting fees                                    45,871        66,390       (20,519)       101,417       143,623       (42,206)
c) Audit, accounting & tax services                    8,517        40,278       (31,761)        37,304        88,589       (51,285)
d) Employee recruiting costs                             -0-           -0-           -0-            -0-        46,335       (46,335)
e) Depreciation & amortization                        18,558        15,704         2,854         50,840        40,079        10,761
f) Office expenses                                    11,850        16,450        (4,600)        55,435        50,410         5,025
g) Legal expenses                                     13,452        35,705       (22,253)        44,306        70,135       (25,829)
h) Appraisal costs                                     2,500           -0-         2,500         28,708           -0-        28,708
i) Insurance                                           9,207        18,175        (8,968)        31,206        40,342        (9,136)
j) Other operating expenses                           50,266        44,839         5,427        126,860       144,733       (17,873)
                                                   ---------     ---------     ---------      ---------     ---------     ---------
Total operating expenses                           $ 198,284     $ 287,151     ($ 88,867)     $ 588,332     $ 743,537     ($155,205)
</TABLE>

The changes are due to the following:

a)   Trust  service/paying  agent fees - decreased for the three and nine months
     due to a decrease in paying agent fees for our investor certificates.
b)   Consulting  fees - In  2003,  we used  consultants  to set up the  mortgage
     participation  agreements  and to  identify  new  business  markets  in the
     African American community (churches,  affordable senior housing and family
     housing) which increased costs over 2004. In 2004, we have continued to use
     consultants  to identify new business  markets  (affordable  housing is the
     main area);  however our overall use of outside consultants is down because
     we now have in-house  people to do the work that,  in past years,  we would
     have used outside consultants to perform.
c)   Audit,  accounting  & tax  services - Decreased  due to: 1) the hiring of a
     full-time accountant in the middle of 2003 which has decreased our need for
     outside accounting services; and 2) in 2003, we spent $8,155 in CPA fees to
     set up Wellstone Communities, Inc, a formerly wholly-owned subsidiary.


                                                                               6

<PAGE>

d)   Employee  recruiting  costs -  decreased  in 2004  because we are no longer
     using outside recruiting firms to hire our employees.
e)   Depreciation  &  amortization  - The  increases  are due to the purchase of
     additional computers, software and office furniture in 2004.
f)   Office  expenses - The decrease in the current quarter is due to the change
     in our  management  contract  with  CCA.  Prior to  August,  2004,  CMI was
     responsible  for all general  office  costs at our  corporate  offices.  In
     August 2004, the agreement was changed and as part of the agreement, CCA is
     now  responsible  for the  maintenance  and ongoing  operating costs of the
     office.  Please  see Note 3 of the  "Notes  to  Financial  Statements"  for
     additional information about our management agreement with CCA.
g)   Legal expenses - We have used outside attorneys less in 2004 than in 2003.
h)   Appraisal costs - Increased due to new appraisals  being  commissioned on a
     number of properties which serve as collateral on senior housing and church
     loans.
i)   Insurance -  decreased  in 2004 due to: 1) lower  premiums on director  and
     officer  insurance  ($1,000);  2)  elimination  of Workers'  Comp  coverage
     because CCA now pays this  insurance  as part of the  management  agreement
     ($2,000);  and 3)  elimination  of  directors  and officers  insurance  for
     Wellstone  Communities,  Inc  due to the  dissolution  of  this  subsidiary
     ($6,000).
j)   Other  operating  expenses - increased for the three months ended September
     30, 2004 due to increased travel costs related to company business. For the
     nine months ended September 30, 2004,  other operating costs have decreased
     due to economies  of scale that we have  benefited  from as our  operations
     have increased.

Income tax provision (benefit). The income tax provision (benefit) for the three
and nine months ended September 30, 2004 was ($13,123) and ($1,560), compared to
$489,829 and $268,078 for the same periods  ended  September  30, 2003.  The net
decrease in income taxes is due to a decrease in pre-tax  income and an increase
in tax-exempt  bond interest.  The Company's  effective tax provision  (benefit)
rate for 2004 and 2003 is as follows:

                            2004           2003
                            ----           ----
Three Months               (36.2%)         34.6%
Nine Months                 (0.7%)         28.9%

A  reconciliation  of the Company's  effective tax provision rate to the federal
statutory rate is included in the attached "Notes to Financial Statements" (Note
10).

Dividends. Dividends of $155,066 and $169,085 were declared on June 30, 2004 and
2003 and paid on July 15, 2004 and 2003, respectively.

Liquidity and Capital Resources

Cash flows from  operations.  Net cash provided by the Company's  operations for
the nine months ended  September 30, 2004 and 2003 was $291,751 and  $1,404,989,
respectively. This decrease was due to a decrease in net income, deferred taxes,
and cash  received  from loan  fees and loan  interest,  partially  offset by an
increase in  depreciation/amortization  expense, an increase in accrued investor
certificate interest, and a decrease in loans in process.

Investor and mortgage participation interest payable increased $2,726,187 in the
first nine  months of 2004 due to an increase  in  outstanding  debt and because
approximately 25% of the Investor Certificate holders who purchased certificates
in 2003 and 2004 have elected to reinvest the interest due to them each year and
not receive the interest in cash until maturity.

Included  in the 2004 and 2003  changes in accrued  real  estate  loan and joint
venture  interest and deferred  loan fee amounts is  $1,186,383  and $446,471 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, 2004 and 2003 is as
follows:
                                      2004               2003
                                  ----------         ----------
Family Housing Development        $  802,756         $   89,000
Church Construction                   38,464             12,398
Real Estate Joint Venture            345,163            345,073
                                  ----------         ----------
                                  $1,186,383         $  446,471

The amount for 2004  represents  interest  accrued and financed in 2004,  net of
payments  received in 2004 that were financed in previous  years.  2003's amount
represents  interest  accrued and financed in 2003, net of payments  received in
2003 that were financed in previous years.

The increase in the family housing net financed  interest in 2004 as compared to
2003 is due to: 1) the Company  receiving  $453,938 in financed interest in 2003
that was  originally  financed in 2002 on a major  project in  Mableton,  GA, 2)


                                                                               7
<PAGE>

increased loan balances on six projects which are now in the  development  phase
and are financing their monthly interest,  and 3) the addition of four new loans
since  September 30, 2003 which are in the  development  phase of  construction.
Although the amount of financed  interest from these projects will remain fairly
high (currently  $85,000 to $90,000 per month),  the amount of interest financed
should  decline  starting  late in the  fourth  quarter of 2004 and in the first
quarter of 2005  because  three to five of these  projects  should be going into
their sales phase and we will begin to receive interest payments in cash.

The  majority of the Real Estate  Joint  Venture  financed  interest for 2004 is
related to a loan in McKinney,  TX that is  collateralized  by raw land which is
being developed for senior housing.  We have been financing the interest on this
loan since June, 2003. Our other Real Estate Joint Venture  Investment loans are
collateralized  by  existing  facilities  that  only  needed  to  be  remodeled.
Therefore,  the period in which the  interest is being  financed on the McKinney
loan is much longer than the other Real Estate Joint Venture  Investment  loans.
Normally,  we finance two to six months' of interest on senior housing loans. We
anticipate,  due to the  size of the  McKinney  project  that  we  will  finance
interest for another 12 to 24 months.

Cash flows from investing  activities.  For the nine months ended  September 30,
2004, the Company used $24,044,386 in cash from investing activities which is an
increase of $7,341,032 from  $16,703,354 for the nine months ended September 30,
2003. The increase was due to the following:
<TABLE>
<CAPTION>
<S>                                                                        <C>
Increase in real estate  loans and joint  venture  investments  made       $ 5,258,962
Decrease in real estate loan and joint venture investment
   principal payments received                                               5,104,218
Decrease in bonds purchased, net of redemptions                             (2,441,250)
Decrease in fixed asset purchases, net of fixed asset sales                   (580,898)
                                                                           -----------
                                                                           $ 7,341,032
                                                                           ===========
</TABLE>

The increase in real estate loans and joint venture  investments made in 2004 is
due to the new registration  statement  becoming effective on March 26, 2004. We
did not have as much time in 2003 to originate new loans as we have had in 2004.
This trend should  continue in the fourth  quarter of 2004 as we invest the cash
that we have received from new investor certificates and stock issuances.

The decrease in real estate loan and joint venture investment principal payments
received is due to a large principal  pay-off  received in 2003 on a real estate
joint venture investment in Largo, FL.

The  decrease  in  fixed  asset  purchases  is  due to the  purchase  an  office
condominium  in 2003 to house our corporate  offices and to provide office space
for future growth.

Cash flows from financing  activities.  For the nine months ended  September 30,
2004, the Company raised $31,178,614 from the sale of Investor  Certificates and
Mortgage  Participation  Agreements.  This  represents an increase of $6,760,031
from new Investor  Certificate and Mortgage  Participation  sales of $24,418,583
for the nine months ended  September  30, 2003.  In 2003,  we had no  registered
Investor  Certificates  for sale after May,  2003. We have been able to sell new
Investor  Certificates  since  March 26,  2004 which has been the reason for the
increase over last year.

 Investor  Certificates redeemed for cash decreased from $3,449,495 for the nine
months  ended  September  30,  2003 to  $3,336,245  for the  nine  months  ended
September 30, 2004. In both 2003 and 2004,  we redeemed  early certain  Investor
Certificates  to reduce our  average  interest  rate and to extend the length of
time that our certificates will be outstanding. In 2003, we called approximately
$2,000,000 in certificates  related to the church bond fund. In August, 2004, we
called all 9% five year  Investor  Certificates  with a maturity  date of March,
2005.  We gave each investor the option to receive cash or new Series E Investor
Certificates  (8.25%  interest rate) as payment for the  certificates  that were
being  called.  The  total  amount  called  and the  amounts  paid  in cash  and
reinvested in new certificates were as follows:

                                          Principal      Interest        Total
                                          ----------    ----------    ----------
Amounts paid in cash (28%)                $1,276,823    $  253,918    $1,530,741
Amounts reinvested (72%)                   3,258,145       647,779     3,905,924
                                          ----------    ----------    ----------
Total called/early redemptions            $4,534,968    $  901,697    $5,436,665

We have  $12,102,147  in Investor  Certificates  coming due or  redeemable  upon
demand  in the  next 12  months.  $9,747,163  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 historical  experience,  we
expect that less than 20% of the  graduated  certificates  will be redeemed  for
cash during the next 12 months. Also, $327,953 in five year bonds will mature in
March, 2005. Our historical experience indicates that over 75% of the maturities
will be  reinvested  into new Investor  Certificates,  but there is no guarantee
that this will  happen.  We will ensure that we have  enough cash  available  to
handle these maturities.

Among the  measures we take to  mitigate  any demands for cash are:

o    Maintain a minimum cash balance, normally no less than $3,000,000.


                                                                               8
<PAGE>

o    Have readily marketable loans that can be sold for par or a premium.
o    Ask investors their intentions at least 30 days before their bonds mature.
o    Have a bank willing to extend credit lines if needed.
o    Spread maturity dates throughout the year.
o    Limit each investor to not more than $500,000  maturing in any  three-month
     period.

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,  any  opportunities  for  acquisitions  of related
businesses and the overall  success of our marketing  efforts for  certificates,
shares and any other securities.

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,  2004,  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

         Not Applicable

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)  Exhibit   99.1,   Certifications   pursuant  to  Section  906  of  the
     Sarbanes-Oxley  Act of 2002.

     (2) Exhibit 15, Letter on un-audited interim financial information.

(b)  No reports on Form 8-K were filed  during the quarter for which this report
     is filed.

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 10, 2004        Cornerstone Ministries Investments, Inc.
                                (Registrant)


                                By: /S/John T. Ottinger
                                    --------------------------------------------
                                    John T. Ottinger
                                    Vice President and Chief Financial Officer

                                                                               9