SECURITIES AND EXCHANGE COMMISSION
                   Washington, D.C. 20549
                            -------------------------

                                   FORM 10-KSB
              Annual Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934
                  For the Fiscal Year Ended September 30, 2007

                          ----------------------------
                            BELLAVISTA CAPITAL, INC.
             (Exact Name of Registrant as Specified in its Charter)

                    Maryland                                94-3324992
        (State or other jurisdiction of                  (I.R.S. Employer
         incorporation or organization)                 Identification No.)

                          420 Florence Street Suite 200
                               Palo Alto, CA 94301
                         (Address of principal offices)
                                 (650) 328-3060
              (Registrant's telephone number, including area code)
                          ----------------------------

             Securities registered under Section 12(b) of the Act:
                                      None
          Securities registered pursuant to Section 12(g) of the Act:
                    Common Stock, par value $0.01 per share
                                (Title of class)



    Indicate by check mark if the registrant is not required to file reports
              pursuant to Section 13 or Section 15(d) of the Act.
                                 Yes [ ] No [X]

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

    Check if there is no disclosure of delinquent filers in response to Item
    405 of Regulation S-K contained in this form, and no disclosure will be
    contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
                   or any amendment to this Form 10-KSB. [ ]

  Indicate by check mark whether the registrant is a shell company (as defined
                      in Rule 12b-2 of the Exchange Act).
                                 Yes [ ] No [X]

      State issuer's revenues for its most recent fiscal year: $14,725,684.

  The aggregate market value of the voting and non-voting common equity held by
  non-affiliates computed by reference to the price at which the common equity
 was last sold, or the average bid and asked price of such common equity, as of
                 a specified date within the past 60 days: N/A.

State the number of shares outstanding of each of the issuer's classes of common
  equity as of the latest practicable date: 12,545,517 Shares of Common Stock

          Transitional Small Business Disclosure Format: Yes [ ] No [X]

                                       1
<PAGE>



This Annual Report on Form 10-KSB of BellaVista Capital, Inc. (the "Company")
contains forward-looking statements. All statements other than statements of
historical fact may be forward-looking statements. These include statements
regarding the Company's future financial results, operating results, business
strategies, projected costs and capital expenditures, investment portfolio,
competitive positions, and plans and objectives of management for future
operations. Forward-looking statements may be identified by the use of words
such as "may," "will," "should," "expect," "plan," anticipate," "believe,"
"estimate," "predict," "intend," "seek," "target" and "continue," or the
negative of these terms, and include the assumptions that underlie such
statements. The Company's actual results could differ materially from those
expressed or implied in these forward-looking statements as a result of various
risks and uncertainties, including those set forth in the Financial Statements
referred to under Item - 7 Financial Statements, at Footnote 1 under the caption
"Risk Factors." All forward-looking statements in this report are based on
information available to the Company as of the date hereof and the Company
assumes no obligation to update any such statements.

The following information should be read in conjunction with the Financial
Statements and notes thereto included in this Form 10-KSB.


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

Business Focus and Strategies

Organized in 1999 as a real estate investment trust or "REIT," we invest in
residential real estate development projects. We generally invest in for-sale
single-family or multi-family projects, typically structured as secured
construction loans, secured subordinated loans, mezzanine loans, or equity
investments. We will also consider investments in commercial real estate. We
seek to invest throughout California; however, we have invested and will
continue to invest in neighboring states when presented with suitable
opportunities. We do not engage in any foreign operations or derive any revenue
from foreign operations, and do not intend to do so in the future. Effective
January 1, 2004, we withdrew our REIT status and are now taxed as a C
Corporation.

Most investments that we structure as loans are underwritten with maturity dates
of up to 24 months, which dates may be extended when deemed to be in the
Company's best interest. Most investments are secured by recorded deeds of trust
on the property being developed, and title insurance protecting the position of
our deeds of trust is always a precondition to funding a secured loan. We may
also make unsecured loans to development entities or take an ownership interest
in a development entity. In such circumstances we typically require a shared
appreciation interest or other equity participation. We also may invest our
funds directly in real property, if in the opinion of our Board of Directors it
is in our best interest.

All approved investments are subject to detailed legal documentation that has
been formulated by legal counsel for our specific purposes. In addition, our
Board of Directors has implemented specific guidelines for the making of loans
and investments. In accordance with our loan documents, we generally advance the
monthly interest payments out of available loan proceeds, although our loan
documents provide us with a right not to advance or to cease such payments
should it be determined that conditions require such actions. Loan fees, if
charged, are typically advanced out of the loan proceeds with the initial loan
advance. Generally, our loans require the borrower to make a "balloon payment"
equal to the principal advanced as well as advanced interest and fees upon
maturity of the loan. The loan maturity date is the earlier of the date of sale
of the secured real estate or the date stated in the loan documents.

Company Management

Investment Origination. We employ persons skilled in loan underwriting,
disbursement and monitoring, and the various business and legal issues that may
be involved with real estate lending and investing. Our employees and
independent contractors where appropriate, provide all of the services including
but not limited to: underwriting loans and investments, overseeing all loans and
investments, and servicing loans.

                                       2
<PAGE>

Proposed investments are evaluated to determine whether the investment is of a
type typically made by us, whether the developer has the experience necessary to
manage the project, whether the collateral is sufficient to meet our investment
standards, and whether the investment meets criteria and objectives set forth by
the Board of Directors. The Board of Directors must approve any new investment.

Collateral valuation. We utilize the experience of our employees, third party
appraisals or other information deemed useful to make assessments of a proposed
project's viability and projected value in order to determine whether a proposed
investment meets our criteria. In the evaluation process, emphasis is placed on
the ability of the underlying collateral to protect against losses in the event
of default by the borrower. The evaluation is based on the projected market
value of the proposed project, using various tools, including comparable sales
of similar properties and projections of market appeal and demand at completion.
The goal of the underwriting process is to achieve a comfort level that the
projected completion value of the property will support full repayment of the
investment plus the projected rate of return. We typically require third party
appraisals to support valuation.Servicing. Investment servicing involves taking
all steps necessary to administer the investment, including monitoring the
propriety of funding requests, monitoring progress of a project and accounting
for principal and income. Where appropriate, we employ an outside agent to
monitor construction progress and draw requests. Loan proceeds are disbursed as
construction progresses, and only after we have received satisfactory
documentation. Before making disbursements of loan proceeds, borrower
disbursement requests are verified by invoices from the developer or its
subcontractors, and by periodic site inspections of progress.

Sales of construction mortgage loans. We plan to hold mortgage loans to
maturity, and have not embarked on selling loans in any secondary market, nor
are we aware that an efficient secondary market exists for the loans we hold. We
may, however, decide to sell assets from time to time for a number of reasons,
including, without limitation: (1) to dispose of an asset for which credit risk
concerns have arisen; (2) to reduce interest rate risk; (3) or to re-structure
our balance sheet when our management deems it advisable. Our Board of Directors
has not adopted a policy that would restrict management's authority to determine
the timing of sales or the selection of mortgage loans to be sold.

ITEM 2. DESCRIPTION OF PROPERTY.
We own interests in real  property,  including  joint venture  interests in real
property and certain real property that we have  acquired  through  foreclosure.
Our  policy is to  maximize  the  value of the  foreclosed  properties  prior to
liquidation.  In some cases this may involve completing construction,  sometimes
through a subsidiary,  and then  marketing the property for sale. The properties
we  own  are  described  in  Note  5 to the  Consolidated  Financial  Statements
contained as Item 7 of the Form 10-KSB and begin on page FS-1.

ITEM 3. LEGAL PROCEEDINGS.
Legal proceedings are described in Note 10 to the financial  statements included
in the Form 10-KSB under Item 7, under the caption "Litigation."

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No  matters  were  submitted  to a vote of our  shareholders  during  the fourth
quarter ending September 30, 2007


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
        ISSUER PURCHASES OF EQUITY SECURITIES.

Market for Common Equity,  Related Stockholder Matters and Small Business Issuer
Purchases  of  Equity  Securities  are  described  in  Note 8 to  the  financial
statements  included  in the  Form  10-KSB  under  Item  7,  under  the  caption
"Shareholder's Equity."

Securities Authorized for Issuance under Equity Compensation Plans

In May 2006, the Company entered into compensation arrangements with its
executive officer, Michael Rider, which included contingent equity compensation.
See Item 10 below. Set forth below is a table regarding all shares authorized to
be issued under Company equity compensation plans.


                                       3
<PAGE>

<TABLE>
<CAPTION>

----------------------------- ---------------------------- ----------------------------- ----------------------------
  <S>                                 <C>                          <C>                           <C>
Plan category                 Number of securities to be   Weighted-average exercise     Number of securities
                              issued upon exercise of      price of outstanding          remaining available for
                              outstanding options,         options, warrants and         future issuance under
                              warrants and rights          rights                        equity compensation
                                                                                         plans (excluding
                                                                                         securities reflected in
                                                                                         column (a))

                              (a) (b) (c)
----------------------------- ---------------------------- ----------------------------- ----------------------------
Equity compensation           0                            N/A                           0
plans approved by
security holders

----------------------------- ---------------------------- ----------------------------- ----------------------------
Equity compensation           0                            N/A                           70,588 Common Shares
plans not approved by
security holders

----------------------------- ---------------------------- ----------------------------- ----------------------------
Total                         0                            N/A                           70,588 Common Shares

----------------------------- ---------------------------- ----------------------------- ----------------------------
</TABLE>

ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

General

Statements contained in this Item 6, "Management's Discussion and Analysis or
Plan of Operation," ("MD&A") and elsewhere in this Form 10-KSB, which are not
historical facts, may be forward-looking statements. Such statements are subject
to risks and uncertainties that could cause actual results to differ materially
from those projected. Investors are cautioned not to attribute undue certainty
to these forward-looking statements, which speak only as of the date of this
Form 10-KSB. We undertake no obligation to publicly release any revisions to
these forward-looking statements to reflect events or circumstances after the
date of this Form 10-KSB or to reflect the occurrence of unanticipated events,
other than as required by law.

Overview

BellaVista Capital was incorporated in March 1999 as Primecore Mortgage Trust,
Inc. Since incorporation and through December 2000, Primecore engaged in the
business of providing loans for the development of primarily high-end single
family residential real estate. During 1999 and 2000 Primecore raised the
capital to fund these loans from the sale of shares of Preferred Stock. This
capital was invested primarily in high priced San Francisco Bay Area residential
real estate at a time when prices were increasing at a rapid pace. By the end of
2000, Primecore had loan commitments of $436 million on 117 loans with over $216
million funded.

After 2000, the market for high-end real estate in the San Francisco Bay Area
began to deteriorate, Primecore began to experience borrower defaults and
through 2003 took title to 48 properties by way of foreclosure or deed in lieu
of foreclosure. Primecore also recognized significant impairments in its
portfolio. The impairment of the investment portfolio resulted in substantial
operating losses. The Company realized that these net operating losses could be
carried forward and used to reduce future taxable income. In prior years, the
company used its REIT status, and the payment of dividends, to eliminate
corporate level taxation. However, the REIT rules restricted the types of loans
the Company could make. In particular, the Company was prohibited from making
loans with equity participations. With the ability to carry forward prior years'
net operating losses to offset future taxable income, the Company was free to
terminate its REIT status, which it did effective January 1, 2004, and was no
longer restricted in the types of investments it could make. As of September 30,
2007 the Company's available Federal net operating loss carryforwards were
approximately $96.6 million. If these net operating loss carryforwards are fully
utilized to offset future taxable income, at current Federal and California
state tax rates, it would save the Company approximately $37.4 million in tax
payments.

After assessing the failures of Primecore's business model, new management and
the Board of Directors formalized a plan for future business operation. The
basic principles of the plan are as follows:

                                       4
<PAGE>

o    We will concentrate on $1 million to $6 million  investments in residential
     and commercial real estate development;
o    We will target a 15% average  return on our  portfolio  of  investments  by
     blending lower yield,  more secure first trust deed investments with higher
     yield subordinated debt and equity investments;
o    We will focus on  investments  covering a broad range of price points,  but
     with a majority of  investments  in housing priced close to the median sale
     prices for the areas in which we lend;
o    We will diversify the portfolio into other geographic  areas,  primarily in
     California; and
o    We have  established a rigorous  process for  investment  underwriting  and
     approval designed to mitigate our risk.

In April 2004 Primecore changed its name to BellaVista Capital in order to
reflect its new business focus. During 2004 new management focused on completing
and liquidating the existing portfolio of assets, internalizing operations,
resolving outstanding legal issues and developing a pipeline of new investment
opportunities. In addition to the completion and sale of our non-performing
investments, management completed the transition to internal management and
significantly reduced continuing operating expenses. Since 2004 we have approved
and funded new investments totaling approximately $80.6 million. As of September
30, 2007 these new investments comprised approximately 92% of our invested
assets.

The current real estate market is best characterized by both uncertainty in
residential real estate values and inventory absorption; thus the Company has
currently discontinued investments in subordinated debt and equity investments.
Investments made during this uncertain time period, which is currently expected
to extend through calendar year 2008 will typically be secured by first deeds of
trust requiring monthly interest payments and have smaller average sizes,
typically between $0.5 million and $2.0 million.

RESULTS OF OPERATIONS

We reported revenues from Loans Receivable Secured by Real Estate totaling $1.7
million during the year ended September 30, 2007 compared with $1.1 million
during the year ended September 30, 2006. The increase in revenues was due to an
increase in the average amount invested in these loans during 2007, an average
of $14.3 million during the year ended September 30, 2007 compared to $10.1
million year ended September 30, 2006. Additionally, the average interest rate
on these investments increased during 2007 to 11.75% compared with 11.33% during
2006.

We reported revenues of $1.9 million from our Joint Venture Investments in Real
Estate Developments during the year ended September 30, 2007 compared with $0.3
million during the year ended September 30, 2006. Our revenues are derived from
repayment of loans and equity participations. During the year ended September
30, 2007 investments we made during 2004 and 2005 began selling units,
generating repayment of our loans and thereby increased revenues.

During the year ended September 30, 2007 we reported revenues totaling $11.1
million from our Direct Investments in Real Estate Developments compared with
revenues of $43.5 million during the year ended September 30, 2006. The revenues
decreased during 2007 compared with 2006 due to fewer sales in our 72 unit San
Jose project which had sold 53 of the 72 units during the year ended September
30, 2006. This was our only project classified as a Direct Investment in Real
Estate Development selling units during the comparable time periods.

For financial statement purposes we report revenues from our Joint Venture
Investments only after we have collected it from the sale or repayment of the
associated investment. These loans are a significant portion of our total
investments. The Company believes that the rules governing the reporting of
income from our joint venture investments make it difficult for readers to
understand our economic performance. Specifically, our investments typically
take two years or longer to complete and repay. During this time the interest or
preferred return owed under the terms of our investment contracts is not
reported as income for financial statement purposes. However, during the same
period that we are charging, but not reporting this income, we are incurring
expenses necessary to originate and service our investments and these expenses
are reported during the period they are incurred.

The following table, using Non-GAAP measures, presents the results of operations
that would be reported if we reported the income we earned from our Joint

                                       5
<PAGE>

Venture Investments in Real Estate Development as it accrues. Proforma net
income (loss) per share is calculated using the weighted average number of
shares outstanding for common shares.

                                                  Year Ended September 30,
                                           -------------------------------------
                                                       2007                2006
                                           ----------------- -------------------
Net (loss) income per GAAP, as reported        $ (6,318,941)        $ 3,066,438
Revenues from JV Investments not reported         2,956,994            (322,120)
                                           ----------------- -------------------
Proforma net income - Non GAAP                 $ (3,361,947)        $ 2,744,318
                                           ================= ===================
Proforma net income per share - Non GAAP       $      (0.24)        $      0.18
                                           ================= ===================

Expenses

We group our operating expenses in three categories: recurring expenses;
nonrecurring expenses and impairments. Recurring expenses are associated with
the ongoing operations of our new investment strategy. Nonrecurring expenses are
legal costs and carrying costs of real estate owned associated with our previous
management. During the year ended September 30, 2007 our recurring operating
expenses were approximately $1.5 million compared with $1.3 million during the
year ended September 30, 2006. The increase in recurring operating expenses was
primarily due to increases in accounting and legal expense and Board of
Directors fees and insurance. As a result of the downturn in the real estate
market and significant uncertainties associated with future investments, we have
discontinued funding any new investments while we wait for the market to
stabilize. As a result, effective November 30, 2007 we have terminated our Chief
Investment Officer and our part time administrative associate. These staff
reductions will result in lower salaries expenses during future periods.

During the year ended September 30, 2007 our nonrecurring operating expenses
were $0.3 million compared with $0.8 million during the year ended September 30,
2006. The decrease in nonrecurring operating expenses was due to reductions in
REO carrying costs resulting from the reduction in the number of our real estate
owned properties and lower litigation costs as we have settled a number of
lawsuits during prior periods.

We recorded impairment charges totaling $7.7 million during the year ended
September 30, 2007 compared with $0.9 million during the year ended September
30, 2006. The impairments reported during 2007 stem from four investments where
declining real estate prices and longer than normal estimated marketing periods
have eroded the value of these four investments. Two of the investments with
impairment totaling $5.5 million involve projects where a construction lender
has filed a Notice of Default, the first step in a foreclosure process. A
foreclosure by the construction lender will render our investment worthless. We
have the option to invest additional capital in these projects, however, our
analysis based on current market conditions indicates that there is insufficient
equity to support the risk of additional capital in order to cure the default in
the construction loan. Therefore, we have concluded that we will not cure the
default resulting in a likely foreclosure of the property by the construction
lenders and have impaired the entire amount of our investments in those two
projects. Subsequent to the September 30, 2007, one of the construction lenders
completed their foreclosure process.

The remaining $2.3 million in recorded impairments during 2007 relates to two
other investments where declining real estate prices and extended estimated
marketing periods have eroded the value of our investments. One of these
investments is a conversion from apartments to condominiums where our investment
is a loan and we are the only lender. We may hold these units as rentals until
the market improves at which time we may sell the units as condominiums or sell
the entire project as a rental property. The second investment is a condominium
project where construction is complete but sale prices are significantly below
estimates. We have negotiated an extension with our construction lender and may
hold some units as rentals while we wait for the market to improve. We have
impaired our investment by our estimate of the decrease in value of the
condominium units and the costs to hold them while we sell them.

Since December 31, 1999, all interest costs have been capitalized as a cost of
our investments. Interest cost associated with our borrowings was $9,522 during
the year ended September 30, 2007 compared with $724,367 during the year ended
September 30, 2006. The decrease was due to the repayment during 2006 of all our
existing debt with proceeds received from the sale of REO properties. During
February 2007 we obtained a $1.0 million unsecured line of credit, and in June
2007 we obtained a $3.0 million secured line of credit, borrowing and repaying a
total of $2.8 million through September 30, 2007.


                                       6
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Liquidity means the need for, access to and uses of cash. Our principal source
of liquidity is the repayment of our real estate investments. Our principal
demands for liquidity are funds that are required to satisfy obligations under
existing loan commitments and operating expenses.

Sources of Cash

As of September 30, 2007 our primary source of liquidity was the collection of
our investments in real estate, a $4.0 million in lines of credit and the cash
we had in the bank. We do not currently have any plan to sell equity or issue
debt securities. However, we do have the ability to borrow money from various
financial institutions using our real estate investments as collateral if we
determine that we need additional liquidity.

We typically receive repayment on our investments when the development project
has been completed and sold or refinanced to third parties. Accordingly, our
repayments are a function of our developers' ability to complete and sell the
development properties in which we have invested. During the year ended
September 30, 2007 we received repayments, including income, totaling $28.2
million compared with $46.8 million during the year ended September 30, 2006 The
following table summarizes our liquidity expectations based on current
information regarding project completion and sales absorption assumptions for
the investments we held at September 30, 2007. The expected proceeds in the
table are higher than our net realizable value estimates because they include
our estimated costs to complete.


                                                       Expected Proceeds
                                                 ------------------------
Scheduled investment completion:
   Year ended 9/30/08                                       $ 32,839,483
   Year ended 9/30/09                                         11,942,365
   Year ended 9/30/10                                         15,696,105
                                                 ------------------------
   Total                                                    $ 60,477,953
                                                 ========================

It is possible that our repayments may not be sufficient to timely meet our
commitments and we may be forced to sell assets or seek financing at terms that
may not be favorable to us. This would have a negative impact on the estimated
net realizable value of our assets.

Uses of Cash

The following table sets forth the projected timing and amount of our
obligations through September 30, 2008, without taking into account new
investments that may be made during future periods:


                                                        Year               Year
                                                       ended              ended
                                               September 30,      September 30,
Obligation                         Total                2008               2009
                       ------------------ ------------------- -----------------
Investment fundings          $ 5,909,558         $ 5,909,558       $         --
Operating leases                  44,670              44,670                 --
                       ------------------ ------------------- -----------------
   Total                     $ 5,954,228         $ 5,954,228       $         --
                       ================== =================== =================

Investment fundings are the largest use of our cash. During the year ended
September 30, 2007 we invested $27.9 million in new and continuing development
projects compared with $50.6 million during the year ended September 30, 2006.

At September 30, 2007 we estimated the costs to complete our direct investments
in real estate developments plus the remaining funding obligation on our joint
venture investments in real estate developments was $6.0 million. The exact
timing of the investment fundings is dependent on several factors including

                                       7
<PAGE>

weather, governmental regulation and developer related issues, so the timing of
investment fundings in the above table is an estimate based on information
available to us at this time. Additionally, we expect the amount of actual
investment fundings to be higher than our obligation existing at September 30,
2007 as we may continue to make and fund new investments in future periods.

Stock Repurchases

In the past, we have provided liquidity to our stockholders through the
repurchase of outstanding shares. Because our stock does not trade in any
secondary market, no market value exists for our stock and another method must
be used to determine the repurchase price. The Board of Directors has used the
net realizable value of the Company's assets to guide determinations of
repurchase price for planned repurchases as well as Company repurchases in
response to unsolicited tender offers.

Stockholder Liquidity and Realizable Value of Investments

In October 2005 the Board of Directors announced the Company's long-term
strategy to increase shareholder value and transform BellaVista into an
attractive investment for both new and existing shareholders. The strategy
involves a two-phased approach:

o    In the medium  term,  the Company  needs to  demonstrate  a track record of
     consistent share price increases, and
o    In the longer  term,  the Company  should  establish  a regular  program to
     provide   liquidity  through  a  combination  of  distributions  and  share
     redemption.

In order to establish a track record of consistent share price increases, the
Company determined that it would be necessary to reinvest all capital and
earnings through December 2008 and, as a result, the Company does not intend to
use its funds to pay dividends or distributions or, except in certain
extraordinary circumstances, to redeem shares, during this period. The Company
believes that successfully achieving these goals will attract new investors and
create access to other capital sources. This will allow the Company to create a
liquidity program that provides regular distributions and share redemptions.
This liquidity will enhance the value for all shareholders.

As a metric to track the Company's progress toward its goals, the Board of
Directors uses the net realizable value of the Company's assets. The realizable
value of our assets represents our current estimate of the amount of proceeds we
expect to receive once our investments are completed and ready for sale. The
estimate relies on a number of assumptions including the expected value of the
investment once completed, less applicable selling costs, the remaining costs
and the length of time required to complete the project. Many factors outside
our control can cause changes in these estimates and produce different results.
Furthermore, as noted above, there is no organized public market for the
Company's shares, so the Company's calculation of the estimated realizable value
of its assets per outstanding share should not be viewed as an estimate of any
market value per share, and there can be no assurance as to the amount or timing
of any investment returns on the shares.

The information presented below reconciles the differences between the carrying
value of our investments based on US GAAP and the estimated realizable value of
our investments.

<TABLE>
<CAPTION>
                                                                                     As of September 30,
                                                                            --------------------------------------
                                                                                          2007               2006
                                                                            ------------------- ------------------
   <S>                                                                                <C>                    <C>
Loans receivable secured by real estate                                          $  11,163,000      $  13,846,500
Joint Venture investments in real estate developments                               33,704,973         33,270,955
Direct investments in real estate developments                                       5,213,220         11,691,620
                                                                            ------------------- ------------------
Total investments in real estate per US GAAP                                        50,081,193         58,809,075
Collectible interest and preferred return not reportable per US GAAP                 4,887,203          4,395,256
                                                                            ------------------- ------------------
   Estimated realizable value of investments in real estate                      $  54,968,396      $  63,204,331
                                                                            =================== ==================
</TABLE>


Net Realizable Value of Assets per Share

The following calculation determines the estimated net realizable value per
share of stock at September 30, 2007 and 2006:


                                       8
<PAGE>


<TABLE>
<CAPTION>
                                                                                     As of September 30,
                                                                            --------------------------------------
                                                                                          2007               2006
                                                                            ------------------- ------------------
   <S>                                                                                <C>                    <C>
Cash                                                                              $  1,759,241       $  3,006,024
Other assets                                                                         1,015,379          1,135,881
Estimated realizable value of investments in real estate                            54,968,396         63,204,331
                                                                            ------------------- ------------------
Total realizable assets                                                             57,743,016         67,346,236
Accounts and notes payable                                                            (597,313)        (1,650,694)
                                                                            -------------------- ------------------
Estimated net realizable assets                                                  $  57,145,703      $  65,695,542
Shares outstanding                                                                  13,951,452         14,991,325
                                                                            ------------------- ------------------
   Estimated net realizable assets per share                                     $        4.10      $        4.38
                                                                            =================== ==================
</TABLE>

Our estimated net realizable assets per share were $4.10 at September 30, 2007,
a decrease of $0.28 per share from the $4.38 we estimated at September 30, 2006.
The decrease results from writedowns in estimated realizable value of some of
our investments resulting from the declines in home prices for the real estate
developments in which we have invested.


Critical Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition or Plan of Operation
covers our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. On an on-going basis, management evaluates its estimates and
judgments, including those related to the valuation of our assets and
liabilities. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions. Management believes the following
critical accounting policies, among others, affect the more significant
judgments and estimates used in the preparation of its consolidated financial
statements.

Valuation and Realizability of Investments. All of our ADC loans are classified
for financial reporting purposes as joint venture investments in real estate
developments (see Note 4 to the financial statements). We have foreclosed on
some ADC loans that are classified as direct investments in real estate
developments (Note 5). Such investments include capitalized interest and are
stated at the lower of cost or fair value. Management conducts a review for
impairment on an investment-by-investment basis whenever events or changes in
circumstances indicate that the carrying amount of an investment may not be
recoverable. Impairment is recognized when estimated expected future cash flows
(undiscounted and without interest charges), typically from the sale of a
completed property, are less than the carrying amount of the investment, plus
estimated costs to complete. The estimation of expected future net cash flows is
inherently uncertain and relies to a considerable extent on assumptions
regarding current and future economics and market conditions. If, in future
periods, there are changes in the estimates or assumptions incorporated into the
impairment review analysis, the changes could result in an adjustment to the
carrying amount of the investments. To the extent that there is impairment, the
excess of the carrying amount of the investment over its estimated fair value,
less estimated selling costs, will be charged to income. We believe that all of
our investments are carried at the lower of cost or fair value, however
conditions may change and cause our ADC loans and REO properties to decline in
value in a future period.

Loan Accounting. We have applied the guidance of AICPA Practice Bulletin 1,
Purpose and Scope of AcSEC Practice Bulletins and Procedures for Their Issuance,
Exhibit I in accounting for our investment loans as real estate acquisition,
development, or construction (ADC) arrangements. In accordance with the ADC
accounting rules, we treat these loans as if they were real estate joint
ventures, and thus we do not accrue income for interest and points on our ADC
loans until the sale or refinancing of a property. Revenue from interest and
points from these ADC loans is recognized as cash is received from the sale or
refinancing of such properties. ADC loans are classified as joint venture
investments in real estate developments (see Note 4 to the financial statements)
and include amounts funded under the loan agreements and capitalized interest
expense. If our ADC loans qualified as loans under GAAP, interest and points
would be recognized as income in periods prior to the sale of the underlying
property.


                                       9
<PAGE>

In addition to ADC loans, we have made direct equity investments in real estate
joint ventures. These joint venture investments are accounted for in the same
manner as our ADC loans and are classified as joint venture investments in real
estate developments.


ITEM 7.  FINANCIAL STATEMENTS

Required financial statements and supplementary data are included in this Form
10-KSB commencing on page FS-1.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None.


ITEM 8A.  CONTROLS AND PROCEDURES

Management is responsible for establishing and maintaining adequate internal
control over financial reporting and for the assessment of the effectiveness of
internal control over financial reporting. As defined by the SEC, internal
control over financial reporting is a process designed by, or under the
supervision of, the Company's principal executive and principal financial
officers and effected by the Company's board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statement for external
purposes in accordance with generally accepted accounting principles.

The Company's internal control over financial reporting is supported by written
policies and procedures that: (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the Company's assets; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles and that
receipts and expenditures of the company are being made only in accordance with
authorizations of the Company's management and directors; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company's assets that could have a
material effect on the financial statements.

Under the supervision of Michael Rider, the Company's Chief Executive Officer
and Chief Financial Officer, we carried out an evaluation of the effectiveness
of the Company's disclosure controls and procedures (as defined in Rules 13a -
15(e) and 15d - 15(e) under the Securities Exchange Act of 1934) as of September
30, 2007. Based on that evaluation, Mr. Rider has concluded that those controls
and procedures were effective in making known to them, on a timely basis, the
material information needed for the preparation of this Report on Form 10-KSB.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect those internal controls since the date
of their evaluation.

A significant deficiency is a control deficiency, or combination of control
deficiencies, that adversely affects the company's ability to initiate,
authorize, record, process, or report external financial data reliably in
accordance with generally accepted accounting principles such that there is more
than a remote likelihood that a misstatement of the company's annual or interim
financial statements that is more than inconsequential will not be prevented or
detected.

Our auditors identified the following significant deficiency in connection with
their audit of the 2006 Financial Statements: (i) there were not sufficient
personnel in the accounting and finance department. Our auditors determined that
these significant deficiencies, in the aggregate, do not constitute material
weaknesses in the system of internal controls.

In order to address this significant deficiency, in March 2007 the Company
engaged a consultant experienced in financial accounting to review all journal
entries on a quarterly basis and to help compile and prepare the Company's
quarterly and annual financial information reported on forms 10-QSB and 10-KSB.


                                       10
<PAGE>

ITEM 8B.  OTHER INFORMATION

None.


                                    PART III


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Our Board of Directors consists of five director positions. Our directors,
executive officers and senior officers and their positions, as of the date of
this filing, are:

   Name                               Position
   ----                               --------
 Michael Rider                        Chief Executive Officer, Chief Financial
                                         Officer and Director
 William Offenberg                    Chairman
 Robert Puette                        Director
 Jeffrey Black                        Director
 Patricia Wolf                        Director


       The business background and experience of our directors and executive
officers is as follows:

       Michael Rider, age 45, is a co-founder, director, Chief Executive Officer
and Chief Financial Officer of the Company. Mr. Rider's term of office as a
director expires in 2008. Mr. Rider was controller, then Chief Financial Officer
for The Plymouth Group and its successor, TPG Development Corporation, a San
Francisco Bay Area real estate development company from 1991 until 1998. From
1986 to 1990 Mr. Rider was senior accountant with Kenneth Leventhal & Company, a
national public accounting firm specializing in real estate accounting and
advisory services. Mr. Rider is a certified public accountant and a member of
the Urban Land Institute. Mr. Rider received a B.A. degree in Economics/Business
from the University of California Los Angeles.

         William Offenberg, age 54, has been a member of the Board since July
2005. Prior to joining the Board, Mr. Offenberg acted as a consultant to the
Board since July 2004. From 1998 to 2005, Mr. Offenberg was an Operating Partner
at Morgenthaler Partners, a $2 billion private equity firm, where he specialized
in recapitalizations and leveraged buyouts. In his capacity as Operating
Partner, Mr. Offenberg has served in a variety of executive and board positions
at various Morgenthaler portfolio companies. Between 1993 and 1997, Mr.
Offenberg was President and Chief Executive Officer of Gatan International, a
developer of scientific instrumentation. Prior to joining Gatan, Mr. Offenberg
was President of Spectra-Physics Analytical from 1986 to 1993. Between 1977 and
1986, Mr. Offenberg held various management positions at Perkin-Elmer's
Instrument Group. Mr. Offenberg began his career as a chemist at Atlantic
Richfield. Mr. Offenberg has degree in Chemistry from Bowdoin College and did
graduate work in analytical chemistry at Indiana University.

       Robert Puette, age 65, is the President of Puette Capital Management,
Inc., an investment and consulting company that he founded in 2005. He has been
a member of the BellaVista Board since March 1, 2002. Prior to such time, Mr.
Puette served as an advisory director to the Company. Between 2001 and 2004, Mr.
Puette was a partner at the WK Technology venture capital firm. Between 1997 and
2000, Mr. Puette was the President, Chief Executive Officer, and member of the
Board of Directors of Centigram Communications Corporation (NASDAQ), a
communications technology firm. Prior to his position at Centigram, from 1995 to
1997, Mr. Puette served as President, CEO and Chairman of the Board of Directors
at NetFRAME Systems (NASDAQ), a high-availability computer server company, and
from 1990 to 1993, Mr. Puette served as President of Apple USA, Apple
Corporation (NASDAQ). Prior to 1990, Mr. Puette served as a Group General
Manager of Hewlett-Packard Corporation (NYSE). Mr. Puette is also on the Boards
of Bentek Corporation (Private), Fat Spaniel Corporation (Private),
AuditSolutions, Inc. (Private), Angstrom Power, Inc. (Private) and Aether Wire
Corporation (Private). He is also a former director of Cisco Systems (NASDAQ).
Mr. Puette holds a BSEE degree from Northwestern University and a MSOR degree
from Stanford University.

         Jeffrey Black, age 53, is a Senior Vice President in the Silicon Valley
office of Grubb & Ellis, a national real estate company, where he has worked
since 1977. In his 30 years as a real estate broker, he has concluded real
estate transactions in excess of $1 billion. Notable clients that Mr. Black has
represented include eBay, Altera, Amdahl, AT&T, Exxon Corporation, Marriott, TRW
Corporation, VLSI Technology, Steelcase, Advanced Micro Devices and Ernst &
Young. He has been named one of the Top 10 Brokers Nationwide (Grubb & Ellis
2003); No. 4 Broker in Silicon Valley (San Jose Business Journal 2003); the Hall

                                       11
<PAGE>

of Fame Award (Association of Silicon Valley Brokers 1997). Mr. Black has a
Bachelor's of Science and Commerce degree in Finance from the University of
Santa Clara.

       Patricia Wolf, age 61, is currently Chair of the Board of Trustees for
Ottawa University where she focuses on strategic planning issues. From 1986
until 2002 she was employed by Management Technology America, the computer
software company she founded in 1986. In 1999, Ms. Wolf sold Management
Technology America to a company listed on the NYSE. During the period from 1999
to 2002 she continued her employment with Management Technology America. Ms.
Wolf holds a Bachelor's degree in Business Administration and a Master's degree
in Management, both from Ottawa University.

Terms of Directors and Officers

Our Board of Directors consists of the number of persons as shall be fixed by
the Board of Directors from time to time by resolution to be divided into three
classes, designated Class I, Class II and Class III, with each class to be as
nearly equal in number of directors as possible. Currently there are five
director positions. Mr. Puette is a Class I director and his term expires as of
the annual meeting of shareholders for the fiscal year ended in 2009. Mr. Black
and Ms. Wolf are Class II directors and their terms expire as of the meeting for
the fiscal year ended in 2007. Mr. Rider and Mr. Offenberg are Class III
directors, and their terms expire as of the meeting for the fiscal year ended in
2008. At each annual meeting, the successors to the class of directors whose
term expires at that time are to be elected to hold office for a term of three
years, and until their successors are elected and qualified, so that the term of
one class of directors expires at each annual meeting. The full Board acts to
nominate candidates for the Board, as there is no separate nominating committee.
There have been no changes during the year covered by this report in the
procedures for nomination or by which shareholders may recommend nominees to the
Board.

For any vacancy on the Board of Directors, including a vacancy created by an
increase in the number of directors, the vacancy may be filled by election of
the Board of Directors or the shareholders, with the director so elected to
serve until the next annual meeting of shareholders, if elected by the Board of
Directors, or for the remainder of the term of the director being replaced, if
elected by the shareholders; any newly-created directorships or decreases in
directorships are to be assigned by the Board of Directors so as to make all
classes as nearly equal in number as possible. Directors may be removed only for
cause and then only by vote of a majority of the combined voting power of
shareholders entitled to vote in the election for directors. Subject to the
voting rights of the holders of the stock, the charter may be amended by the
vote of a majority of the combined voting power of shareholders, provided that
amendments to the article dealing with directors may only be amended if it is
advised by at least two-thirds of the Board of Directors and approved by vote of
at least two-thirds of the combined voting power of shareholders. The effect of
these as well as other provisions of our charter and bylaws may discourage
takeover attempts and make more difficult attempts by shareholders to change
management.

Executive officers are appointed by the Board of Directors, serve at the Board's
pleasure and may be removed from office at any time without cause. There are no
family relationships among any of our directors or executive officers.

Audit Committee

The Company has no separate audit committee. The Board of Directors acts as the
audit committee for all purposes relating to communications with the auditors
and responsibility for oversight of the audit. The Board of Directors has an
independent member financial expert, Robert Puette, who has financial expertise
gained as an executive of and former audit committee member of public company
Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely on a review of copies of the Forms 3, 4 and 5 and amendments
thereto furnished to the Company with respect to the fiscal year ended 2007, or
written representations that no such reports were required to be filed with the
Securities and Exchange Commission, the Company believes that, except as noted
below, during the year ended September 30, 2007, all directors and officers of
the Company and beneficial owners of more than 10% of any class of equity
securities of the Company registered pursuant to Section 12 of the Exchange Act
filed their required Forms 3, 4, or 5, as required by Section 16(a) of the
Securities Exchange Act of 1934, as amended. The Company became aware in
December 2007 that director Jeffrey Black had not filed a Form 4 or 5 for
certain acquisitions of beneficial ownership occurring in December 2005 and
December 2006. As of the date of this report, Mr. Black has filed the required
Form 4.


                                       12
<PAGE>

Code of Ethics

The Company has adopted a Code of Ethics applicable to the Chief Executive
Officer, the Chief Financial Officer, and the principal accounting officer. The
Company's Code of Ethics is set forth as Exhibit 14.1 to this report.


ITEM 10.     EXECUTIVE COMPENSATION.


Compensation of Officers

<TABLE>
<CAPTION>

Summary Compensation Table
 <S>              <C>    <C>          <C>       <C>         <C>      <C>          <C>         <C>         <C>
-----------------------------------------------------------------------------------------------------------------
Name             Year    Salary      Bonus      Stock      Option     Non-       Nonqualified All         Total
and                      ($)         ($)        Awards     Awards     Equity     Deferred     Other       ($)
Principal                                       ($)        ($)        Incentive  Compensa-    Compen-
Position                                                              Plan       tion         sation
                                                                      Compensa-  Earnings     ($)
                                                                      tion        ($)
                                                                      ($)
---------------- ------- ----------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
Michael          2007    $250,000   $12,500     0          0          0          0          0           $262,500
Rider,
Chief Executive
Officer,
Director         ------- ---------- ----------- ---------- ---------- ---------- ---------- ----------- ----------
                 2006    $250,000   $19,397     0          0          0          0          0           $269,397
---------------- ------- ---------- ----------- ---------- ---------- ---------- ---------- ----------- ----------
Eric             2007    $150,000   $20,500     0          0          0          0          0           $170,500
Hanke,
Chief
Investment
Officer,
Secretary       ------- ---------- ----------- ---------- ---------- ---------- ---------- ----------- ----------
                 2006    $159,519   $70,000     0          0          0          0          0           $229,519
-----------------------------------------------------------------------------------------------------------------
</TABLE>


On May 12, 2007, the Company entered into a 2007 Compensation Agreement with
each of Michael Rider and Eric Hanke.

Mr. Rider's agreement provides for base salary of $250,000 per annum. It
provides for an annual bonus of up to $50,000 which is scaled and contingent
based on performance criteria, including (i) scaled increases in a measure of
the Company's net realizable value of its assets during the calendar year 2007,
(ii) achieving goals in control of operating expenditures, and (iii) engaging a
consultant to provide additional accounting oversight; plus an additional bonus
of up to $25,000 in the event certain performance targets are exceeded. The
agreement also provides for deferred equity compensation, in the form of up to
70,588 shares of the registrant's common stock, to be granted based on increases
in a measure of the registrant's net realizable value of its assets over the
three calendar year period ending December 31, 2008. All or a portion of the
shares will vest on that date in an amount scaled and determined according to
benchmark values, with all of the shares vesting if the registrant's net
realizable value of its assets, as calculated for purposes of its periodic
reports, has increased to $6.12 per share at that date. If such value is in
excess of $6.12 per share at that date, then additional shares may be granted in
the discretion of the Board. The agreement also provides for determination of
these bonus compensation items upon termination of Mr. Rider's employment by the
registrant with cause, termination without cause or voluntary termination by Mr.
Rider.

Mr. Hanke's agreement provides for base salary of $150,000 per annum. It
provides for an annual bonus of up to $50,000 which is scaled and contingent
based on performance criteria, including (i) scaled increases in a measure of
the registrant's net realizable value of its assets during the calendar year
2007, (ii) comparison of the performance of completed investments to Company
targets, and (iii) assessment of management of the registrant's loan portfolio

                                       13
<PAGE>

during the year; plus an additional bonus of up to $25,000 in the event certain
performance targets are exceeded. The agreement also provides for deferred
compensation, in the form of up to 70,588 shares of the registrant's common
stock to be granted based on increases in a measure of the registrant's net
realizable value of its assets over the three calendar year period ending
December 31, 2008. All or a portion of the shares will vest on that date in an
amount scaled and determined according to benchmark values, with all of the
shares vesting if the registrant's net realizable value of its assets, as
calculated for purposes of its periodic reports, has increased to $6.12 per
share at that date. If such value is in excess of $6.12 per share at that date,
then additional shares may be granted in the discretion of the Board. The
agreement also provides for determination of these bonus compensation items upon
termination of Mr. Hanke's employment by the registrant with cause, termination
without cause or voluntary termination by Mr. Hanke. On November 30, 2007 the
Company terminated Mr. Hanke. According to the terms of his employment agreement
Mr. Hanke shall receive payment of $75,000 in the form of salary continuance
from the date of his termination to May 31, 2008. Due to the termination Mr.
Hanke will not be eligible to receive any bonus compensation nor be eligible for
the deferred compensation discussed above.

The terms of employment contracts between the Company and each of Mr. Rider and
Mr. Hanke are set forth in Exhibits 10.1 and 10.2, respectively, to this report.

Outstanding Equity Awards At Fiscal Year-End

<TABLE>
<CAPTION>

 <S>       <C>         <C>            <C>         <C>      <C>        <C>       <C>        <C>        <C>
--------------------------------------------------------------------------------------------------------------------
Name      Number      Number         Equity      Option   Option     Number    Market     Equity     Equity
          of          of             Incentive   Exercise Expiration of Shares Value of   Incentive  Incentive
          Securities  Securities     Plan        Price    Date       or Units  Shares or  Plan       Plan
          Underlying  Underlying     Awards;     ($)                 of Stock  Units of   Awards;    Awards;
          Unexercised Unexercised    Number                          That Have Stock      Number     Market or
          Options     Options        of                              Not       That Have  of         Payout
          (#)         (#)            Securities                      Vested    Not        Unearned   Value
          Exercisable Unexercisable  Underlying                      (#)       Vested     Shares,    Of
                                     Unexercised                               ($)        Units or   Unearned
                                     Unearned                                             Other      Shares,
                                     Options                                              Rights     Units or
                                     (#)                                                  That Have  Other
                                                                                          Not        Rights
                                                                                          Vested     That Have
                                                                                          (#)        Not
                                                                                                     Vested
                                                                                                     ($)

--------------------------------------------------------------------------------------------------------------------
Michael                                                                                   70,588     $431,999(1)
Rider
--------------------------------------------------------------------------------------------------------------------
<FN>
(1) Payout Value is not calculated based on any current market value, as payout
will be earned only if a specified estimated share value is achieved.
Accordingly, the Company has estimated the Payout Value based on the earn out
criterion of $6.12 per share.
</FN>
</TABLE>

Compensation of Directors

<TABLE>
<CAPTION>

 <S>                <C>          <C>          <C>            <C>           <C>             <C>           <C>
--------------------------------------------------------------------------------------------------------------------
Name               Fees         Stock        Option       Non-Equity    Nonqualified     All Other       Total
                  Earned        Awards       Awards     Incentive Plan    Deferred     Compensation       ($)
                    Or           ($)           ($)       Compensation   Compensation        ($)
                  Paid in                                    ($)          Earnings
                   Cash                                                      ($)
                    ($)
--------------- ------------ ------------- ------------ --------------- -------------- -------------- -------------
William             $39,000             0            0               0              0              0       $39,000
Offenberg
--------------- ------------ ------------- ------------ --------------- -------------- -------------- -------------
Robert               34,000             0            0               0              0              0        34,000
Puette
--------------- ------------ ------------- ------------ --------------- -------------- -------------- -------------
Patricia             34,000             0            0               0              0              0        34,000
Wolf
--------------- ------------ ------------- ------------ --------------- -------------- -------------- -------------
Jeffrey              34,000             0            0               0              0              0        34,000
Black
--------------- ------------ ------------- ------------ --------------- -------------- -------------- -------------
</TABLE>

                                       14
<PAGE>

None of the directors of the Company who also serve as executive officers or
employees receives any separate compensation for service on our Board of
Directors or on any Board committee. As Chairman of the Board, Mr. Offenberg
receives annual compensation totaling $30,000 while Messrs. Puette, Black and
Ms. Wolf receive $25,000 each for their participation in our standard board
meetings. All directors independent of management are also compensated $1,000
for every special board meeting they attend. Our charter obligates us to
indemnify our directors and officers and to pay or reimburse expenses for such
individuals in advance of the final disposition of a proceeding to the maximum
extent permitted from time to time by Maryland law. The Maryland General
Corporation Law, the "Maryland GCL", permits a corporation to indemnify its
present and former directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities, unless it is established that (a)
the act or omission of the director or officer was material to the matter giving
rise to the proceeding and (1) was committed in bad faith, or (2) was a result
of active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services, or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful.


ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
           RELATED STOCKHOLDER MATTERS.

The following table presents information regarding the beneficial ownership of
the only known beneficial owners of in excess of 5% of our outstanding common
shares.

Security Ownership of Certain Beneficial Owners

                                                         Number      Percent
Title of Class  Name and Address of Beneficial Owner   of Shares     of Class
                                                      ------------ ------------
 Common Stock   MacKenzie Patterson Fuller, LLC
                1640 School Street
                Moraga, California 94556                1,349,232        10.75

                Jay Duncanson
                c/o Menlo Advisors
                800 Oak Grove Avenue
                Menlo Park, CA 94025                      658,735         5.25
                                                      ------------ ------------
                   Total                                2,007,967        16.00
                                                      ============ ============


The following table presents information regarding the beneficial ownership of
our capital stock as of September 30, 2007 of: (1) each of our directors and
executive officers; and (2) all of our directors and executive officers as a
group. As of the date of this report, MacKenzie, Patterson, Fuller, Inc.,
holding 1,349,232 shares and Jay Duncanson, holding 658,735 shares, are the only
persons known by us to own beneficially five percent or more of our outstanding
capital stock. Unless otherwise indicated in the footnotes to the table, the
beneficial owners named have, to our knowledge, sole voting and investment power
with respect to the shares beneficially owned, subject to community property
laws where applicable.

                                       15
<PAGE>

                                                     Number             Percent
 Title of Class    Beneficial Owner               of Shares            of Class
                                          ------------------ -------------------
 Common Stock      Robert Puette                    405,241                3.23
                   Jeffrey Black                    276,138                2.20
                   Patricia Wolf                    167,030                1.33
                   William Offenberg                107,404                   *
                   Michael Rider                     12,164                   *
                   Eric Hanke                         2,170                   *
                                          ------------------ -------------------
                      Total                         970,147                7.73
                                          ================== ===================

  * Less than one percent of our outstanding capital stock.


ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Of the five current members of the Board, Michael Rider, as an officer of the
Company, cannot be considered an independent director, and all other members of
the Board are considered independent, as that term is defined under New York
Stock Exchange Rule Section 303A, the NYSE's Corporate Governance Rules. Under
those Rules, no director qualifies as "independent" unless the Board of
Directors affirmatively determines that the director has no material
relationship with the Company (either directly or as a partner, shareholder or
officer of an organization that has a relationship with the Company). Material
relationships can include commercial, industrial, banking, consulting, legal,
accounting, charitable and familial relationships, among others. However, as the
concern is independence from management, the NYSE does not view ownership of
even a significant amount of stock, by itself, as a bar to an independence
finding. Accordingly, while Mssrs. Offenberg, Puette and Black and Ms. Wolf own
shares of the Company's common stock, the Board views these directors/nominees
as independent under these standards. In addition, a director is not independent
under the NYSE Rules if: (i) the director is, or has been within the last three
years, an employee of the Company, or an immediate family member is, or has been
within the last three years, an executive officer, of the Company; (ii) the
director has received, or has an immediate family member who has received,
during any twelve-month period within the last three years, more than $100,000
in direct compensation from the listed company, other than director and
committee fees and pension or other forms of deferred compensation for prior
service (provided such compensation is not contingent in any way on continued
service; (iii) (A) the director or an immediate family member is a current
partner of a firm that is the Company's internal or external auditor; (B) the
director is a current employee of such a firm; (C) the director has an immediate
family member who is a current employee of such a firm and who participates in
the firm's audit, assurance or tax compliance (but not tax planning) practice;
or (D) the director or an immediate family member was within the last three
years (but is no longer) a partner or employee of such a firm and personally
worked on the Company's audit within that time; (iv) the director or an
immediate family member is, or has been within the last three years, employed as
an executive officer of another company where any of the Company's present
executive officers at the same time serves or served on that company's
compensation committee; or (v) the director is a current employee, or an
immediate family member is a current executive officer, of a company that has
made payments to, or received payments from, the Company for property or
services in an amount which, in any of the last three fiscal years, exceeds the
greater of $1 million, or 2% of such other company's consolidated gross
revenues.




ITEM 13.  EXHIBITS.

a.   Financial Statements. The following financial information is included as a
     separate section of this Annual Report on Form 10-KSB:

1.   Report of Independent Registered Public Accounting Firms

2.   Consolidated Balance Sheets as of September 30, 2007 and 2006

3.   Consolidated Statements of Operations for the years ended
     September 30, 2007 and 2006

4.   Consolidated Statement of Shareholders' Equity for the years ended
     September 30, 2007 and 2006

5.   Consolidated Statements of Cash Flows for the years ended
     September 30, 2007 and 2006

6.   Notes to Consolidated Financial Statements for the years ended
     September 30, 2007 and 2006

                                       16
<PAGE>

b.   Exhibits

     Exhibits submitted with this Form 10-KSB, as filed with the Securities and
     Exchange Commission, or those incorporated by reference to other filings
     are:

     Exhibit No.           Description of Exhibit

     3(i)                  Articles of Incorporation of the Company is
                           incorporated by reference to Exhibit 3(i) to the
                           Company's Form 10-12 G/A, previously filed on April
                           28, 2000

     3(ii)                 Bylaws, Amended March 30, 2000 is incorporated by
                           reference to Exhibit 3(ii) to the Company's Form
                           10-12 G/A, previously filed on April 28, 2000

     3(iii)                Articles Supplementary of the Company is incorporated
                           by reference to Exhibit 99.1 to the Company's Form
                           10-12 G/A, previously filed on April 28, 2000

     3(iv)                 Specimen Stock  Certificate,  is  incorporated by
                           reference to Exhibit 99.2 to the Company's
                           Form 10-12 G/A, previously filed on April 28, 2000

     4.1                   Shareholder Rights Agreement dated July 19, 2004 is
                           incorporated by reference to Exhibit 4.4 in the
                           Form 8-K previously filed July 20, 2004

     10.1                  Compensation Agreement dated May 12, 2007 between
                           BellaVista Capital, Inc. and Michael Rider is
                           incorporated by reference to Exhibit 10.1 to the
                           Company's March 31, 2007 Form 10-QSB, previously
                           filed on May 21, 2007

     10.2                  Compensation Agreement dated May 12, 2007 between
                           BellaVista Capital, Inc. and Eric Hanke is
                           incorporated by reference to Exhibit 10.2 to the
                           Company's March 31, 2007 Form 10-QSB, previously
                           filed on May 21, 2007

     10.3                  Legal Services Retention Agreement between BellaVista
                           Capital,  Inc. and Ben Hamburg is incorporated by
                           reference to Exhibit 10.1 to the Company's 2004
                           Form 10-K, previously filed on May 9, 2005

     10.4                  Compensation Agreement dated September 25, 2007
                           between BellaVista Capital, Inc. and William
                           Offenberg

     14.1                  Code of Ethics is  incorporated  by reference to
                           Exhibit 14.1 to the Company's 2003 Form 10-K,
                           previously  filed on April 14, 2004

     31.1                  Certification of Chief Executive Officer and Chief
                           Financial Officer

     32.1                  Certification Pursuant to 18 U.S.C. Section 1350, as
                           Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                           Act of 2002

c.   Financial Statement Schedules

     None

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The Company accrues expenses associated with principal accountant fees and
services in the year being audited or serviced. The following table presents the
expenses accrued by the Company for such fees and services:

                                           Year Ended September 30,
                                     -------------------------------------
                                                  2007               2006
                                     ------------------ ------------------
Audit fees                                  $  162,028         $  138,160
Audit-related fees                                  --                 --
Tax fees                                        24,170             18,925
All other fees                                      --                 --
                                     ------------------ ------------------
   Total                                    $  186,198         $  157,085
                                     ================== ==================

Tax fees are comprised of fees related to the preparation and filing of the
Company's federal and applicable state tax returns.

                                       17
<PAGE>

The Company does not have an independent audit committee, and the full board of
directors therefore serves as the audit committee for all purposes relating to
communication with the Company's auditors and responsibility for the Company
audit. All engagements for audit services, audit related services and tax
services are approved in advance by the full board of directors of the Company.
The Company's Board of Directors has considered whether the provision of the
services described above for the years ended September 30, 2007 and 2006, is
compatible with maintaining the auditor's independence.

All audit and non-audit services that may be provided by our principal
accountant to the Company shall require pre-approval by the Board. Further, our
auditor shall not provide those services to the Company specifically prohibited
by the Securities and Exchange Commission, including bookkeeping or other
services related to the accounting records or financial statements of the audit
client; financial information systems design and implementation; appraisal or
valuation services, fairness opinion, or contribution-in-kind reports; actuarial
services; internal audit outsourcing services; management functions; human
resources; broker-dealer, investment adviser, or investment banking services;
legal services and expert services unrelated to the audit; and any other service
that the Public Company Oversight Board determines, by regulation, is
impermissible.


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.


Signature                  Capacity                            Date
---------                  --------                            ----

                           Chief Executive Officer, Chief
/s/ Michael Rider          Financial Officer and Director      December 31, 2007
-------------------------
Michael Rider

/s/ William Offenberg      Chairman                            December 31, 2007
-------------------------
William Offenberg

/s/ Robert Puette          Director                            December 31, 2007
-------------------------
Robert Puette

/s/ Jeffrey Black          Director                            December 31, 2007
-------------------------
Jeffrey Black

/s/ Patricia Wolf          Director                            December 31, 2007
-------------------------
Patricia Wolf









                                       18
<PAGE>






                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                         Page No
                                                                         -------

Report of independent registered public accounting firm -
PMB Helin Donovan, LLP                                                    FS-1

Consolidated balance sheets as of September 30, 2007 and 2006             FS-2

Consolidated statements of operations for the years ended
September 30, 2007 and 2006                                               FS-3

Consolidated statements of shareholders' equity for the years ended
September 30, 2007 and 2006                                               FS-4

Consolidated statements of cash flows for the years ended
September 30, 2007 and 2006                                               FS-5

Notes to consolidated financial statements                                FS-6



<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of
BellaVista Capital, Inc.

We have audited the accompanying consolidated balance sheets of BellaVista
Capital, Inc., as of September 30, 2007 and 2006 and the related consolidated
statements of operations, shareholders' equity, and cash flows for the years
ended September 30, 2007 and 2006. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of BellaVista
Capital, Inc. as of September 30, 2007 and 2006, and the results of its
consolidated operations and its consolidated cash flows for the years ended
September 30, 2007 and 2006, in conformity with accounting principles generally
accepted in the United States of America.


                                                         PMB Helin Donovan, LLP


San Francisco, California
December 19, 2007














                                      FS-1
<PAGE>


                            BELLAVISTA CAPITAL, INC.

                           CONSOLIDATED BALANCE SHEETS

                               AS OF SEPTEMBER 30,


<TABLE>
<CAPTION>

                                                                          2007                  2006
                                                          --------------------- ---------------------
 <S>                                                                    <C>                   <C>
ASSETS:
Cash and cash equivalents                                        $   1,759,241         $   3,006,024
Loans receivable secured by real estate                             11,163,000            13,846,500
Joint venture investments in real estate developments               33,704,973            33,270,955
Direct investments in real estate developments                       5,213,220            11,691,620
Fixed assets, net of $95,620 and $73,919 accumulated
   depreciation at September 30, 2007 and 2006                          32,220                44,400
Other assets, net                                                      958,201               747,672
                                                          --------------------- ---------------------
        Total assets                                             $  52,830,855         $  62,607,171
                                                          ===================== =====================


LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable and accrued expenses                             $    587,791         $   1,650,694
Capital lease                                                            9,521                    --
                                                          --------------------- ---------------------
        Total liabilities                                              597,312             1,650,694

Commitments and contingencies (see note 11)

Common stock: par value $0.01, 50,000,000 shares
   authorized at September 30, 2007 and 2006;
   13,951,452 and 14,991,325 shares issued and
   outstanding at September 30, 2007 and 2006,
   respectively                                                    198,812,376           201,216,369
Accumulated dividends and distributions                            (90,621,455)          (90,621,455)
Accumulated deficit                                                (55,957,378)          (49,638,437)
                                                          --------------------- ---------------------
        Total shareholders' equity                                  52,233,543            60,956,477
                                                          --------------------- ---------------------
        Total liabilities and shareholders' equity              $   52,830,855         $  62,607,171
                                                          ===================== =====================
</TABLE>




               The accompanying notes are an integral part of these statements.


                                             FS-2
<PAGE>

                            BELLAVISTA CAPITAL, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                        FOR THE YEARS ENDED SEPTEMBER 30,


<TABLE>
<CAPTION>
                                                                                       2007               2006
                                                                          ------------------ ------------------
   <S>                                                                            <C>                   <C>
REVENUES:
Revenues from loans receivable                                                 $  1,685,510       $  1,149,498
Revenues from joint venture investments in real estate developments               1,855,390            387,458
Revenues from direct investments in real estate developments                     11,117,701         43,515,738
Interest income                                                                      49,932            103,434
Other revenues                                                                       17,151            120,081
                                                                          ------------------ ------------------
   Total revenues                                                                14,725,684         45,276,209
   Cost of direct investments in real estate developments                       (11,288,647)       (40,164,858)
                                                                          ------------------ ------------------
   Gross profit                                                                   3,437,037          5,111,351

EXPENSES:
Salaries expense                                                                    714,245            724,614
Facilities expense                                                                   93,440             87,514
Legal and accounting expense                                                        290,239            184,755
Board of directors fees and insurance                                               318,023            250,324
Administrative expense                                                               84,432             98,873
REO and non-recurring expenses                                                      327,064            826,679
Depreciation                                                                         21,701             31,149
Provision for impairment of real estate investments                               7,665,943            928,855
                                                                          ------------------ ------------------
   Total expenses                                                                 9,515,087          3,132,763
                                                                          ------------------ ------------------
   Net income (loss) from operations                                             (6,078,050)         1,978,588

OTHER INCOME (EXPENSE)
Income from legal settlements, net of collection costs                                   --          1,090,250
Discount on other receivable                                                       (213,496)                --
                                                                          ------------------ ------------------
   Total other income                                                              (213,496)         1,090,250
                                                                          ------------------ ------------------
   Net income before tax                                                         (6,291,546)         3,068,838
   Income tax expense                                                               (27,395)            (2,400)
                                                                          ------------------ ------------------
   Net income (loss) allocable to common stock                                $  (6,318,941)      $  3,066,438
                                                                          ================== ==================

Basic and diluted net income (loss) per common share......................      $     (0.44)        $     0.20
                                                                          ================== ==================

Basic and diluted weighted-average common shares outstanding..............       14,286,236         14,991,325
                                                                          ================== ==================
</TABLE>




               The accompanying notes are an integral part of these statements.


                                             FS-3

<PAGE>


                            BELLAVISTA CAPITAL, INC.

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                 FOR THE YEARS ENDED SEPTEMBER 30, 2007 AND 2006






<TABLE>
<CAPTION>

                                                             Common Stock
                                                    ----------------------------
                                                                                    Accumulated
                                                                                  Dividends and    Accumulated
                                                           Shares        Amount   Distributions        Deficit           Total
                                                    -------------- ------------- --------------- --------------- --------------
  <S>                                                      <C>            <C>          <C>            <C>             <C>
Shareholders' equity at October 1, 2005                14,991,325   201,216,369     (90,621,455)    (52,704,875)    57,890,039
   Net income                                                  --            --             --        3,066,438      3,066,438
                                                    -------------- ------------- --------------- --------------- --------------
Shareholders' equity at September 30, 2006             14,991,325   201,216,369     (90,621,455)    (49,638,437)    60,956,477
   Stock repurchases                                   (1,039,873)   (2,403,993)             --              --     (2,403,993)
   Net income                                                  --            --              --      (6,318,941)    (6,318,941)
                                                    -------------- ------------- --------------- --------------- --------------
Shareholders' equity at September 30, 2007             13,951,452  $198,812,376    $(90,621,455)   $(55,957,378)   $52,233,543
                                                    ============== ============= =============== =============== ==============
</TABLE>





















               The accompanying notes are an integral part of these statements.


                                             FS-4
<PAGE>


                            BELLAVISTA CAPITAL, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                        FOR THE YEARS ENDED SEPTEMBER 30,


<TABLE>
<CAPTION>

                                                                                                       2007                2006
                                                                                        -------------------- -------------------
        <S>                                                                                        <C>                  <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
      Net (loss) income                                                                       $  (6,318,941)       $  3,066,438
    Adjustments to reconcile net income to net cash provided by operating activities:
         Depreciation                                                                                21,701              31,149
         Provision for impairment                                                                 7,665,943             928,855
         (Decrease) increase in accounts payable and accrued expenses                              (263,266)            357,214
         Increase in other assets, net                                                             (210,529)           (533,237)
                                                                                        -------------------- -------------------
           Net cash provided by operating activities                                                894,908           3,850,419

 CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from repayments of investments in real estate                                      28,198,247          43,333,771
     Investments in real estate                                                                 (27,935,945)        (50,576,186)
     Purchase of fixed assets                                                                            --              (3,776)
                                                                                        -------------------- -------------------
         Net cash (used in) provided by investing activities                                        262,302          (7,246,191)

 CASH FLOWS FROM FINANCING ACTIVITIES:
    Stock repurchases                                                                            (2,403,993)                 --
    Borrowings under unsecured notes payable                                                      2,770,000                  --
    Repayment of unsecured notes payable                                                         (2,770,000)                 --
    Borrowings under secured notes payable                                                               --          12,810,681
    Repayment of secured notes payable                                                                   --         (20,845,128)
                                                                                        -------------------- -------------------
         Net cash used in financing activities                                                   (2,403,993)         (8,034,447)
                                                                                        -------------------- -------------------
           Net (decrease) increase in cash and cash equivalents                                  (1,246,783)        (11,430,219
           Beginning cash and cash equivalents                                                    3,006,024          14,436,243
                                                                                        -------------------- -------------------
           Ending cash and cash equivalents                                                    $  1,759,241        $  3,006,024
                                                                                        ==================== ===================
 Cash paid for interest, net of amounts capitalized of $9,522 and $781,116 for the             $         --        $         --
    years ending September 30, 2007 and 2006
                                                                                        ==================== ===================

 Cash paid for income taxes and franchise fees                                                 $      2,400        $      2,400
                                                                                        ==================== ===================
 Supplementary disclosure of noncash investing and financing activities:

 Acquisition of property and equipment through a capital lease                                 $      9,521         $        --
                                                                                        ==================== ===================
</TABLE>


               The accompanying notes are an integral part of these statements.

                                             FS-5
<PAGE>

                            BELLAVISTA CAPITAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   ORGANIZATION AND BUSINESS:


Organization

BellaVista Capital, Inc., a Maryland corporation (the Company, our, we), was
formed on March 18, 1999 and commenced operations effective May 1, 1999. We are
engaged in the business of investing in real estate development projects,
primarily in California. Our investments are structured as loans secured by real
estate, loans made to real estate development entities, or as joint venture
investments in real estate development entities. We are organized in a single
operating segment for purposes of making operating decisions and assessing
performance. BellaVista Capital, Inc. is also the 100% shareholder of 99
Investors, Inc. and Sands Drive San Jose, Inc., both California corporations
formed for the purpose of developing and selling residential real estate.

Risk Factors

General Economic Conditions in Lending Areas. Our business plan seeks to
diversify our investments throughout California and other states in the western
United States of America. Approximately 56% of our investments are currently
located in the San Francisco Bay Area, 17% are in Southern California, 16% are
in California's Central Valley and Lake Tahoe region, and 11% are located in
other western states of the United States of America. The potential success of
real estate investments in general is subject to fluctuations in local market
conditions, including fluctuations in the supply of and demand for similar
properties, and the success of our investments will depend, to some extent, on
the economic and real estate market conditions prevailing in the markets where
our investments are located. Since the investments are located in a limited
geographical region, they may be subject to a greater risk of delinquency or
default if the industries concentrated there suffer adverse economic or business
developments.

Realization of Assets. The Company's liquidity and ability to meet its
obligations as they become due are subject to, among other things, its ability
to obtain timely repayments or other dispositions of its investments. Many of
the investments rely on the completion and sale of the developed real estate in
order to realize repayment or other disposition proceeds. In the event that
proceeds from repayments or other investment dispositions are not sufficient to
timely meet our commitments and credit facilities are not extended on terms
favorable to us, we may be forced to sell some of our investments prematurely.
In such cases, the amount of proceeds received could be substantially less than
what we would have expected if we allowed a proper marketing period for the
investment. This would have a negative impact on the estimated net realizable
value of our assets and would force the Company to adopt an alternative strategy
that may include actions such as seeking additional capital or further
downsizing of the Company. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Other. In addition, we are subject to other significant business and financial
risks, including but not limited to liquidity, the prevailing market for
residential real estate, fluctuations in prevailing interest rates, timely
completion of projects by developers, uninsured risks such as earthquake and
other casualty damage that may be uninsurable or insurable only at economically
unfeasible costs, and potential environmental liabilities relating to properties
on which we have made investments or received through foreclosure.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:


Consolidation Policy

The  consolidated  financial  statements  include  the  accounts  of  BellaVista
Capital,  Inc. and its wholly owned subsidiaries,  99 Investors,  Inc. and Sands
Drive San Jose,  Inc.  All  intercompany  accounts  and  transactions  have been
eliminated in consolidation.



                                      FS-6
<PAGE>


                            BELLAVISTA CAPITAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)



Use of Estimates

These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation
of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Valuations of investments in real estate include management's
best estimates of the amounts expected to be realized on the sale of its
investments. The estimates are based on an analysis of the properties, including
certain inherent assumptions and estimates that are involved in preparing such
valuations. The amounts the Company will ultimately realize could differ
materially in the near term from these estimates.

Loans Receivable Secured By Real Estate

We have originated loans secured by real estate. These loans are secured by
deeds of trust on real property, pay interest on a monthly basis and are
typically additionally collateralized by personal guarantees from the principals
of our borrowers. We recognize interest income on these loans during the period
in which the interest is earned and recognize income on any loan fees charged
under the effective interest method.

We establish and maintain credit reserves for loans receivable secured by real
estate based on estimates of credit losses inherent in these loans as of the
balance sheet date. To calculate the credit reserve, we assess inherent losses
by determining loss factors (defaults, the timing of defaults, and loss
severities upon defaults) that can be specifically applied to each loan. We
follow the guidelines of Staff Accounting Bulletin No. 102, Selected Loan Loss
Allowance Methodology and Documentation Issues (SAB 102), and Financial
Accounting Statement No. 5, Accounting for Contingencies (FAS 5), in setting
credit reserves for our residential and commercial loans. We follow the
guidelines of Financial Accounting Statement No. 114, Accounting by Creditors
for Impairment of a Loan (FAS 114), in determining impairment on commercial real
estate loans.

We had no impaired loans receivable as of September 30, 2007 or 2006.

Joint Venture Investments in Real Estate Developments

Our joint venture investments in real estate developments are comprised of
loans, known as ADC Loans, which are secured by real estate and have many
characteristics of joint venture investments and investments in real estate
joint ventures.

ADC Loans

We have originated secured loans to Acquire, Develop and Construct (ADC)
residential real estate ("ADC loans"). These loans contain many of the following
characteristics which are identified with ADC loans:

1.   The lender has agreed to provide all or  substantially  all necessary funds
     to acquire,  develop or construct the  property.  The borrower has title to
     but little or no cash equity in the project;
2.   The lender funds substantially all the interest and fees during the term of
     the loan by adding them to the loan balance;
3.   Typically, the lender's only security is the project itself. The lender has
     no recourse to other  assets of the  borrower,  and the  borrower  does not
     guarantee the debt;
4.   In order for the lender to  recover  its  investment  in the  project,  the
     property  must be sold to  independent  third  parties or the borrower must
     obtain refinancing from another source.

Because our ADC loans contain many of the characteristics of investments in real
estate, they are classified for financial reporting purposes as joint venture
investments in real estate developments (Note 4). ADC loans with no equity
participation interest are stated at the lower of cost or fair value and
accounted for as an investment in real estate. Revenue from interest and points
is recognized as cash is received from the sale or refinancing of such


                                      FS-7
<PAGE>

properties. ADC loans that include an equity participation interest are
accounted for in the same manner as joint venture investments in real estate
developments. ADC loans include amounts funded under the loan agreements and
capitalized interest expense, where applicable. If our ADC loans qualified as
borrowings under US GAAP, interest and points would be recognized in income as
earned instead of at the time of sale of the underlying property.

Joint Venture Investments in Real Estate

We provide equity capital to real estate developers necessary to acquire,
develop and construct real estate developments. Such investments are structured
as membership interests in the development entity. We account for such
investments using the equity method of accounting.

Management conducts a review for impairment on an investment-by-investment basis
whenever events or changes in circumstances indicate that the carrying amount of
an investment may not be recoverable, or at least quarterly. Impairment is
recognized when estimated expected future cash flows (undiscounted and without
interest charges), typically from the sale of a completed property, are less
than the carrying amount of the investment, which does not include accrued
interest and points. The estimation of expected future net cash flows is
inherently uncertain and relies to a considerable extent on assumptions
regarding current and future economic and market conditions. If, in future
periods, there are changes in the estimates or assumptions incorporated into the
impairment review analysis, the changes could result in an adjustment to the
carrying amount of the investments. To the extent an impairment has occurred,
the excess of the carrying amount of the investment over its estimated fair
value, less estimated selling costs, is charged to operations.

Direct Investments in Real Estate Developments

Direct Investments in Real Estate Developments represent development projects
that the Company has obtained through foreclosure of its mortgage loans, and
relate to real properties for which the Company has, by default, become the sole
owner. We consolidate the assets and liabilities of these Direct Investments in
Real Estate Developments in our financial statements. The Company's basis in the
projects is the carrying amount of the project at the time of loan foreclosure.
Management conducts a review for impairment of these assets on an
investment-by-investment basis whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable, but not less
frequently than quarterly. Impairment is recognized when estimated expected
future cash flows (undiscounted and without interest charges), typically from
the sale of a completed property, are less than the carrying amount of the
investment, which does not include accrued interest and points. The estimation
of expected future net cash flows is inherently uncertain and relies to a
considerable extent on assumptions regarding current and future economic and
market conditions. If, in future periods, there are changes in the estimates or
assumptions incorporated into the impairment review analysis, the changes could
result in an adjustment to the carrying amount of the investments. To the extent
an impairment has occurred, the excess of the carrying amount of the investment
over its estimated fair value, less estimated selling costs, is charged to
operations.

Cash and Cash Equivalents

Cash and cash equivalents include cash held in financial institutions and other
highly liquid short-term investments with original maturities of three months or
less. As of September 30, 2007 we had cash totaling approximately $1.6 million
in excess of the $100,000 limits provided by the Federal Deposit Insurance
Corporation.

Income Taxes

Our taxable income differs from income measured in accordance with generally
accepted accounting principles in the United States of America due to timing
differences in the recognition of income from our ADC loans and REO properties.
For tax purposes, interest and points are accrued as income according to the
terms of our loan contracts, but not recognized under generally accepted
accounting principles in the United States of America until the contract has
been paid through sale or refinancing of the secured property.


                                      FS-8
<PAGE>

The Company uses the asset and liability method whereby deferred tax assets and
liability account balances are determined based on differences between the
financial reporting and tax bases of assets and liabilities and are measured
using enacted tax rates and laws that will be in effect when the differences are
expected to reverse. The Company provides a valuation allowance, if necessary,
to reduce deferred tax assets to their estimated realizable value.

Recent Accounting Pronouncements:

In June 2006, the FASB issued Interpretation No.48, "Accounting for Uncertainty
in Income Taxes -- An Interpretation of FASB Statement No. 109", (FIN 48). FIN
48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
"Accounting for Income Taxes". FIN 48 also prescribes a recognition threshold
and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return that
results in a tax benefit. Additionally, FIN 48 provides guidance on
de-recognition, statement of operations classification of interest and
penalties, accounting in interim periods, disclosure, and transition. This
interpretation is effective for fiscal years beginning after December 15, 2006.
The Company will adopt FIN 48 as of January 1, 2007, as required. The Company
has determined that there is no impact in adopting FIN 48.

In February 2007, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS 159
permits entities to choose to measure many financial instruments and certain
other items at fair value that are not currently required to be measured at fair
value. SFAS 159 also establishes presentation and disclosure requirements
designed to facilitate comparisons between entities that choose different
measurement attributes for similar types of assets and liabilities. SFAS 159 is
effective for the Company's year ending September 30, 2009. The Company is
currently evaluating the impact of SFAS 159 on the Company's financial
statements.


3.  LOANS RECEIVABLE SECURED BY REAL ESTATE:

As of September 30, 2007 we had loans receivable secured by real estate
summarized by location below:

<TABLE>
<CAPTION>

Description                                      Amount                               Carrying
                                               Invested        Impairments              Amount         In Default
                                     ------------------- ------------------ ------------------- ------------------
 <S>                                          <C>                 <C>                 <C>                  <C>
SF Bay Area                                 $ 9,353,000          $      --         $ 9,353,000        $   600,000
California Central Valley                       960,000                 --             960,000                 --
Other Western States                            850,000                 --             850,000                 --
                                     ------------------- ------------------ ------------------- ------------------
Total                                      $ 11,163,000          $      --        $ 11,163,000        $   600,000
                                     =================== ================== =================== ==================
</TABLE>

Loans Receivable Secured by Real Estate consist of loans to real estate
developers which are secured by deeds of trust on real property, pay interest
monthly and generally have repayment guarantees from the principals of the
borrowing entity. As of September 30, 2007 $10,463,000 of these loans were
secured by first trust deeds and $700,000 were secured by second trust deeds.
Additionally, at September 30, 2007 one loan totaling $600,000 was in default
under the terms of our loan.


4. JOINT VENTURE INVESTMENTS IN REAL ESTATE DEVELOPMENTS:

As of September 30, 2007 we had the following joint venture investments in real
estate developments which are summarized by location below:


                                      FS-9
<PAGE>


<TABLE>
<CAPTION>
                                                                                                        Remaining
                                                Amount                                Carrying            Funding
Description                                    Invested        Impairments              Amount         Obligation
                                     ------------------- ------------------ ------------------- ------------------
 <S>                                          <C>                 <C>                 <C>                  <C>
SF Bay Area                               $  17,448,042       $         --       $  17,497,206       $  4,175,878
California Central Valley                    11,697,253         (2,303,348)          9,429,120          1,283,679
Southern California                          10,966,847         (5,362,595)          5,617,424                 --
Other                                         1,157,425                 --           1,161,223                 --
                                     ------------------- ------------------ ------------------- ------------------
Total                                     $  41,269,567       $  7,665,943       $  33,704,973       $  5,459,557
                                     =================== ================== =================== ==================
</TABLE>

Joint Venture Investments in real estate developments consist of ADC Loans and
joint ventures investments with real estate developers. ADC Loans, which are
loan arrangements that are typically secured by real property, provide for the
payment of interest from an interest reserve established from loan funds and may
also provide for the payment of an exit fee as a percentage of sales from each
unit in the development or a share of project profits. Joint Venture investments
are equity investments in operating entities formed for the purpose of
developing real estate. Our investment typically earns a preferred return
calculated based on our investment amount at a specific rate during the term of
the investment and a share of the project profits. As of September 30, 2007 we
had recognized impairments totaling approximately $7.7 million on four of our
joint venture investments in real estate developments.

5.   DIRECT INVESTMENTS IN REAL ESTATE DEVELOPMENTS:

As of September 30, 2007, we held title to the following property which we
received through foreclosure:

<TABLE>
<CAPTION>
                                        Amount Invested         Recognized           Carrying           Costs to
Description                           (net of payments)         Impairment             Amount           Complete
                                     ------------------- ------------------ ------------------ ------------------
     <S>                                       <C>                  <C>               <C>                   <C>
   SF Bay Area                             $  6,469,661        $ 1,492,052       $  5,213,220         $   50,000
                                     ------------------- ------------------ ------------------ ------------------
         Total                             $  6,469,661        $ 1,492,052       $  5,213,220         $   50,000
                                     =================== ================== ================== ==================
</TABLE>

This property is an approximately 6,400 square foot home in Tiburon, California.
Construction is complete and the property is on the market for sale.


6.  PROPERTY, PLANT AND EQUIPMENT:

We had the following property, plant and equipment:

                                                 As of September 30,
                                        ---------------------------------------
                                        September 30, 2007  September 30, 2006
                                        ------------------- -------------------
Computer Equipment                               $  88,110          $  78,589
Furniture                                           39,730             39,730
                                        ------------------- -------------------
   Total furniture and equipment                   127,840            118,319
   Accumulated depreciation                        (95,620)           (73,919)
                                        ------------------- -------------------
   Furniture and Equipment, net                  $  32,220          $  44,400
                                        =================== ===================



7.  NOTES PAYABLE:

The following table describes our notes payable:

                                                 As of September 30,
                                        ---------------------------------------
                            Credit line               2007                2006
                                        ------------------- -------------------
Unsecured line of credit     1,000,000           $      --           $      --
Secured line of credit       3,000,000                  --                  --
                                        ------------------- -------------------
   Total                                         $      --           $      --
                                        =================== ===================



                                     FS-10
<PAGE>


The unsecured line of credit is a revolving line of credit which bears interest
at Prime plus 0.75% (8.25% and 9.00% at September 30, 2007 and 2006,
respectively) and is due February 2008.

The secured line of credit is a revolving line of credit secured by our Direct
Investment in Real Estate Development. The line bears interest at Prime plus
0.50% (8.0% and 8.75% at September 30, 2007 and 2006, respectively) and is due
July 2008.


8.  SHAREHOLDERS' EQUITY:

There is currently no public trading market for our stock. We are authorized to
issue up to 50,000,000 shares of Common Stock. During the period from April 30,
1999 through August 31, 2004 we sold 28,007,243 shares of Class A Convertible
Preferred Stock, including sales made through our dividend reinvestment program.
During this period of time we also repurchased 8,523,991 shares of our Preferred
Stock through our redemption programs. We have also offered and sold Series A
and B promissory notes of varying amounts and maturities. All sales of stock
were made under exemption from the registration requirements of the Securities
Act of 1933 pursuant to Regulation D, Rule 506. All sales of stock and notes
were to accredited investors, as defined in Regulation D, Rule 501. Appropriate
legends were placed on each stock certificate, including a statement that all
such shares are restricted stock for purposes of the Securities Act of 1933. On
September 1, 2004 our outstanding shares of Preferred Stock totaling 19,483,252
shares, converted to Common Stock in accordance with the terms of the Preferred
Stock. At the time of conversion, there were 100 shares of common stock issued
and outstanding. On December 27, 2004 we repurchased 1,179,184 shares in
connection with a legal settlement. On March 1, 2005 we repurchased an
additional 3,312,843 shares of Common Stock under an issuer tender offer at a
price of $3.62 per share.

Since June 2005, a group of entities associated with Mackenzie Patterson Fuller,
Inc. (collectively "MPF") have acquired an aggregate of 1,256,872 shares as of
September 30, 2007 through a series of unsolicited tender offers. During the
year ended September 30, 2007 the Company responded to tender offers made by MPF
at prices the Company believed were overly opportunistic by commencing its own
tender offer to repurchase shares, and purchased shares in the following amounts
and prices:

Offer Date                         Shares              Price       Total Amount
                                Purchased
                           ---------------                       ---------------
October 14, 2006                  725,217              $2.25         $1,631,728
June 8, 2007                      300,656              $2.40            721,574
                           ---------------                       ---------------
                                1,025,873                            $2,353,302
                           ===============                       ===============

During the year ended September 30, 2007, the Company negotiated settlements and
releases of certain claims against the Company and certain of its current and
former officers and directors made by two shareholders holding 14,000 Shares.
The settlement included, among other terms, the repurchase of the 14,000 Shares
held by the shareholders at $3.62 per share for a purchase price of $50,691, and
the dismissal with prejudice of the claims of the shareholder included in the
complaint served on the Company in April 2006.

On October 17, 2007, subsequent to our fiscal year end, the Company negotiated
settlements and releases of certain claims against the Company and certain of
its current and former officers and directors the terms of which provided that
the shareholder tender 130,000 shares of his BellaVista Capital stock to the
Company for no consideration and additionally provided that the Company would
repurchase 25,966 shares of BellaVista stock from the shareholder at a price of
$2.40 per share for a total payment of $62,318.40.

Subsequent to September 30, 2007, MPF commenced another tender offer to purchase
up to 750,000 shares at a price of $1.75 per share. The Company responded with
its own tender offer to repurchase up to 1,500,000 shares at a price of $2.00
per share, and purchased a total of 1,249,969 shares at that price in November
2007.

The Company has not declared or paid any dividends on its capital stock during
the period from January 1, 2005 through the date of this report.


                                     FS-11
<PAGE>


9.   INCOME TAXES

On October 7, 2003 our Board of Directors voted to withdraw our REIT election
effective with the tax year beginning January 1, 2004. The withdrawal of this
election results in the loss of our ability to deduct the payment of dividends
from our taxable income. However, as the result of losses from prior years'
operations, the Company had generated a net operating loss carry forward which
it can use to offset future taxable income.

At September 30, 2007 and 2006, we had U.S. federal net operating loss
carryforwards of approximately $96.7 million and $98.1 million, respectively.
The net operating loss carryforwards expire in various amounts between the years
2016 and 2020. If there is a change in ownership, utilization of the U.S. net
operating losses may be subject to substantial annual limitation due to the
"change in ownership" provisions of the Internal Revenue Code of 1986, as
amended and similar state provisions. The annual limitation may result in the
expiration of net operating losses before utilization.

Operating Loss Carryforward

Operating loss carryforwards consisted of the following:

                                                  Federal          California
                                           Operating Loss      Operating Loss
                                             Carryforward        Carryforward
                                      -------------------- -------------------
September 30, 2006                          $   4,413,981        $  4,411,581
September 30, 2005                             12,485,650          12,485,650
December 31, 2004                              34,098,334          34,098,334
December 31, 2003                              38,176,549          22,905,929
December 31, 2002                               7,488,817           3,915,918
                                      -------------------- -------------------
   Total                                    $  96,663,331       $  77,817,412
                                      ==================== ===================


Deferred Taxes

The significant components of the Company's deferred tax assets are as follows:

                                                  As of September 30,
                                         --------------------------------------
                                                       2007               2006
                                         ------------------- ------------------
Net operating loss carryforwards               $ 37,405,711       $ 37,974,252
Income from real estate investments
   reported on tax returns but not
   includible in financial statement
   income                                         2,328,370          2,777,752
Impairment charges reported in financial
   statements but not deducted on tax
   return                                         3,615,978            594,350
   Valuation allowance                          (43,350,059)       (41,346,354)
                                         ------------------- ------------------
   Net deferred tax assets                     $         --       $         --
                                         =================== ==================

As of September 30, 2007 and 2006, the Company and its subsidiaries had provided
valuation allowances of approximately $43.4 million and $41.3 million,
respectively, in respect of deferred tax assets resulting from tax loss
carryforwards and temporary timing differences in the reporting of revenues and
expenses because it is more likely than not that the carryforwards may expire
unused and that future tax deductions may not be realized through future
operations.

The following table presents the income tax provision for federal and state
income taxes for the years ended September 30, 2007 and 2006.


                                     FS-12
<PAGE>


                                    Year Ended September 30,
                              --------------------------------------
                                            2007               2006
                              ------------------- ------------------
Federal                             $     20,525         $       --
State                                      6,870              2,400
                              ------------------- ------------------
   Total                            $     27,395         $    2,400
                              =================== ==================


The provision for income taxes differs from the amount that would result from
applying the federal statutory rate for the years ended September 30, 2007 and
2006:

                                             Year Ended September 30,
                                       --------------------------------------
                                                     2007               2006
                                       ------------------- ------------------
Statutory regular federal
   income tax benefit rate                       (34.00)%           (34.00)%
State taxes                                       (5.83)%            (5.83)%
Change in valuation allowance                     39.83 %            39.83 %
                                       ------------------- ------------------
   Total                                              --%                --%
                                       =================== ==================


10.   COMMITMENTS AND CONTINGENCIES:

Operating leases

The following is a schedule, by years, of future minimum rental payments
required under operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of September 30, 2007:

Year ended September 30, 2008                                  $   44,670
Year ended September 30, 2009                                          --
                                                       -------------------
   Net minimum lease payments                                  $   44,670
                                                       ===================

Litigation

As of September 30, 2007, the Company was involved in the following litigation
in which claims for damages would be material if the plaintiff prevailed and
there is at least a reasonable possibility that a loss may have occurred:

         Steven Mayer v BellaVista Capital, Inc. et al. A lawsuit by a
         shareholder seeking damages totaling approximately $2.1 million for
         alleged securities law violations. The company has tendered defense of
         this case to its insurance carrier which has agreed to accept the
         tender with a reservation of rights. The case was submitted to binding
         arbitration in accordance with the terms of the Company's stock
         subscription agreement with the shareholder. The arbitration hearing
         was conducted during the period from September through December 2006.
         Both parties submitted closing arguments during February 2007 with oral
         arguments presented on March 1, 2007. On April 25, 2007 the arbitrator
         issued his ruling finding in favor of the Company on all claims. In
         accordance with the terms of the subscription agreement we directed our
         legal counsel to recover our legal costs resulting from this action. On
         October 11, 2007 we reached a settlement with Mr. Mayer.

         Robert Allen et al v BellaVista Capital, Inc. et al. A lawsuit by
         several shareholders holding a total of 207,599 shares seeking damages
         alleging securities law violations was served on the Company in April
         2006. The shareholders are seeking damages of $10 per share plus
         special and punitive damages. The Company believes it has strong and
         viable defenses and plans to vigorously defend the allegations. Because
         of the early stage of this action, the Company cannot estimate the
         range of possible loss regarding this claim as of the date hereof.



                                     FS-13
<PAGE>

          During the year ended September 30, 2007 the Company negotiated
         settlement and release of claims with plaintiffs holding 14,000 Shares.
         The settlements included, among other terms, the repurchase of the
         14,000 shares held by the shareholders at $3.62 per share for a
         purchase price of $50,691, and the dismissal with prejudice of the
         claims of the shareholder included in the complaint.

In addition to the above matters where the Company is a defendant, the Company
was the plaintiff in several legal matters which have since been settled. To the
extent we have collected those settlements, we have reported income as follows:

<TABLE>
<CAPTION>
                                                                                  Year Ended September 30,
                                                                            --------------------------------------
                                                                                          2007               2006
                                                                            --------------------------------------
   <S>                                                                                    <C>                <C>
Amount received net of $0 and $99,000 in collection costs, respectively,
resulting from the settlement totaling $900,000 of a lawsuit to collect on
a personal guarantee of repayment from the principals of a borrower who
defaulted on payment of its loan.  As of September 30, 2007 no further
payments were remaining related to the settlement.                                   $      --        $   801,000
Amount received, net of $0, and $16,500 in collection costs respectively,
resulting from payments received from the settlement totaling $200,000 of a
lawsuit against a borrower for fraud and misappropriation of loan funds. As of
September 30, 2007 no further payments were remaining related to the
settlement.                                                                                 --            133,500
Amount received, net of $0 and $19,250, respectively in collection costs,
relates to payments received from the settlement totaling $175,000 of a
lawsuit against a borrower for fraud and misappropriation of loan funds. As
of September 30, 2007 no further payments were remaining related to the
settlement.                                                                                 --            155,750
                                                                            ----------------------------------------
     Totals                                                                          $      --       $  1,090,250
                                                                            ========================================
</TABLE>




General Uninsured Losses

We require that our borrowers carry comprehensive liability, fire, flood,
extended coverage, and rental loss insurance with policy specifications, limits,
and deductibles customarily carried for similar properties. Additionally, we
carry insurance on our direct investments in real estate development. There are,
however, certain types of extraordinary losses that may be either uninsurable or
not economically insurable. Further, all of our investments are located in areas
that are subject to earthquake activity, and we generally do not require our
borrowers to maintain earthquake insurance. Should an investment sustain damage
as a result of an earthquake, we may incur losses due to insurance deductibles,
co-payments on insured losses, or uninsured losses. Should an uninsured loss
occur, we could lose our investment in, and anticipated profits and cash flows
from an investment.



                                     FS-14
<PAGE>



11.  QUARTERLY STATEMENTS OF OPERATIONS (UNAUDITED):

The following tables contain selected unaudited quarterly financial data for the
years ended September 30, 2007 and 2006:

<TABLE>
<CAPTION>

                                                    Three Months       Three Months       Three Months        Three Months
                                                           Ended              Ended              Ended               Ended
                                               December 31, 2006     March 31, 2007      June 30, 2007  September 30, 2007
                                              ------------------- ------------------ ------------------ -------------------
    <S>                                                  <C>                <C>                <C>                 <C>
 REVENUES:
 Revenues from loans receivable                          448,288            427,782            409,652             399,788
 Revenues from joint venture investments                 109,914            306,606            909,307             529,563
 Revenues from direct investments                      8,194,760          2,358,376            564,565                  --
 Interest income                                          21,380              7,271             10,018              11,263
 Other                                                    10,642                501                555               5,453
                                              ------------------- ------------------ ------------------ -------------------
    Total revenues                                     8,784,984          3,100,536          1,894,097             946,067
    Cost of direct investments in real estate
      developments                                    (8,015,225)        (2,817,393)          (456,029)                 --
                                              ------------------- ------------------ ------------------ -------------------
    Gross profit                                         769,759            283,143          1,438,068             946,067

 EXPENSES:
 Salaries                                                174,316            192,068            182,127             165,734
 Facilities expenses                                      24,172             23,090             23,089              23,089
 Legal and accounting expense                             30,760             34,559             28,049             196,871
 Board of directors fees and insurance                    60,492             73,781             68,794             114,956
 General administrative and other                         23,315             17,894             23,569              19,654
 REO and non-recurring expense                            21,324             67,166            111,640             126,934
 Depreciation expense                                      7,971              8,016              2,328               3,386
 Provision for impairment of investments in
    real estate                                               --                 --          2,303,348           5,362,595
                                              ------------------- ------------------ ------------------ -------------------
    Total expenses                                       342,350            416,574          2,742,944           6,013,219
                                              ------------------- ------------------ ------------------ -------------------
    Net (loss) income from operations                    427,409           (133,431)        (1,304,876)         (5,067,152)

 OTHER INCOME (EXPENSE):
 Discount from sale of receivable                             --                 --                 --            (213,496)
                                              ------------------- ------------------ ------------------ -------------------
    Total other income                                        --                 --                 --            (213,496)
                                              ------------------- ------------------ ------------------ -------------------
    Net income (loss) before income tax                  427,409           (133,431)        (1,304,876)         (5,280,648)
    Income tax expense                                    (2,400)            (8,921)           (47,186)             31,112
                                              ------------------- ------------------ ------------------ -------------------
    Net income (loss)                                $   425,009       $   (142,352)     $  (1,352,062)      $  (5,249,536)
                                              =================== ================== ================== ===================

 Basic and diluted net loss per weighted
    average common share                             $      0.03       $      (0.01)     $       (0.09)      $       (0.37)
                                              =================== ================== ================== ===================

 Basic and diluted weighted-average common
    shares outstanding                                14,589,303         14,266,108         14,264,394          14,024,464
                                              =================== ================== ================== ===================
</TABLE>




                                     FS-15
<PAGE>


11.  QUARTERLY STATEMENTS OF OPERATIONS (UNAUDITED) (continued):

<TABLE>
<CAPTION>
                                                    Three Months       Three Months       Three Months        Three Months
                                                           Ended              Ended              Ended               Ended
                                               December 31, 2005     March 31, 2006      June 30, 2006  September 30, 2006
                                              ------------------- ------------------ ------------------ -------------------
    <S>                                                  <C>                <C>                <C>                 <C>
 REVENUES:
 Revenues from loans receivable                          233,183            242,563            284,565             389,187
 Revenues from joint venture investments                  33,700            173,456             24,081             156,221
 Revenues from direct investments                             --          9,527,366         23,435,223          10,553,149
 Interest income                                          63,073              7,925             32,091                 345
 Other                                                     3,259             24,157             51,796              40,869
                                              ------------------- ------------------ ------------------ -------------------
    Total revenues                                       333,215          9,975,467         23,827,756          11,139,771
    Cost of direct investments in real estate
      developments                                            --         (8,087,341)       (21,799,901)        (10,277,616)
                                              ------------------- ------------------ ------------------ -------------------
    Gross profit                                         333,215          1,888,126          2,027,855             862,155

 EXPENSES:
 Salaries                                                266,613            173,284            151,038             133,679
 Facilities expenses                                      22,335             22,735             21,444              21,000
 Legal and accounting expense                             21,807             19,126             48,802              95,020
 Board of directors fees and insurance                    66,151             60,044             61,742              62,387
 General administrative and other                         32,990             20,989             21,747              23,147
 REO and non-recurring expense                           265,359            117,503            101,682             342,135
 Depreciation expense                                      7,656              7,656              7,656               8,181
 Provision for impairment of investments in
    real estate                                          403,991                 --             81,211             443,653
                                              ------------------- ------------------ ------------------ -------------------
    Total expenses                                     1,086,902            421,337            495,322           1,129,202
                                              ------------------- ------------------ ------------------ -------------------
    Net (loss) income from operations                   (753,687)         1,466,789          1,532,533            (267,047)

 OTHER INCOME (EXPENSE):
 Income from legal settlements, net of
    collection costs                                     854,500             67,000            168,750                  --
                                              ------------------- ------------------ ------------------ -------------------
    Total other income                                   854,500             67,000            168,750                  --
                                              ------------------- ------------------ ------------------ -------------------
    Net income (loss) before income tax                  100,813          1,533,789          1,701,283            (267,047)
                                                          (2,400)                --                 --                  --
                                              ------------------- ------------------ ------------------ -------------------
    Net income (loss)                                 $   98,413       $  1,533,789       $  1,701,283         $  (267,047)
                                              =================== ================== ================== ===================

 Basic and diluted net loss per common share          $     0.01       $       0.10       $       0.11         $     (0.02)
                                              =================== ================== ================== ===================

 Basic and diluted weighted-average common
    shares outstanding                                14,991,325         14,991,325         14,991,325          14,991,325
                                              =================== ================== ================== ===================
</TABLE>






                                     FS-16