UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                   Form 10-KSB

[X]  Annual report under section 13 or 15(d) of the  Securities  Exchange Act of
     1934 for the fiscal year ended December 31, 2005

                                       or

[ ]  Transition report under section 13 or 15(d) of the securities  exchange act
     of 1934 For the transition period from to

                        Commissions file number 333-93475

                    Cornerstone Ministries Investments, Inc.
                 (Name of small business issuer in its charter)


            Georgia                                 58-2232313
 (State or other jurisdiction of             (IRS Employer Identification No.)
  incorporation or organization)

   2450 Atlanta Highway, Suite 904, Cumming, GA               30040
    (Address of principal executive offices)                (Zip Code)

   Issuer's telephone number (678) 455-1100

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: None

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing  requirements  for the past 90 days.
Yes _X_ No ___

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  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. [X]

     State issuer's revenues for its most recent fiscal year: $15,703,121

     State 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 sold, or the average bid and asked price of such common equity, as of
a  specified  date within the past 60 days.  As of March 27, 2006 the  aggregate
market value held by  non-affiliates  was  $5,762,946  based upon current public
offering price.

     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of the latest practicable date: 886,607 shares of common stock
as of March 27, 2006.

     Documents  incorporated  by  reference:  Portions  of  Issuer's  Form  SB-2
Registration Statements:  No. 333-118613,  filed August 27, 2004; No. 333-104810
filed April 29, 2003; No. 333-91564 filed June 28, 2002; and No. 333-93475 filed
January 14, 2000.

     Transitional Small Business Disclosure Format: Yes____; No_X_


                                       1
<PAGE>

Cornerstone Ministries Investments, Inc.

Form 10-KSB Index
                                                                          Page

Form 10-KSB Title Page                                                       1
Index                                                                        2

Part I:
  Item 1.  Description of Business                                           3
  Item 2.  Description of Property                                           7
  Item 3.  Legal Proceedings                                                 8
  Item 4.  Submission of Matters to a Vote of Security Holders               9

Part II:
  Item 5.  Market for Common Equity and Related Stockholder Matters          9
  Item 6.  Management's Discussion and Analysis or Plan of Operations       10
  Item 7.  Financial Statements                                             22
     Independent Auditor's Report                                          F-1
     Balance Sheets                                                        F-2
     Statements of Operations                                              F-3
     Statements of Changes in Shareholders' Equity                         F-4
     Statements of Cash Flows                                              F-5
     Notes to Financial Statements                                         F-6

  Item 8.  Changes In and Disagreements with Accountants on Accounting      22
             and Financial Disclosures.
  Item 8A. Controls and Procedures                                          22

Part III:
  Item 9.  Directors, Executive Officers, Promoters and Control Persons;    23
             Compliance with Section 16(a) of the Exchange Act
  Item 10. Executive Compensation                                           25
  Item 11. Security Ownership of Certain Beneficial Owners and              25
             and Related Stockholder Matters
  Item 12. Certain Relationships and Related Transactions                   26
  Item 13. Exhibits and Reports on Form 8-K.                                27
  Item 14. Principal Accountant Fees and Services                           27

Signatures                                                                  28
Certifications                                                              29

Exhibit 99.1 - Certifications Pursuant to Section 906 of the                31
                 Sarbanes-Oxley Act of 2002
Exhibit 99.2 - Code of Ethics                                               32


                                       2
<PAGE>

                                     Part I

Item 1. Description of Business.

Summary

Our  primary  objective  is to provide  income for our  certificate  holders and
shareholders,  mainly by financing the acquisition and development of facilities
for  use by  churches,  their  related  ministries  and  other  faith-based  and
non-profit  organizations.  We define "faith-based"  organizations as ones which
have been formed and are operated in  furtherance of their  sponsors'  religious
commitments.  During  the  last  quarter  of  2004,  we  began  making  loans to
for-profit sponsors of affordable and low-income housing projects.  We will make
loans to for-profit  sponsors if the project provides senior living,  affordable
housing or  age-restricted  housing  programs  that are  similar to those of our
non-profit borrowers.

Presbyterian  Investors  Fund,  Inc. was  incorporated  as a Georgia  non-profit
corporation in December 1985 and Cornerstone  Ministries  Investments,  Inc. was
formed as a Georgia  for-profit  corporation  on March  18,  1996.  Presbyterian
Investors Fund, Inc. was merged into Cornerstone Ministries Investments, Inc. on
December  29,  2000  and our  corporate  name  was  changed  to  PIF/Cornerstone
Ministries Investments, Inc. The name was changed back to Cornerstone Ministries
Investments, Inc. on February 26, 2003.

We offer development, construction, bridge and interim loans, usually due within
one to three years.  The typical maximum  investment  amount in a church loan is
$1,000,000.  The typical maximum  investment  amount in a family housing project
loan or senior housing loan is from $5,000,000 to $10,000,000.  Our largest loan
is approximately  $38,000,000,  made for the acquisition of eight senior housing
facilities.  The annual  interest  rate on all but one loan that we made  during
2003,  2004 and 2005 was from 9% to 10%.  It is our  policy  to  acquire  assets
primarily for income.  We do not have any limits on the percentage of our assets
that  may be in any one  investment  or in any  geographic  area  of the  United
States. We have not established any maximum ratio of our total debt to our total
shareholders' equity. These policies would be made by our board of directors and
could be changed, without the vote of share or certificate owners. A description
of our loan programs follows.

Types of loans we make

We make loans to four  distinct  groups of  borrowers.  These  borrowers  can be
characterized as churches, senior housing facilities, family housing development
projects and daycare/faith-based  schools.  Inherent credit risk is reflected by
the  effective  interest  rate  charged to each  borrower.  In each of the above
borrower groups, we normally charge 10% as an annual interest rate.  However, we
do  recognize  the risk in each  borrower  by the  amount  of  origination  fees
charged,  renewal fees charged,  the loan term and any loan participation we may
have in the net profit from the borrower's  sale or refinancing of the property.
For larger  loans,  we may elect to partner  with  other  lenders.  Accordingly,
though each loan may carry identical  interest rates,  the overall risk adjusted
return  can  be  managed  by  fees  charged  and  loan  terms  and is  based  on
underwriting credit requirements and review. Typically, church loans will have a
5% origination  fee charged,  have a one year term and may have a 5% renewal fee
charged.  Non-church  loans are charged a 10%  origination  fee,  may have terms
beyond one year and may not have a renewal fee charged.

Our fees and interest rates are similar to the costs of specialized construction
and  development  loans or  underwritten  bond issues,  and less than  sub-prime
lenders.  Banks and insurance  companies,  who make loans on similar  properties
that are larger and more fully developed, typically charge lower interest rates.
These  conventional  lenders  typically charge 0.5% to 2.5% origination fees. We
are paid more  because  of our  experience,  advice and  willingness  to finance
organizations in their development stage. Our costs of administering these loans
require  us to charge  higher  loan fees and  interest  rates.  The chart  below
outlines the relative loans outstanding as of December 31, 2005.
<TABLE>
<CAPTION>
                                Principal              %
 Borrower                      Outstanding        Outstanding           Initial              Origination    Renewal
   Type                        Dec 31, 2005       Dec 31, 2005           Term*       Rate        Fee*         Fee*
------------------------------ -------------------------------------------------------------------------------------
<S>                             <C>                    <C>               <C>          <C>          <C>          <C>
Daycare/Schools                 $         0              0%              1 year       10%         10%         None
Churches                        $ 8,971,537            7.3%              1 year       10%          5%           5%
Senior Housing
 - Loans                        $ 38,901,607          31.7%              1 year       10%         10%         0-5%
 - Real Estate Joint
Venture
Investments                     $ 14,425,955          11.8%              1 year       10%         10%         0-5%
Family Housing Development      $ 60,255,260          49.2%              1 year       10%       5-10%         0-5%
                                ------------         ------
                                $122,554,359         100.0%
                                ============         ======
</TABLE>

* Subject to underlying credit statistics

                                       3
<PAGE>

Senior  housing  loans  classified  in this table as real estate  joint  venture
investments  are loans in which we  participate  in the residual  profits of the
property and all of the following exist at the inception of the loan:

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

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

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

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

We participate in residual profits through loan participation agreements,  which
enable us to receive  income  from the  borrower  when the  property in which we
provided financing is sold or refinanced to another lender. The participation is
between  25%  and  33%  of the  borrower's  gain.  We  normally  provide  all or
substantially all of the financing (directly or through loan guarantees) for the
acquisition  and development of these  facilities,  which are owed by non-profit
entities.

We  make  three  basic  types  of  loans:  Development  and  acquisition  loans,
construction  loans and  semi-permanent  loans.  The development and acquisition
loans involve the most risk of the borrower's  failure to make timely payment of
interest or for us to lose principal in the event of default. Construction loans
are made when a property is ready to begin  construction  or renovation,  so the
risk is somewhat  less.  Semi-permanent  loans are made on completed  properties
that are being used for their intended  purpose,  so they involve the least risk
to us of the three  categories.  The following table shows the amount of each of
these types of loans in our portfolio at December 31, 2005:

   Type of                        Principal Outstanding      % of principal at
     Loan                         at December 31, 2005       December 31, 2005
     ----                         --------------------       -----------------
Development and acquisition            $ 8,684,314                    7.1%
Construction                           $54,650,576                   44.6%
Semi-permanent                         $59,219,469                   48.3%
                                       ------------                 -----
                                       $122,554,359                 100.0%
                                       ============                 =====

The following are further descriptions of each of these three types of loans:

Development  and Acquisition  Loans. We will provide  financing to young growing
churches,  non-profit  and  for-profit  owners  of  senior  housing  facilities,
non-profit and for-profit sponsors of affordable/low-income housing projects and
other  ministries that we judge to possess  excellent growth or income potential
and which show a strong  ability to repay a loan through  their growth or income
(as in the case of senior housing,  for instance.)  These borrowers may lack the
history,  size,  equity or  income  required  by  conventional  lenders  or bond
underwriters.  Development and acquisition loans may be used to acquire property
that is either  developed or to be developed (in conjunction with a construction
loan provided by us or another  lender).  Each loan is initially made for one to
three years;  however,  these loans may be renewed,  with or without fees, for a
maximum of three  years under  normal  circumstances.  Normally  these loans are
refinanced by banks or others  before there is a reduction in principal.  During
2005, one loan in the amount of $1,050,045  was refinanced by a commercial  bank
and two loans in the amount of $126,109 were partially refinanced.

Construction  Loans.  Construction  loans  are  typically  made to  finance  the
construction of new facilities,  renovate  existing  facilities,  and to develop
family  housing  projects.  They normally have a maturity of one to three years.
The  borrowers  may lack  the  history,  size,  equity  or  income  required  by
conventional  lenders.  Borrowers typically pay interest only on the outstanding
balance  drawn  for  construction.  We focus  primarily  on  loans of less  than
$1,000,000  for churches and day-care  facilities;  larger loans are required to
develop senior housing, family housing projects and student housing. Our largest
construction loan to date has been  $13,000,000,  which was for a family housing
project. For large loans we may partner with another lender. These have included
loans where we have been equal partners,  where our portion was  subordinated to
that of our  partner and where we have  guaranteed  payment to our  partner.  We

                                       4
<PAGE>

currently have five loans in which we have  partnered with a commercial  bank or
other lenders. The total of these loans was $59 million at December 31, 2005, of
which $31.6 million was provided by the other lenders.  We require the customary
documentation for construction loans, including lien subordinations and waivers,
builders risk insurance,  budgets and assignment of relevant contracts to us. We
make weekly  disbursements on finished invoices and require interim lien waivers
on all disbursements.

Semi-permanent  Loans.  These are often called  mini-perms or bridge loans. They
are issued  for as long as three  years and may be linked to a  construction  or
development and acquisition loan. Once a property is being used for its intended
purpose,   the  loan  is  converted  from  a  construction  or  acquisition  and
development  loan into a  semi-permanent  loan.  Also,  they are  often  used by
churches and other borrowers who expect to receive  pledges,  grants,  leases or
other  anticipated  income but who are in need of immediate funds. The loans are
usually repaid by other forms of financing, such as church bonds or conventional
loans.  We will assist the borrower in finding long term financing  through some
of the lenders with which we have established relationships, or we will sell the
loan to one of these  lenders.  During  2005,  eight loans  totaling  almost $23
million were partially refinanced by an outside lender.

We receive monthly interest  payments on all of our real estate loans and senior
housing loans  classified as real estate joint venture  investments  except when
the terms of a loan allow the borrower to finance  interest  payments.  Interest
payments are financed in the following circumstances: Family housing development
loans  may  finance  monthly  interest  payments  while  the  project  is in the
development  and  pre-sales  phase.  This  phase  takes  from  12 to 36  months,
depending  on the size of the project.  We receive the financed  interest as the
borrower sells homes in the development.  Church  construction loans may finance
monthly interest payments while the church building is under construction.  This
takes  three to nine  months  depending  on the size of the  building.  When the
building is operational,  the financed  interest from the construction  phase is
included in the loan's principal amount and we begin receiving  monthly interest
payments from the borrower.  Real estate joint venture loans may finance monthly
interest payments during the  construction/renovation and lease-up stages of the
borrower's  operations.  This  takes two to six  months if there is an  existing
building  and 12 to 24 months  if the  financed  property  is raw land and a new
building is being constructed. When the construction or renovations are complete
and the facility is operational, the financed interest is included in the loan's
principal  amount and we start  receiving  monthly  interest  payments  from the
borrower.

Our loan policies

Loan Terms and  Conditions.  Each loan is secured by a first or second  mortgage
lien or a pledge of the  borrower's  LLC  ownership  interest if the property is
owned by an LLC, a pledge of revenue and, where we determine necessary,  limited
personal  guarantees  made by members or  principals  of the  borrowers.  We may
provide a fixed or variable rate loan.  Our loans on senior  housing  facilities
may include a participation feature where there is the possibility of additional
income from the borrower upon the  borrower's  refinancing  of a property or the
sale of the property  acquired by a borrower  and resold  during the term of our
loan. The terms and conditions  offered to borrowers,  including interest rates,
fees,  maturities and guarantees,  will be based upon current market  conditions
and factors like our operating expenses and the loan's origination  expenses. We
charge each borrower an application  fee to offset the cost of loan  origination
and approval,  legal fees and out-of-pocket expenses. We charge a commitment and
closing fee and may also charge a loan  renewal  fee.  These fees may be paid in
cash by the  borrower  or added to the loan  principal,  at our  discretion.  We
generally require the normal protections afforded commercial lenders,  including
title insurance,  real estate surveys,  appropriate resolutions by the borrower,
appraisals  of the  property,  and the issuance of fire and  extended  insurance
coverage.

Loan Guarantees.  Certain real estate joint venture  investments and real estate
acquisition  and  development  loans in which  the  borrower  chooses  to secure
outside financing may require a guarantee from the Company as a condition of the
extension of the loan by the financial institution.  The guarantee is limited to
amounts  under the loans  and only  covers  outstanding  principal  and  accrued
interest and terminates upon maturity and principal  repayment.  At December 31,
2005,  there were three loans with a potential total of $27,697,300 for which we
have a guarantee.  The total amount  outstanding  and  therefore  guaranteed  at
December 31, 2005 was  $27,456,540.  All of the loans which have a guarantee are
current  based on the  respective  loan  terms.  See Note 14 (page  F-17) of the
"Notes  to  Financial   Statements"  for  additional   information  about  these
guarantees.

Loan underwriting requirements

Mortgage loan  applications  submitted to our  underwriting  staff will normally
include  (i) a  completed  application  on our form,  or  substantially  similar
information on a form acceptable to us, (ii) corporate organizational documents,
(iii)  financial  statements  including  pro forma  financial  statements,  (iv)

                                       5
<PAGE>

certified real estate appraisal,  (v) a real estate survey certified to us, (vi)
preliminary title report,  (vii) market and feasibility  reports, if applicable,
(viii)  copies of  relevant  insurance  coverage,  (ix)  copies of all  material
contracts and leases and (x) environmental report or affidavit.

Our loan  standards  used in  evaluating  the loan  requests are based upon both
objective and subjective  criteria and may vary depending upon the nature of the
borrower. For church loans we examine:

     o    Membership trends and growth potential

     o    Historical financial performance and patterns

     o    Value of real estate involved and other collateral

For non-church loans we will review:

     o    Proposed business plan and management

     o    Markets and demographics

     o    Current and projected earnings and cash flow

     o    Current and future value of real estate and other collateral

For our senior housing loans, we also look to the pro-forma  financial condition
upon  stabilization  of  operations  and  require  third party  appraisers  with
specialized  knowledge of these types of projects and property. We apply loan to
value and coverage ratios consistent with other commercial lenders. Additionally
we will require  survey,  title  reports and  insurance,  property and liability
insurance and full  environmental  reports.  If necessary,  we will also require
market studies and other demographic information.

Completed  applications  and  supporting  material  are  submitted  to the  loan
committee of our Board of  Directors,  which has  authority to approve  loans of
$500,000 or less. Loans or investments over this amount must be submitted to the
full  board  for  approval.  The  loan  committee  consists  of at  least  three
directors.  The loan committee  determines the  creditworthiness of the borrower
and oversees the rates,  terms and  conditions  of the loan.  Upon approval of a
loan  application,  our loan staff will work with its officers and legal counsel
to supervise the loan closing.  It is our policy to require borrowers to pay all
expenses of the loan  including our legal  expenses.  These expenses are usually
deducted from the loan proceeds.

Most of the  organizations  that we loan to have  little or no assets with which
they can provide additional guarantees, collateral or equity for the project. We
will seek to obtain  additional  guarantees from the principals of the church or
organization, or from an affiliated organization that can provide the additional
security or collateral;  however, the majority of our loans are made with little
or no equity from the borrower. For the return of our investment, we rely on the
value of the property to be  acquired/developed,  the feasibility of the project
and the expertise and knowledge of the developer and manager.

Loan investments we have made

This  chart  shows the  number  and  amount of new real  estate  loans and joint
venture investments that we have made in each of the last seven years:

                                 Number of                      Amount of
         Year                    loans made                    loans made
         ----                    ----------                    ----------
         1999                         17                      $12,953,200
         2000                         10                      $11,041,500
         2001                         11                      $14,029,191
         2002                         16                      $30,383,224
         2003                         10                      $14,622,943
         2004                          8                      $17,562,888
         2005                          8                      $16,405,561

Each of our loans has a date when the full principal amount becomes due, or when
we may call the loan for repayment.

These are the  number  and  amount of our real  estate  loans and joint  venture
investments  at December 31,  2005,  which become due or callable in 2006 and in
later years:

                                 Number of loans                 Principal
         Year                    due or callable              due or callable
         ----                    ---------------              ---------------
         2006                         34                      $ 47,441,439
         2007                          7                        74,523,104
         2008                         -0-                              -0-
         2009                          2                           589,816
         2010                         -0-                              -0-
         2011/thereafter              -0-                              -0-
                                     ----                     ------------
         Total                        43                      $122,554,359


                                       6
<PAGE>

Loan management

We monitor each loan closely.  A loan becomes  delinquent when a payment default
remains  uncured after 15 days.  Any  delinquency is addressed  immediately  and
involves  sending a legal notice  requiring  strict  performance  under the loan
documents  and outlines all the remedies  available to us should the default not
be cured within the period required by the loan documents.  In addition to these
legal steps, we work closely with each borrower. We may make personal visits and
prepare to take all legal  remedies  available to us through the loan  documents
and the laws of the appropriate state.

A loan is considered impaired if either of the following occurs:

     o    We determine that it is probable that we will be unable to collect all
          amounts due according to the contractual terms of the loan agreement.

     o    A loan is restructured due to the financial  condition of the borrower
          and the interest rate is reduced below what we would  normally  charge
          for a similar loan.

A specific  impaired loan loss allowance is recognized  when an impaired  loan's
carrying  amount exceeds the present value of expected  future cash flows or the
collateral's  net  realizable  value  if  the  loan  is  considered   collateral
dependent.  We would  place a loan on  non-accrual  status if a loan is 180 days
past due under the terms of the loan  agreement and we have  determined  that an
allowance for impairment  loss should be recognized on the loan. In our history,
we have had six loan  delinquencies  of more than six months.  At  December  31,
2005,  five loans are past due more than 180 days;  however,  we have not placed
any of them on non-accrual  status  because the  underlying  collateral for each
loan is greater  than the  outstanding  loan amount and we believe  that we will
receive the entire  outstanding  amount on each loan.  No allowance for specific
impaired  loan loss was  recognized.  During 2005 we foreclosed on a church loan
and repossessed the land and building that collateralized the loan. This was our
first ever foreclosure.  We have determined that the net realizable value of the
foreclosed assets is greater than the loan's carrying amount;  therefore, we did
not  recognize a loan loss.  We have never  realized a loan loss  write-off  and
would do so upon the borrower filing bankruptcy or when other collection methods
have been exhausted and foreclosure is likely.  The charge-off would be equal to
the amount in which the loan's carrying amount exceeds the net realizable  value
of the collateral.

In addition to allowances for loan losses related to specific impaired loans, we
review our loan portfolio for  collective  loan losses as prescribed by SFAS No.
5. A collective loan loss is recognized when the  characteristics  of a group of
loans  indicate  that it is  probable  that a loss  exists  even though the loss
cannot be identified  with a specific loan.  The collective  loan loss allowance
amount is based on observable data that management believes is reflective of the
underlying  credit losses that are inherent in the portfolio.  The components of
this  evaluation  include trends in our historical loss  experience,  changes in
credit risk and credit  quality,  credit  concentrations,  economic  conditions,
collateral  values and other risks  inherent in the  portfolio.  We conduct this
review  quarterly and changes in our allowance for loan losses are made based on
the results of these reviews.

Subsidiaries

We had no  subsidiaries  as of December 31, 2005. See Item 12 and Note 17 of our
"Notes  to  Financial   Statements"   for   information   regarding  two  former
subsidiaries, Wellstone Communities, Inc. and Wellstone Financial Group, LLC.

Item 2. Description of Property.

In February  2003,  we moved our growing  staff into a 4,400  square foot office
building in Cumming,  Georgia.  We paid $532,040 to purchase the building and as
of December 31, 2005,  there is a $417,294  mortgage on the building.  Effective
August 1, 2004, we began leasing the office and its  furnishings  to Cornerstone
Capital  Advisors for $5,000 per month.  See Note 3 (page F-10) of the "Notes to
Financial Statements" for additional information about this lease. We also owned
two  nearby  office  condominiums,  on which  there was a  mortgage  loan with a
$161,015 balance as of December 31, 2005. They were leased to two tenants, for a
total of $2,400 per month.  We sold these two office  condominiums  in  February
2006 for $272,000, recognizing a $52,000 gain from the sale. In our management's
opinion, the properties are adequately insured.

                                       7
<PAGE>

Item 3. Legal Proceedings.

Laws of many states  provide an exemption  from  registration  for  offerings of
securities approved for listing on the Chicago Stock Exchange. Since April 2000,
we have  considered  our  securities  to have been  approved  for listing on the
Chicago  Exchange.  Prospectuses  for our public  offerings  of bonds and common
stock, as well as our publicly-filed  reports, have included statements that our
common stock was approved for listing on the Chicago Exchange.

     On  December  3,  2004,  a letter  from the  Chicago  Exchange  denied  our
application for listing and said that it had not previously  approved our common
stock for  listing.  However,  on  February  4, 2005,  a second  letter from the
Chicago Exchange said that, upon review,  it had apparently  approved our common
stock for listing  subject to the  completion of an offering that would meet the
Chicago Exchange's numerical standards for shareowners' equity, number of public
shareholders  and publicly held shares. A March 1, 2005  clarification  from the
Chicago Exchange said that it agreed that our status was not  inconsistent  with
our being  "approved for listing upon notice of issuance,"  the language used in
state  exemption  laws.  That being said, our common stock and other  securities
will not be listed on the Chicago Exchange in the future.

     Based upon the Chicago Exchange's  position in its December 3, 2004 letter,
securities  regulators  for  several  states have raised the issue of whether we
lawfully offered and sold securities without registration in those states and/or
whether our prospectuses and  publicly-filed  reports were false and misleading,
in their  reference to Chicago  Exchange  approval for  listing.  The  following
paragraphs  describe the status of some of such states' regulators  proceedings.
While we do not believe that we have violated any securities  laws in connection
with our previous  reliance on the Chicago Exchange  exemption,  we have to date
elected to settle all such related state  regulatory  actions where the costs of
such  settlements  are  likely  to be  significantly  less  than  the  costs  of
litigation in each state.

     On  February  4, 2005 the Texas  State  Securities  Board told us that,  by
February 11, 2005,  we must either sign an Agreed Cease and Desist Order and pay
a $25,000 fine or it would obtain an emergency  administrative  cease and desist
order, without our being represented.  We chose to sign the order on February 9,
2005 and paid the fine.  The order  states that we must  "immediately  cease and
desist from  engaging in conduct that is  materially  misleading or is otherwise
likely  to  deceive  the  public  in  connection  with the offer for sale of any
security in Texas."

     On March 10, 2005 we  attempted  to register  our Series F bonds and common
stock in New Jersey by filing a  registration  statement  with the New  Jersey's
Bureau of Securities.  Because our initial prospectus for the Series F bonds and
common stock  included the statement  that the our common stock was approved for
listing on the Chicago  Exchange upon notice of issuance,  the New Jersey Bureau
of Securities denied the effectiveness of our registration  statement by issuing
a Stop Order on October 5, 2005.  According to the Stop Order we are  prohibited
from selling the Series F bonds and common stock in the State of New Jersey.

     On April 26, 2005 we  consented  to an entry of a Cease and Desist Order by
the  Minnesota  Commissioner  of Commerce that we cease and desist from offering
and selling  securities in Minnesota  until we are in compliance  with Minnesota
statutes and until the  Commissioner's  further order.  We also agreed to redeem
all  certificates  purchased by Minnesota  residents  and to pay an $8,000 civil
penalty.

     On August 11, 2005,  the Ohio Division of  Securities  sent us a draft of a
Cease and Desist  Order,  the terms of which did not  require us to pay fines or
give  rescission  offers.  We to agreed to the Cease and  Desist  Order,  and on
September 12, 2005, the Ohio Division of Securities  issued the Cease and Desist
Order.  According  to the terms of the Order,  we are  ordered  to refrain  from
offering to sell unregistered  securities in Ohio unless a proper exemption from
registration exists.

     On  August  25,  2005,  at  the  informal  request  of  Maine's  Office  of
Securities, we made rescission offers to investors in Maine.

     On September 20, 2005 we entered into a Consent  Agreement with the Indiana
Securities Division, the terms of which required us to give rescission offers to
Indiana  investors,  pay a $600  investigation  expense  cost,  and refrain from
violating provision of the Indiana Securities Act in the future.

                                       8
<PAGE>

     On  September19,  2005 we entered  into a Consent  Order with the  Michigan
Office of Financial and  Insurance  Services,  and we agreed to make  rescission
offers to  investors,  and pay a $4,000 fine to the State of Michigan  Office of
Financial & Insurance Services.

     At the  request of the  Tennessee  Department  of  Commerce  and  Insurance
Securities Division, and because the Tennessee Securities Division believed four
Tennessee   shareholders   received  incorrect   prospectuses  when  buying  our
registered  common stock,  we redeemed eight shares of our common stock owned by
these four Tennessee shareholders, and in October 2005, the Tennessee Department
of Commerce  and  Insurance  Securities  Division  approved our  calculation  of
rescission offers made to these four Tennessee shareholders.

     On October 27, 2005, the Colorado Division of Securities sent us a draft of
a  Stipulation  for  Consent  Cease and Desist  Order,  the terms of which would
require us to make rescission offers to certain Colorado investors. We agreed to
the terms of this particular  Order, and have  subsequently  made the rescission
offers set forth in the Order

     Since  February 2005, we have been  discussing our previous  offers to sell
securities in Kansas with the Kansas Office of the Securities Commissioner,  and
on August 24, 2005, the Kansas Office of the Securities  Commissioner  requested
that we provide  them with  additional  information  relating to these offers to
sell. On September  12, 2005,  we provided the Kansas  Office of the  Securities
Commissioner with the requested additional materials, and as of the date of this
prospectus,  we have not received any additional requests or correspondence from
the Kansas Office of the Securities Commissioner.

     As a  result  of the  aforementioned  rescission  offers  we  have  made in
Colorado, Indiana, Maine, Michigan, and Tennessee,  combined with the redemption
order issued by the state of Minnesota, we have paid approximately $1,065,500 to
those  investors who either elected to accept our rescission  offers or received
our mandatory redemption payments.

     As of March 27, 2006, we are not aware that any other state has  instituted
any  formal  proceeding  on  this  or  any  other  issue  related  to any of our
securities  offerings,  and we  are  not a  party  to any  other  pending  legal
proceeding.  We are not aware that any of the properties covered by our mortgage
loans is  subject  to any  pending  legal  proceeding  or that any  governmental
authority is  contemplating  any legal  proceeding  involving us or any of those
properties, other than as described above.

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

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of the fiscal year covered by this report,  through the  solicitation of
proxies or otherwise.

                                     Part II

Item 5. Market for Common Equity and Related Stockholder Matters.

a) Items required by Item 201 and Item 701 of Regulation S-B:

o    The  Issuer's  common  stock  is not  approved  for  listing  on any  stock
     exchanges. No sales of unregistered securities occurred in 2005.

o    The Issuer has no outstanding options,  warrants or securities  convertible
     into common  stock as of December 31,  2005.  There is an aggregate  24,839
     shares of the Issuer's  common stock owned by its  directors  and executive
     officers and any shareholder it knows to beneficially own 5% or more of the
     outstanding  shares of its common  stock.  These shares could be sold under
     Rule 144.

o    The Issuer has filed a Form SB-2 Registration Statement in which the Issuer
     proposes to publicly offer 5,000,000 shares of its common stock at the same
     $6.50  price per  share as in its  previous  offerings.  There is no public
     trading and  therefore  no market  price of the common  stock that could be
     affected.

o    There are 487 holders of record of the Issuer's common stock.

o    For the last two  fiscal  years,  the  Issuer  has  paid  semi-annual  cash
     dividends on its common  stock,  at an annual rate of 9% on the $6.50 share
     price.  Earnings are the only restriction that may limit the ability to pay
     future dividends.

b) The Issuer is not required to furnish the information pursuant to Rule 463 of
the Securities Act of 1933.

                                       9
<PAGE>

c) The Issuer  repurchased  2,341, 4 and 2,823 shares of its common stock during
October,  November and December 2005, respectively.  All shares were repurchased
at $6.50 per share. The repurchases were not part of a publicly declared plan to
repurchase shares.

Item 6. Management's Discussion and Analysis or Plan of Operation.

Selected financial data.

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

                                                    Year ended
                                                   December 31,
                                    2005               2004            2003
                                    ----               ----            ----
Revenues                        $15,703,121        $13,154,641     $10,923,548
                                -----------        -----------     -----------

Investor interest expense        11,638,145          9,263,934       7,246,202
Loan loss expense                   100,000            257,000         375,000
Marketing expenses                1,082,967          1,004,511         630,508
Management & advisory fees        1,444,264          1,205,069       1,013,730
Operating expenses                  695,756            775,787       1,091,962
                                -----------        -----------     -----------
   Total expenses                14,962,132         12,506,301      10,357,402
                                -----------        -----------     -----------
Operating income                    740,989            648,340         566,146
Income tax provision                163,362            136,973          87,266
                                -----------        -----------     -----------
Net income                      $   577,627        $   511,367     $   478,880

Overview of operations.

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

We generate revenue from:

o    interest on loans

o    origination and renewal fees on loans

o    loan participation income

o    interest on securities

We currently charge a 5% to 10% fee on new loans, based upon expected terms, and
renewal fees of as much as 5% of the  outstanding  balance of the renewing loan.
Our interest  rate on all new loans is currently  from 9% to 10%. Some loans are
participating  loans,  which enables us to receive income from the borrower when
the borrower sells or refinances  (with another lender) the property in which we
provided the financing.  The participation percentage varies between 25% and 33%
of the borrower's gain.

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

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

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

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

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

Comparison of Periods Ended December 31, 2004 and December 31, 2005

General. Assets increased from $134,407,935 at December 31, 2004 to $153,060,088
at December 31, 2005 for an increase of  $18,652,153  or 14%. This increase is a
result of the sale of Investor Certificates and Mortgage Participations,  net of
redemptions  of  $12,694,967,   a  $5,127,274   increase  in  accrued   Investor

                                       10
<PAGE>

Certificate  interest  payable and new common stock issuances of $605,242.  With
the  additional  net cash from these items we invested in real estate  loans and
joint venture investments,  net of principal payments received,  of $10,417,540.
Total revenue  increased  for the year ended  December 31, 2005 by $2,548,480 or
19% from  $13,154,641  in 2004 to  $15,703,121  in 2005. Net income for the year
ended  December  31, 2005 was  $577,627  compared to $511,367 for the year ended
December 31, 2004.

Total real estate loans and joint venture  investments  outstanding  on December
31, 2005 was  $121,104,139  compared to $110,686,599 on December 31, 2004 for an
increase  of  $10,417,540  or 9.4%.  This  increase  is due to sales of Investor
Certificates   and  Mortgage   Participation   Agreements   and  the  subsequent
origination or  refinancing of real estate loans and joint venture  investments,
as follows:

New real estate loan originations                                  $15,741,719
Increase in existing loans, net of principal received                1,992,220
New real estate joint venture investments made                           -0-
Decrease in existing real estate joint venture investments          (7,316,399)
                                                                   -----------
                                                                   $10,417,540

All other  assets  composed  primarily  of cash,  bond  holdings,  property  and
equipment,  and unamortized debt issue costs were $31,955,949 as of December 31,
2005. Bond holdings  increased  approximately $10 million due to the purchase of
$10,730,000  in tax-free  bonds and $1,953,000 in church bonds net of $2,543,000
in tax-free bond redemptions.

Our cash balance  decreased  $2,715,466 from $15,162,659 on December 31, 2004 to
$12,447,193  on December 31, 2005. The large cash balances on hand at the end of
2005 and 2004 were due to large principal  payments  received during December of
each year from real estate joint  venture  investments  and senior  housing real
estate loans.  We  anticipate  using the cash on hand at the end of 2005 to make
new loans during the first three to five months of 2006.

Principal   and  interest   payable  on  Investor   Certificates   and  Mortgage
Participation ("MP") Agreements  increased  $17,785,244 or 14% from $127,823,355
as of December 31, 2004 to  $145,608,599  as of December 31, 2005. In 2004,  the
Company  filed  a  registration  statement  with  the  Securities  and  Exchange
Commission to sell up to $20,000,000  in additional  Investor  Certificates  and
$9,750,000 in Common Stock. The registration  statement was approved on November
1, 2004 which allowed us to start selling new Investor Certificates in the first
quarter  of  2005  and  continue  the   substantial   increase  in   outstanding
certificates  and the  subsequent  investment in new real estate loans and joint
venture investments.

Real estate loan and joint venture interest and fees earned. Interest income and
fees from real estate loans and joint  venture  investments  for the years ended
December 31 is as follows:
<TABLE>
<CAPTION>
                                                       2005              2004            Increase          %
                                                       ----              ----            --------         ---
<S>                                              <C>                  <C>                <C>             <C>
                                                 $14,093,734          $12,668,299        $1,425,435      11.3%
The increase was due to the following:
Increase in average outstanding principal                                                $2,832,490
   ($127,484,677 - 2005; $98,295,723 - 2004)
Decrease in weighted average interest rate                                                 (167,103)
   (9.72% - 2005; 9.89% - 2004)
Decrease in loan fees recognized                                                         (1,239,952)
                                                                                         ----------
                                                                                         $1,425,435
</TABLE>

The  increase in average  outstanding  principal is due to the addition of 8 new
real estate loans with  outstanding  principal of $16,405,561 and an increase in
the average  outstanding  principal on existing loans of $12,783,393.  Loan fees
recognized  decreased  because three large loans that we originated in late 2003
and early  2004 had  their  loan  fees  fully  recognized  by early  2005,  thus
decreasing  2005's  revenue as  compared  to 2004.  Two of our new loans that we
originated  in early 2005 did not have loan fees  charged so we were not able to
replace all of this revenue in 2005. In the second half of 2005, we charged over
$2,100,000  in new loan fees to various  borrowers  which  should  increase  our
recognized loan fees in 2006.

                                       11
<PAGE>

Loan  participation and other income. For the year ended December 31, 2005, loan
participation and other income increased (decreased) as follows:



                                     2005           2004             Change
                                     ----           ----             ------
Investment income                 $  590,866      $433,476        $  157,390
Loan participation & other         1,018,521        52,866           965,655
                                  ----------      --------        ----------
   Total                          $1,609,387      $486,342        $1,123,045

The Company's  investment  income is from the purchase of tax-free bonds used as
permanent financing for projects the Company funded during their development and
initial operations, local church bonds and from interest income on the Company's
excess cash. The increase in investment  income is due to the purchase of church
bonds in 2005  ($57,000) and from an increase in the  short-term  interest rates
that we earned on our  excess  cash  ($100,000).  Loan  participation  and other
income increased due to $825,000 in loan participation/break-up fees received in
2005,  $104,000 in loan guarantee  revenue  recognized in 2005 and an additional
$35,000 in rent received from  Cornerstone  Capital Advisors in 2005 as compared
to 2004.  We  received no loan  participation  revenue  and  recognized  no loan
guarantee revenue in 2004.

Investor interest expense. Investor interest expense for the year ended December
31, 2005 was $11,638,145, an increase of $2,374,211 or 26% compared to 2004. The
increase is due to:


Increase in average outstanding certificate principal, including     $2,536,450
 interest payable subject to compounding
   ($127,800,221 - 2005; $98,723,402 - 2004)
Change in weighted average interest percentage                          (29,617)
   (8.72% - 2005; 8.75% - 2004)
Decrease in average outstanding Mortgage Participation principal
   ($4,947,090 - 2005; $6,273,310 - 2004)                              (132,622)
                                                                     ----------
                                                                     $2,374,211

Loan loss expense and allowance for loan losses.  In the fourth quarter of 2003,
as part of our regular  loan  grading and risk  assessment  process,  we charged
$375,000 to loan loss expense and  increased  our allowance for real estate loan
losses to $375,000 from $0 as of December 31, 2002.  For the year ended December
31, 2004, we charged an additional  $257,000 to loan loss expense.  Prior to the
fourth quarter of 2003, we had never recognized an allowance for loan loss.

Even though we have not incurred a loan  write-off,  we increased  our loan loss
allowance in 2003 because of an increase in our family housing  development loan
portfolio's relative credit risk. The increased credit risk was caused by slower
than expected new home sales in the fourth  quarter of 2003,  which was a result
of slower than  expected  growth in the U.S.  economy.  The increase in our loan
loss  allowance  during 2004 was due to: 1) an  increase  in the family  housing
development loan  portfolio's  outstanding  principal,  resulting in $100,000 in
loan loss  expense,  2) slower  than  expected  new home  sales  volumes  at two
projects,  and 3) an increase  in the time that it has taken  three  projects to
finish the development  phase and start selling homes.  The slower than expected
home sales and the development time increases have increased the relative credit
risk of these  projects  which  resulted in an additional  $157,000 in loan loss
expense in 2004.  In 2005, we increased our allowance for loan loss $100,000 due
to an increase in our family housing  development loan  portfolio's  outstanding
principal.  We will  continue to review the credit risk of these  projects  each
quarter and make  adjustments  to our  allowance  for loan  losses  based on the
results of our reviews.

The  allowance  for loan  loss  increases  that  we've  made are  classified  as
collective loan loss allowances.  A collective loan loss allowance is recognized
when the characteristics of a group of loans indicate that it is probable that a
loss exists even though the loss cannot be identified  with a specific loan. The
allowance for loan losses is reviewed  quarterly and increases or decreases will
be made based on the results of these reviews.

As of December 31, 2005, one joint venture investment loan and four church loans
were considered  impaired  because they were at least six months behind on their
interest  payments.  The joint venture  investment loan had a carrying amount of
$6,084,377  and  the  four  church  loans  had a  combined  carrying  amount  of
$3,854,226.  In  total  we  had  $9,938,603  (8%  of our  total  loan  principal
outstanding) in impaired loans. At December 31, 2004 we had one church loan with
a carrying  amount of $263,291 that was  impaired.  This increase was due to the

                                       12
<PAGE>
lack of growth in the  borrower's  operating  results which meant that they were
not  able to pay all of the  interest  on  their  loans.  We  have  received  an
appraisal  on the  joint  venture  investment  loan  collateral  and it is worth
approximately  $1.3  million  dollars  more  than our  loan's  carrying  amount;
therefore,  we have not  recognized a loss on this loan.  We continue to monitor
the operating  progress of this  borrower and are actively  involved in possible
re-financing  opportunities for this property. Three of the four impaired church
loans received second  mortgage  financing in January 2006 and have been able to
pay all of their back interest with these funds.  The second  mortgage holder is
Church Growth Foundation, Inc. which is a former Company shareholder.

As of December 31, 2005,  allowance for loan losses as a percent of  outstanding
loan principal by loan type:

                                           Loan Loss     Outstanding
                                           Allowance      Principal        %
                                           ---------      ---------       ---
Family Housing Development Loans         $ 732,000       $ 60,255,260     1.2%
Church Mortgage Loans                         -0-           8,971,537       0%
Senior Housing Mortgage Loans                 -0-          38,901,607       0%
Real Estate Joint Venture Investments         -0-          14,425,955       0%
                                         ---------       ------------     ---
  Total                                  $ 732,000       $122,554,359      .6%

Marketing  expenses.  Total expenses for the marketing of investor  certificates
for the year ended December 31, 2005 were $1,082,967  compared to $1,004,511 for
2004. The increase is due to:

                                       2005         2004          Change
                                       ----         ----          ------
Debt issue cost amortization        $ 968,955     $ 822,862      $146,093
Compliance and registration            51,234         7,891        43,343
Printing and promotions                19,581        66,619       (47,038)
Other marketing costs                  43,197       107,139       (63,942)
                                   ----------    ----------       -------
       Total                       $1,082,967    $1,004,511       $78,456

Debt issue cost amortization expense increased due to Investor  Certificates and
Mortgage Participations sold since December 31, 2004. This expense will continue
to increase as new Investor  Certificates and Mortgage  Participations are sold.
Compliance  and  registration  costs are up due to the  Chicago  Stock  Exchange
issues  that we have had to deal  with in 2005 (see Part I, Item 3 on page 8 for
more information). Printing and promotions costs are down because we did not use
outside  consultants to market our  securities in 2005.  Other  marketing  costs
decreased because we eliminated our full-time  marketing manager position during
2004 because we no longer deemed this position necessary. If we determine in the
future that we need help to market our certificates or stock we will most likely
hire an independent consultant and use them for a specific program or issue.

Selling  commissions  paid to brokers  for  selling  Investor  Certificates  and
Mortgage Participations and costs incurred to register Investor Certificates are
paid in cash and charged as an expense  over the term of the related  debt.  The
unamortized  balance  is  classified  as  an  asset  on  the  Balance  Sheet  as
"Unamortized debt issue costs".  The balance was $2,748,855 and $2,671,340 as of
December 31, 2005 and 2004, respectively.

Operating and management/advisory expenses. Management and advisory expenses for
the year ended  December 31, 2005 increased  $240,195 or 20% from  $1,205,069 in
2004 to  $1,445,264  in 2005.  The  increase is due to the  Company's  growth in
revenues.  Prior to July 1,  2003,  our  employees  were  paid  directly  by the
Company. On July 1, 2003,  Cornerstone Capital Advisors ("CCA") hired all of our
employees  and has billed us according  to the terms of the advisory  agreement,
which is described below.

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

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

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

                                       13
<PAGE>

Please  see  Note  3 of the  "Notes  to  Financial  Statements"  for  additional
information  about our  agreement  with CCA and for amounts that we have paid to
CCA during 2005 and 2004.

For the year ended December 31, 2005, operating expenses were $695,756, which is
a decrease of $80,031 from 2004's operating expenses of $775,787. This change is
due to:

Consulting Expense              ($74,161)
Legal Fees                        90,019
Appraisal Costs                  (23,708)
Travel Expense                   (37,039)
Office Expenses                  (30,846)
Other                             (4,296)
                                --------
                                ($80,031)

Consulting expense decreased because in 2004 we used consultants to identify new
markets  for our  loans  in the  African-American  church  community  and in the
low-income  apartment  housing  market.  We have  not used  consultants  for any
material  projects  in  2005.  Legal  fees  have  increased  due  to  the  legal
proceedings  concerning the Chicago Stock  Exchange.  Appraisal  costs decreased
because we ordered fewer appraisals in 2005 than we did in 2004. Travel expenses
decreased because we have not had to travel as much in 2005 as compared to 2004.
We are being more  effective in  determining  when we have to travel and when we
can use technology to conduct business via the internet or other methods instead
of  traveling.  Office  expenses  decreased due to the change we made in the CCA
management  and advisory  contract on August 1, 2004.  When the new contract was
put in place,  CCA became  responsible  for paying the normal  office  operating
costs that we had been paying prior to August 1, 2004 which reduced our costs in
2005 as compared to 2004.

Income tax  provision.  The income tax provision for the year ended December 31,
2005 was $163,362 compared to $136,973 for the year ended December 31, 2004. The
increase in income taxes is due to an increase in pre-tax income.  The Company's
effective  tax   provision   rate  for  2005  and  2004  was  22.1%  and  21.1%,
respectively.  A reconciliation of the Company's effective tax provision rate to
the  federal  statutory  rate is included in the  attached  "Notes to  Financial
Statements" (Note 10).

Dividends.  Dividends of $489,177 and $421,353  were  declared in 2005 and 2004,
respectively.

Liquidity and Capital Resources

Cash flows from  operations.  Net cash provided by the Company's  operations for
the years  ended  December  31,  2005 and 2004 was  $5,283  522 and  $2,066,663,
respectively.  This increase was due to an increase in net income,  depreciation
and amortization expense,  accrued investor certificate  interest,  accounts and
other payables and cash received from loan fees and interest, plus a decrease in
other  assets.  These  positive  cash flow  items  were  partially  offset by an
increase in loans in process, an increase in accrued bond holdings interest,  an
increase in deferred tax assets, and a decrease in loan loss expense.

Investor and mortgage  participation  interest payable  increased  $5,090,277 in
2005 due to an increase in outstanding debt and because approximately 33% of the
Investor  Certificate  holders who purchased  certificates  in 2003 through 2005
have  elected to reinvest the interest due to them each year and not receive the
interest in cash until maturity.

Included  in the 2005 and 2004  changes in accrued  real  estate  loan and joint
venture  interest and deferred  loan fee amounts is $966,250 and  $1,498,830  in
interest,  which was  financed  as part of loan  principal.  We receive  monthly
interest  payments  on our loans  except  when the terms of certain  loans allow
borrowers to finance  interest  payments  while the  collateralized  property is
under development or construction. A summary (by loan type) of the amount of net
financed interest for the years ended December 31, 2005 and 2004 is as follows:

                                      2005               2004
                                      ----               ----
Family Housing Development          $584,877         $1,005,142
Church                                15,775             33,093
Real Estate Joint Venture            365,598            460,595
                                    --------         ----------
                                    $966,250         $1,498,830

                                       14
<PAGE>

The amount for 2005  represents  interest  accrued and financed in 2005,  net of
payments  received in 2005 that were financed in previous  years.  2004's amount
represents  interest  accrued and financed in 2004, net of payments  received in
2004 that were financed in previous years.

The decrease in the family housing net financed  interest in 2005 as compared to
2004 is due to: 1) four loans  moving  from their  development  phase into their
sales phase which meant that we started to receive previously financed interest,
and 2) an  $850,000  principal  pay  down on a  project  in  Mableton,  GA which
resulted in our receipt of previously  financed interest.  In the second half of
2005 we originated six new family housing loans which will require us to finance
the interest during the development stages of their operations. This, along with
another five to 10 proposed new family  housing loans will increase our financed
interest  significantly in 2006. We will still have a minimum of four loans that
will be in the sale phase of their project and paying  interest but the interest
payments  from  these  projects  will not be  enough to  offset  the new  loans'
financed interest.  We anticipate that between $3.0 and $3.5 million in interest
will be financed in 2006. It is anticipated  that the majority of the loans that
finance their interest in 2006 will move into their sales phase of operations by
early 2007 and start paying their current and previously financed interest.

The Real Estate Joint Venture financed  interest for 2005 is related to loans in
San  Antonio,   TX  and  McKinney,   TX.  The  San  Antonio  facility   financed
approximately  $36,000 in interest in 2005 and is currently under renovation and
will be  operational  by 2007.  The McKinney,  TX loan was  responsible  for the
remainder  of the financed  interest.  This loan is  collateralized  by raw land
which was being developed for senior housing and just recently was changed to an
age-restricted  family housing development.  We have been financing the interest
on this loan since June 2003.  Our other Real Estate  Joint  Venture  Investment
loans  are  collateralized  by  existing  facilities  that  only  needed  to  be
remodeled.  Therefore, the period in which the interest is being financed on the
McKinney loan is much longer than the other Real Estate Joint Venture Investment
loans.  Normally,  we finance two to six  months' of interest on senior  housing
loans.  We  anticipate,  due to the size of the McKinney  project,  that we will
finance interest for another 12 to 16 months.

Cash flows from investing activities.  For the year ended December 31, 2005, the
Company used  $19,590,772 in cash from investing  activities which is a decrease
of  $5,142,394  from  $24,733,166  for the year ended  December  31,  2004.  The
decrease was due to the following:

Increase in real estate loans and joint venture investments made   $14,225,574
Increase in real estate loan and joint venture investment
   principal payments received                                     (29,517,217)
Increase in bonds purchased, net of redemptions                     10,140,480
Other items, net                                                         8,769
                                                                   -----------
                                                                   ($5,142,394)
                                                                   ===========


The increase in real estate loans and joint venture  investments made in 2005 is
due to the Series F registration  statement  becoming effective in late 2004 and
our  selling  of these  securities  in 2005 and due to the large  amount of loan
principal payments received which allowed us to reinvest this money into new and
existing loans.

The increase in real estate loan and joint venture investment principal payments
received is due to 1) four family housing  projects  moving into the sales phase
of  their   operations  and  we  have  begun  to  receive   principal   payments
(approximately $11.0 million), 2) large loan pay-downs on two loans and one loan
pay-off ($5.1 million) and 3) senior housing loan proceeds  received as a result
of  the  sale  of  eight  senior  housing  facilities  to  Wellstone  Retirement
Communities  which resulted in an increase in principal  payments  received from
senior  housing  facilities  of $13.4  million  over 2004's  principal  payments
received.

The  increase in bonds  purchased is from the  purchase of  $1,953,580  in local
church bonds and $10,730,000 in tax-free senior housing bonds, net of $2,543,100
in principal received from existing tax-free bonds.

Cash flows from financing activities.  For the year ended December 31, 2005, the
Company's financing activities provided  $11,591,784,  a decrease of $21,847,527
when compared to 2004's amount of $33,439,311. The decrease was due to:

                                       15
<PAGE>

Decrease in investor certificates and mortgage
  participations sold                                         ($15,351,971)
Increase in redemptions of investor certificates
  and mortgage participations                                   (5,124,353)
Decrease in common stock issued                                 (1,477,288)
All others, net                                                    106,085
                                                               -----------
Total decrease                                                 (21,847,527)

The decrease in investor certificate and mortgage  participation sales is due to
a decrease in the amount of  registered  certificates  that we had  available to
sell in 2005 as  compared  to 2004.  The  increase  in  redemptions  of investor
certificates  and  mortgage  participations  is due to the pay-off of two senior
housing  loans in December  2005 that were used to  collateralize  our  mortgage
participations. The decrease in the amount of common stock issued was due to the
decrease in the amount of available registered securities.

In February 2006, we filed a new registration  statement with the Securities and
Exchange Commission which, if approved,  will allow us to sell up to $60,000,000
in Series G Investor  Certificates  and $32,500,000 in common stock and continue
our increase in outstanding certificates and common stock.

We have  $23,058,930  in Investor  Certificates  coming due or  redeemable  upon
demand in 2006, as follows:  $10,921,029 - graduated certificates;  $1,406,641 -
access   certificates;   $10,921,029   -   five-year   certificates.   Graduated
certificates  can be redeemed yearly on the anniversary date of the purchase and
access certificates are due on demand. Based on past experience,  we expect less
than 20% of the graduated and access certificates to be redeemed in 2006 and, if
we have registered  certificates available to sell, we expect that approximately
75% of the maturing five-year  certificates will be reinvested into new Investor
Certificates.  However,  there is no guarantee  that this will  happen.  We will
ensure that we have enough cash available to handle these maturities.

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

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

o    Have readily marketable loans that can be sold for par or a premium.

o    Ask  investors  about their  intentions at least 30 days before their bonds
     mature.

o    Have a bank willing to extend credit lines if needed.

o    Spread maturity dates throughout the year.

o    Limit each investor to not more than $500,000  maturing in any  three-month
     period.

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

Comparison of Periods Ended December 31, 2003 and December 31, 2004

General.  Assets increased from $94,728,347 at December 31, 2003 to $134,407,935
at December 31, 2004 for an increase of  $39,679,588  or 42%. This increase is a
result of the sale of Investor Certificates and Mortgage Participations,  net of
redemptions  of  $33,823,692,   a  $3,295,070   increase  in  accrued   Investor
Certificate interest payable and new common stock issuances of $2,082,530.  With
the  additional  net cash from these items we invested in real estate  loans and
joint venture investments,  net of principal payments received,  of $27,963,099.
Total revenue  increased  for the year ended  December 31, 2004 by $2,231,093 or
20% from  $10,923,548  in 2003 to  $13,154,641  in 2004. Net income for the year
ended  December  31, 2004 was  $511,367  compared to $478,880 for the year ended
December 31, 2003.

Total real estate loans and joint venture  investments  outstanding  on December
31, 2004 was  $110,686,599  compared to  $82,723,500 on December 31, 2003 for an
increase  of  $27,963,099  or 34%.  This  increase  is due to sales of  Investor
Certificates   and  Mortgage   Participation   Agreements   and  the  subsequent
origination or  refinancing of real estate loans and joint venture  investments,
as follows:

New real estate loan originations                               $ 1,378,506
Increase in existing loans, net of principal received             2,171,107
New real estate joint venture investments made                   18,649,894
Increase in existing real estate joint venture investments        8,359,312
                                                                -----------
                                                                $27,963,099

                                       16
<PAGE>

All other  assets  composed  primarily  of cash,  bond  holdings,  property  and
equipment,  and unamortized debt issue costs were $23,721,336 as of December 31,
2004.

Our cash balance  increased  $10,772,808 from $4,389,851 on December 31, 2003 to
$15,162,659  on December  31,  2004.  This  increase  is due to large  principal
payments  received  during  December,  2004 on three real estate  joint  venture
investments.  We  anticipate  using this cash to make new loans during the first
three to five months of 2005.

Principal   and  interest   payable  on  Investor   Certificates   and  Mortgage
Participation ("MP") Agreements increased $37,127,901 or 41% from $90,695,454 as
of December  31, 2003 to  $127,823,355  as of December 31,  2004.  In 2003,  the
Company  filed  a  registration  statement  with  the  Securities  and  Exchange
Commission to sell up to $40,000,000  in additional  Investor  Certificates  and
$11,375,000 in Common Stock.  The  registration  statement was approved on March
26, 2004 which  allowed us to start  selling new  Investor  Certificates  in the
second  quarter of 2004 and continue  the  substantial  increase in  outstanding
certificates  and the  subsequent  investment in new real estate loans and joint
venture investments.

On May 31,  August 15, and November 18, 2004,  three loans that we guaranteed on
senior  housing  facilities  in  Fort  Pierce,  FL and St.  Petersburg,  FL were
modified and the maturity dates were extended. These modifications triggered the
recognition  of a loan  guarantee  obligation  on our  balance  sheet.  The loan
guarantee obligation is carried at the guarantee's combined estimated fair value
of  $175,000.  We billed the loan  guarantee  obligations  to the  borrowers  as
compensation  for our  risk and  received  $104,000  in cash  during  2004.  The
remaining $71,000 was received during the first quarter of 2005. Please see Note
14 of the "Notes to Financial Statements" for additional  information related to
loan guarantees.

Real estate loan and joint venture interest and fees earned. Interest income and
fees from real estate loans and joint  venture  investments  for the years ended
December 31 is as follows:
<TABLE>
<CAPTION>
                                                     2004              2003         Increase       %
                                                     ----              ----         --------      ---
<S>                                               <C>               <C>             <C>           <C>
                                                  $12,668,299       $9,319,835      $3,348,464    36%
The increase was due to the following:
Increase in average outstanding principal                                           $2,187,165
   ($98,295,723 - 2004; $76,076,836 - 2003)
Increase in weighted average interest rate                                             281,484
   (9.89% - 2004; 9.52% - 2003)
Increase in loan fees recognized                                                       879,815
                                                                                    ----------
                                                                                    $3,348,464
</TABLE>

The  increase in average  outstanding  principal is due to the addition of 4 new
real estate loans and 4 new joint venture investments with outstanding principal
of $17,562,888 and an increase in the average outstanding  principal on existing
loans of $4,655,999.

Loan  participation and other income. For the year ended December 31, 2004, loan
participation and other income increased (decreased) as follows:


                                   2004              2003             Change
Investment income                $433,476         $350,071           $ 83,405
Loan participation & other         52,866        1,253,642         (1,200,776)
                                 --------       ----------        -----------
   Total                         $486,342       $1,603,713        ($1,117,371)

The Company's  investment  income is from the purchase of tax-free bonds used as
permanent financing for projects the Company funded during their development and
initial  operations and from interest  income on the Company's  excess cash. The
increase in  investment  income is due to the  September,  2003  purchase of new

                                       17
<PAGE>

tax-free bonds, which increased the balance in our bond holdings portfolio. Loan
participation and other income decreased due to a $1,220,277 loan  participation
gain recorded in September,  2003. We received no loan participation  revenue in
2004.

Investor interest expense. Investor interest expense for the year ended December
31, 2004 was $9,263,934,  an increase of $2,017,732 or 28% compared to 2003. The
increase is due to:


Increase in average outstanding certificate principal, including      $1,707,349
 interest payable subject to compounding
   ($98,723,402 - 2004; $79,210,846 - 2003)
Change in weighted average interest percentage                             9,044
   (8.75% - 2004; 8.74% - 2003)
Increase in average outstanding Mortgage Participation principal
   ($6,273,310 - 2004; $3,259,920 - 2003)                                301,339
                                                                      ----------
                                                                      $2,017,732

Loan loss expense and allowance for loan losses.  In the fourth quarter of 2003,
as part of our regular  loan  grading and risk  assessment  process,  we charged
$375,000 to loan loss expense and  increased  our allowance for real estate loan
losses to $375,000 from $0 as of December 31, 2002.  For the year ended December
31, 2004, we charged an additional  $257,000 to loan loss expense.  Prior to the
fourth quarter of 2003, we had never recognized an allowance for loan loss.

Even though we have not incurred a loan  write-off,  we increased  our loan loss
allowance in 2003 because of an increase in our family housing  development loan
portfolio's relative credit risk. The increased credit risk was caused by slower
than expected new home sales in the fourth quarter of 2003, which is a result of
slower than expected growth in the U.S.  economy.  The increase in our loan loss
allowance  during  2004  was  due  to:  1) an  increase  in the  family  housing
development loan  portfolio's  outstanding  principal,  resulting in $100,000 in
loan loss  expense,  2) slower  than  expected  new home  sales  volumes  at two
projects,  and 3) an increase  in the time that it has taken  three  projects to
finish the development  phase and start selling homes.  The slower than expected
home sales and the development time increases have increased the relative credit
risk of these  projects  which  resulted in an additional  $157,000 in loan loss
expense in 2004.  We will  continue to review the credit risk of these  projects
each quarter and make  adjustments to our allowance for loan losses based on the
results of our reviews.

The  allowance  for  loan  loss  increases  that we made in 2003  and  2004  are
classified as collective loan loss allowances.  A collective loan loss allowance
is recognized when the  characteristics  of a group of loans indicate that it is
probable  that a loss exists even  though the loss cannot be  identified  with a
specific loan. The allowance for loan losses is reviewed quarterly and increases
or decreases will be made based on the results of these reviews.

As of  December  31, 2004 and 2003,  one church  loan with a carrying  amount of
$263,291  and  $242,621,  respectively,  was  considered  impaired.  No specific
impaired  loan loss  allowance was recorded  because the carrying  amount of the
loan is less than the  loan's  collateral  or the  present  value of the  loan's
expected future cash flows.

As of December 31, 2004,  allowance for loan losses as a percent of  outstanding
loan principal by loan type:

                                        Loan Loss       Outstanding
                                        Allowance        Principal         %
                                        ---------      ------------       ---
Family Housing Development Loans        $ 632,000      $ 36,007,454       1.8%
Church Mortgage Loans                        -0-          9,285,858         0%
Senior Housing Mortgage Loans                -0-          9,286,352         0%
Real Estate Joint Venture Investments        -0-         56,945,936         0%
                                        ---------      ------------       ---
  Total                                 $ 632,000      $111,525,600        .6%

Marketing  expenses.  Total expenses for the marketing of investor  certificates
for the year ended  December 31, 2004 were  $1,004,511  compared to $630,508 for
2003. The increase is due to:

                                        2004        2003         Change
Debt issue cost amortization          $822,862    $510,924      $311,938
Management & Consulting                 76,194      44,186        32,008
Printing and promotions                 66,619      34,870        31,749
Other marketing costs                   38,836      40,528        (1,692)
                                    ----------    --------      --------
       Total                        $1,004,511    $630,508      $374,003

                                       18
<PAGE>

Debt issue cost amortization expense increased due to Investor  Certificates and
Mortgage Participations sold since December 31, 2003. This expense will continue
to increase as new Investor  Certificates and Mortgage  Participations are sold.
Management  and  consulting  expense  is up  due to the  hiring  of a  full-time
marketing manager who is designing and implementing new marketing strategies for
our Investor  Certificates,  new  investments  and general  corporate  programs.
Printing and  promotions  costs are up due to the printing of  prospectuses  and
marketing  brochures  for our new  certificates,  which  we began to sell in the
second quarter of 2004.

Selling  commissions  paid to brokers  for  selling  Investor  Certificates  and
Mortgage Participations and costs incurred to register Investor Certificates are
paid in cash and charged as an expense  over the term of the related  debt.  The
unamortized  balance  is  classified  as  an  asset  on  the  Balance  Sheet  as
"Unamortized debt issue costs".  The balance was $2,671,340 and $1,772,631 as of
December 31, 2004 and 2003, respectively.

Operating and personnel expenses.  Personnel expenses (salaries,  payroll taxes,
and  benefits)  for the year ended  December 31  increased  $191,339 or 19% from
$1,013,730  in 2003 to  $1,205,069  in 2004.  The increase is due to  additional
employees hired to handle the Company's  growth in operations.  Prior to July 1,
2003,  the  employees  were  paid  directly  by the  Company.  On July 1,  2003,
Cornerstone  Capital  Advisors ("CCA") hired all of our employees and has billed
us according to the terms of the personnel agreement, which is described below.

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

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

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

Please  see  Note  3 of the  "Notes  to  Financial  Statements"  for  additional
information  about our  agreement  with CCA and for amounts that we have paid to
CCA during 2004 and 2003.

For the years ended  December  31,  2004 and 2003,  operating  expenses  were as
follows:

                                          2004           2003        Change
                                          ----           ----        ------
a) Trust service/paying agent fees      $153,966     $  162,566     ($8,600)
b) Consulting fees                        76,860        142,794     (65,934)
c) Audit, accounting & tax services       68,403        102,846     (34,443)
d) Employee recruiting costs                -0-          46,335     (46,335)
e) Depreciation & amortization            66,861         56,695      10,166
f) Office expenses                       100,443        122,803     (22,360)
g) Legal expenses                         73,567         99,186     (25,619)
h) Subsidiary registration costs            -0-         113,473    (113,473)
i) Insurance                              41,557         38,508       3,049
j) Other operating expenses              194,130        206,756     (12,626)
                                        --------     ----------   ---------
Total operating expenses                $775,787     $1,091,962   ($316,175)


   The changes are due to the following:

     a)   Trust  service/paying  agent fees -  decreased  due to a  decrease  in
          paying agent fees for our investor certificates.

     b)   Consulting fees - In 2003, we used  consultants to set up the mortgage
          participation  agreements and to identify new business  markets in the
          African American  community  (churches,  affordable senior housing and
          family  housing)  which  increased  costs over 2004.  In 2004, we have
          continued  to  use  consultants  to  identify  new  business   markets
          (affordable  housing is the main  area);  however  our  overall use of
          outside  consultants is down because CCA now has in-house people to do
          a lot of the work that,  in past  years,  we would  have used  outside
          consultants to perform.

                                       19
<PAGE>

     c)   Audit,  accounting & tax services - Decreased due to: 1) the hiring of
          a  full-time  accountant  in the  middle  of  2003  by CCA  which  has
          decreased  our need for  outside  accounting  services;  and 2) $8,155
          spent  in 2003 for CPA fees to audit  Wellstone  Communities,  Inc,  a
          formerly wholly-owned subsidiary.

     d)   Employee recruiting costs - decreased in 2004 because we are no longer
          using outside recruiting firms to hire employees.

     e)   Depreciation  &  amortization - The increase is due to the purchase of
          additional computers, software and office furniture in 2003 and 2004.

     f)   Office  expenses - The decrease is due to the change in our management
          contract with CCA. Prior to August,  2004, CMI was responsible for all
          general  office costs at our corporate  offices.  In August 2004,  the
          agreement  was  changed  and  as  part  of the  agreement,  CCA is now
          responsible  for the  maintenance  and ongoing  operating costs of the
          office.  Please see Note 3 of the "Notes to Financial  Statements" for
          additional information about our management agreement with CCA.

     g)   Legal  expenses - We have used outside  attorneys less in 2004 than in
          2003.

     h)   Subsidiary  registration  costs - In the fourth  quarter  of 2003,  we
          suspended Wellstone  Communities,  Inc's (WCI) registration  statement
          and decided to not go forward  with the filing.  We spent  $113,473 on
          this filing,  which was charged to operating  expense.  See Note 18 of
          the "Notes to Financial  Statements" for more  information  about this
          registration statement.

     i)   Insurance - increased slightly in 2004 due to our larger operations in
          2004.

     j)   Other  operating  expenses - Decreased  due to economies of scale from
          our increased operations.

Income tax  provision.  The income tax provision for the year ended December 31,
2004 was $136,973  compared to $87,266 for the year ended December 31, 2003. The
net  increase  in income  taxes is due to an  increase  in pre-tax  income.  The
Company's  effective tax  provision  rate for 2004 and 2003 was 21.1% and 15.4%,
respectively.  A reconciliation of the Company's effective tax provision rate to
the  federal  statutory  rate is included in the  attached  "Notes to  Financial
Statements" (Note 10).

Dividends.  Dividends of $421,353 and $338,172  were  declared in 2004 and 2003,
respectively.

Liquidity and Capital Resources

Cash flows from  operations.  Net cash provided by the Company's  operations for
the years  ended  December  31,  2004 and 2003 was  $2,066,663  and  $3,130,394,
respectively. This decrease was due to a decrease in net income, deferred taxes,
and cash  received  from loan fees and loan  interest,  and an increase in other
assets partially offset by an increase in depreciation and amortization expense,
an increase in accrued investor  certificate  interest,  and an increase in loan
guarantee payments received.

Investor and mortgage  participation  interest payable  increased  $3,956,610 in
2004 due to an increase in outstanding debt and because approximately 33% of the
Investor  Certificate  holders who purchased  certificates in 2003 and 2004 have
elected to  reinvest  the  interest  due to them each year and not  receive  the
interest in cash until maturity.

Included  in the 2004 and 2003  changes in accrued  real  estate  loan and joint
venture  interest and deferred  loan fee amounts is  $1,498,830  and $797,589 in
interest  which was  financed  as part of loan  principal.  We  receive  monthly
interest  payments  on our loans  except  when the terms of certain  loans allow
borrowers to finance  interest  payments  while the  collateralized  property is
under development or construction. A summary (by loan type) of the amount of net
financed interest for the years ended December 31, 2004 and 2003 is as follows:

                                            2004                2003
                                         ----------           --------
Family Housing Development               $1,005,142           $339,820
Church                                       33,093              8,684
Real Estate Joint Venture                   460,595            449,085
                                         ----------           --------
                                         $1,498,830           $797,589

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

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

                                       20
<PAGE>

increased loan balances on five projects which are now in the development  phase
and are  financing  their  monthly  interest,  3) the addition of four new loans
since September 30, 2003 which are in the development  phase of construction and
4) a delay in the start of home sales at three projects financed by the Company.
Although the amount of financed  interest from these projects will remain fairly
high (currently $100,000 to $105,000 per month), the amount of interest financed
should start to decline in the third or fourth  quarter of 2005 because three to
five of these projects  should be going into their sales phase and we will begin
to receive interest payments in cash.

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

Cash flows from investing activities.  For the year ended December 31, 2004, the
Company used $24,733,166 in cash from investing  activities which is an increase
of  $6,086,933  from  $18,646,233  for the year ended  December  31,  2003.  The
increase was due to the following:

Increase in real estate loans and joint venture investments made    $15,491,620
Increase in real estate loan and joint venture investment
   principal payments received                                       (7,605,203)
Decrease in bonds purchased, net of redemptions                      (1,216,250)
Decrease in fixed asset purchases, net of fixed asset sales            (583,234)
                                                                     ----------
                                                                     $6,086,933
                                                                     ==========

The increase in real estate loans and joint venture  investments made in 2004 is
due to the new registration  statement  becoming effective on March 26, 2004. We
did not have as much time in 2003 to originate new loans as we have had in 2004.
This trend should  continue in 2005 as we invest the cash that we have  received
from new investor certificates, stock issuances, and loan principal payments.

The increase in real estate loan and joint venture investment principal payments
received is due to three real estate joint venture investments paying down their
loans in 2004  versus one large  principal  pay-off  received  in 2003 on a real
estate joint venture investment in Largo, FL.

The  decrease  in fixed  asset  purchases  in 2004 is due to the  purchase of an
office  condominium in 2003 to house our corporate offices and to provide office
space for future growth.

Cash flows from financing activities.  For the year ended December 31, 2004, the
Company raised  $37,827,217 from the sale of Investor  Certificates and Mortgage
Participation  Agreements.  This represents an increase of $13,514,077  from new
Investor  Certificate  and Mortgage  Participation  sales of $24,313,140 for the
year  ended  December  31,  2003.  In  2003,  we  had  no  registered   Investor
Certificates  for sale after May,  2003.  We have been able to sell new Investor
Certificates  since  March 26,  2004 which has been the reason for the  increase
over last year.  Also,  we issued  $2,082,530  in common  stock (net of issuance
costs)  in 2004  which  was  registered  as part of our  Series  E  registration
statement that became effective in March 2004.

On August 27, 2004, we filed a new  registration  statement  with the Securities
and Exchange  Commission which will allow us to sell up to $20,000,000 in Series
F Investor  Certificates and $9,750,000 in common stock. We were notified by the
Securities and Exchange  Commission  that they were not going to complete a full
review  of  the  registration  statement.   The  registration  statement  became
effective on November 1, 2004 and we started to sell the  securities  registered
under this statement in January 2005.

Investor  Certificates  redeemed for cash increased from $4,208,816 for the year
ended  December 31, 2003 to $4,655,926  for the year ended December 31, 2004. In
both  2003 and  2004,  we  authorized  early  redemptions  on  certain  Investor
Certificates  to reduce our  average  interest  rate and to extend the length of
time that our certificates will be outstanding. In 2003, we called approximately

                                       21
<PAGE>

$2,000,000 in certificates  related to the church bond fund. In August, 2004, we
called all 9% five year  Investor  Certificates  with a maturity  date of March,
2005.  We gave each investor the option to receive cash or new Series E Investor
Certificates  (8.25%  interest rate) as payment for the  certificates  that were
being  called.  The  total  amount  called  and the  amounts  paid  in cash  and
reinvested in new certificates were as follows:

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

We have  $11,948,840  in Investor  Certificates  coming due or  redeemable  upon
demand in 2005, as follows:  $9,839,496 - graduated  certificates;  $1,781,391 -
access certificates;  $327,953 - five-year certificates.  Graduated certificates
can be  redeemed  yearly on the  anniversary  date of the  purchase  and  access
certificates are due on demand.  Based on past  experience,  we expect less than
20% of the  graduated  and access  certificates  to be  redeemed  in 2005 and we
expect that  approximately  75% of the maturing  five-year  certificates will be
reinvested into new Investor  Certificates.  However, there is no guarantee that
this will  happen.  We will ensure that we have enough cash  available to handle
these maturities.

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

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

o    Have readily marketable loans that can be sold for par or a premium.

o    Ask  investors  about their  intentions at least 30 days before their bonds
     mature.

o    Have a bank willing to extend credit lines if needed.

o    Spread maturity dates throughout the year.

o    Limit each investor to not more than $500,000  maturing in any  three-month
     period.

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

Item 7. Financial Statements.

For the  information  required  by this item,  please see  Financial  Statements
beginning on page F-1.

Item  8.  Changes  In and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

On November 2, 2005 we engaged Berman Hopkins Wright & LaHam,  CPA's, LLP as the
principal   accountants  to  audit  our  financial   statements.   Our  previous
independent accountant,  Robert N. Clemons, CPA, PA, was a sole practitioner who
died suddenly and  unexpectedly on September 23, 2005,  which  necessitated  the
change. Our previous auditor's report on our financial  statements for either of
the last two years did not contain an adverse  opinion or  disclaimer of opinion
and was not qualified or modified as to  uncertainty,  audit scope or accounting
principals.  We did not have any  disagreements  with our former  auditor on any
matter of accounting principle or practice,  financial statement disclosure,  or
auditing  scope or  procedure  during the two most recent  fiscal  years and the
subsequent interim period until the death of our auditor on September 23, 2005.

Item 8A. Controls and Procedures.

     (a)  Evaluation  of  Disclosure   Controls  and  Procedures.   The  Company
          maintains a system of "disclosure controls and procedures" (as defined
          in Rules 13a -- 15 and 15d -- 15 under the Securities  Exchange Act of
          1934) designed to provide  reasonable  assurance as to the reliability
          of the financial  statements  and other  disclosures  included in this
          report,  as well  as to  safeguard  assets  from  unauthorized  use or
          disposition. The Company's Chief Executive Officer and Chief Financial
          Officer  evaluated  the  effectiveness  of  the  Company's  disclosure
          controls within 90 days prior to the filing date of this report. Based
          upon that evaluation,  the Chief Executive Officer and Chief Financial
          Officer   concluded  that  the  Company's   disclosure   controls  and
          procedures  are  effective  in  alerting  them in a timely  manner  of
          material information required to be included in the Company's periodic
          Securities and Exchange Commission filings.

                                       22
<PAGE>

     (b)  Changes  in  Internal   Controls.   Since  the  evaluation   date,  no
          significant  changes were made to the Company's  internal  controls or
          other factors that could significantly affect these controls.

                                    Part III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.

Our board of directors is elected by our shareholders.  The board is responsible
for  setting  policies  and  for  hiring  and  retaining  management.   This  is
information about our directors and officers.

Name, residence address           Age                Responsibility
-----------------------           ---                --------------

Cecil A Brooks                    74             Director, Chairman of the
10206 Big Canoe                                  Board, President, CEO
Jasper, GA 30143

John T. Ottinger                  51             Director, Vice President, COO,
6020 Providence Lane                             Secretary and Treasurer
Cumming, GA 30040

Ted Fox                           74             Director
10575 Big Canoe
Jasper, GA  30143

Henry Darden                      72             Director, Member of the
614 Beverly Dr.                                  Loan and Audit Committees
Brandon, FL  33510

Jack Wehmiller                    58             Director
7034 George Barnes Road
Murrayville, GA  30564

Irving B. Wicker                  80             Director, Member of the
132 Eswick Drive                                 Audit Committee
Prattville, AL 36067

Directors are elected for three-year  terms.  Messrs.  Darden and Fox will serve
until the 2006 annual  meeting,  Messrs.  Wehmiller  and Wicker will serve until
2007 and Messrs. Ottinger and Brooks will serve until the 2008 annual meeting.


Cecil A.  Brooks has served in these  capacities  since  Cornerstone  Ministries
Investments,  Inc. was founded.  He graduated  from Mercer  University  in 1952.
After a varied career in sales and  management,  including real estate sales and
development, he graduated from Reformed Seminary in 1975. He served as pastor of
Trinity  Presbyterian  Church in Miami,  Florida  and on the staff of Mission to
North America of the Presbyterian Church of America from 1983 to 1994. He formed
the Investors Fund for Building and Development (the predecessor to Presbyterian
Investors Fund,  Inc.) in 1985 and served as President from its inception to its
merger  with us. Mr.  Brooks has served on the boards of a number of  non-profit
organizations  concerned with foreign missions and housing for the elderly.  Mr.
Brooks has over 20 years  experience in all areas of the church mortgage lending
and  development  business.  Mr. Brooks has also worked closely with church bond
underwriters  and  broker-dealers  in the church lending  market.  He has been a
director since 1985.

John T. Ottinger, Jr. has served as Vice President and Secretary/Treasurer since
Cornerstone Ministries  Investments,  Inc. was founded. Mr. Ottinger is also our
Chief  Financial  Officer  and became our Chief  Operating  Officer in 2000.  He
graduated  from the  University of Delaware in 1976 and spent eight years in the
lodging industry.  Mr. Ottinger has served as pastor of an established church as
well as  organizing  pastor  in  North  Carolina.  He  joined  the  Presbyterian
Investors  Fund,  Inc.  staff in 1985.  Mr.  Ottinger  has 20 years of extensive
experience in church lending. He has been a director since 1996.

                                       23
<PAGE>

Ted Fox has been a director since 1996,  except for a period in 2003 in which he
served as director of our former subsidiary,  Wellstone Communities,  Inc. Since
1999 he has been an independent investor.  Mr. Fox had a 24-year career with Law
Engineering Company,  retiring as Assistant  Vice-President.  From 1993 to 1998,
Mr.  Fox was  employed  part-time  with Cole,  Henderson  and  Drake,  Inc.,  an
advertising  agency in their finance  department,  maintaining  their  financial
records.  Mr. Fox is a past Chairman of the Board of the National Association of
Credit  Managers.  He received a Bachelor of Business  Administration  degree in
Management from Georgia State University.

Henry  Darden has served as a director  since  1992.  He  received a Bachelor of
Science degree in forestry management from the University of Georgia in 1955 and
an AA in real  estate  from  the  City  College  of  Chicago  in  1970.  He is a
Distinguished Graduate of the Industrial College of the Armed Forces. Mr. Darden
retired in 1982 as a Lieutenant  Colonel with the United States Air Force. Since
then, he has been a self-employed financial and tax consultant.

Jack  Wehmiller  has served as a director  since May 2004.  In January  2004, he
joined the staff of  Cornerstone  Capital  Advisors,  Inc. His  responsibilities
include   broker-dealer   relations   along  with  senior  and  student  housing
development.  Mr. Wehmiller was employed in the securities  industry since 1971,
with 17 years in retail  brokerage  and the balance in sales and marketing for a
major mutual fund and variable  annuity  distributors.  From 1998 to 2000 he was
regional vice  president  with ING Mutual Fund  Management and ING Mutual Funds.
During 2001 and early 2002,  he was an  independent  consultant  and, from April
2002  through  2003,  he formed and worked for  Wellstone  Securities  LLC.  Mr.
Wehmiller is an ordained deacon at the First Baptist Church of Gainesville,  GA.
He  attended  the  University  of South  Florida  and the  Southwest  School  of
Municipal Finance.

Irving B. Wicker has served as a director  since  1990.  He  graduated  from the
University  of  Maryland  in 1959 and  received  a Masters  Degree  from  George
Washington University in 1963. He retired in 1969 as a Lieutenant Colonel in the
United States Air Force.  Mr. Wicker was  self-employed  as a real estate broker
and financial planner from 1969 until he retired in 2000.

Independent directors

Decisions involving Cornerstone Capital Advisors, Inc. require the approval of a
majority of the independent directors,  as well as a majority of the full board.
We define an  independent  director  as one who is not an  officer,  director or
shareholder of  Cornerstone  Capital  Advisors,  Inc. We consider  Messrs.  Fox,
Darden and Wicker to be  independent  directors.  We will  maintain at least two
independent directors on our board.

Committees

Audit Committee.  Two independent directors,  Messrs. Darden and Wicker, are the
audit committee.  The audit committee will make  recommendations  concerning the
engagement of independent public  accountants,  review their  independence,  the
services  they  provide  and the  results  of the  audit  engagement.  The audit
committee  will also consider the range of audit and  non-audit  fees and review
the adequacy of our internal accounting controls.  We plan to appoint, by May of
2006, a director  and audit  committee  member who is a  "financial  expert," as
defined by regulations adopted under the Sarbanes-Oxley Act of 2002.

Loan and Investment  Committee.  The board has established a loan and investment
committee consisting of Messrs. Brooks, Ottinger, and Darden and having a quorum
of two members.  The committee will review and may approve loans and investments
of up to  $500,000  on  behalf of the  board,  in  accordance  with the loan and
investment  policies as adopted and amended by the board from time to time.  Any
individual  loans or investments in excess of the committee's  authority will be
subject to approval by the entire board.

Meetings and compensation of directors

The  directors  meet at least  annually  and more  often as  needed.  The  audit
committee meets at least once annually.  The loan and investment committee meets
as required. Directors receive $250 for each conference call board and committee
meeting  they  attend  and $500  for  each  face-to-face  meeting  attended.  We
reimburse them for travel expenses to attend meetings.

Indemnification of directors and officers and limitation of their liability

Officers or directors are not liable to Cornerstone Ministries Investments, Inc.
or its  shareowners,  under Georgia law, if they acted in a manner they believed
in good faith to be in or not  opposed to  Cornerstone  Ministries  Investments,
Inc.'s best  interests.  They are not liable in any criminal  proceeding if they
had no reasonable  cause to believe their conduct was unlawful.  As permitted by
Georgia law, we will indemnify our officers and directors  against liability and
their  defense  costs in any  proceeding  in which they have been  successful or
where the directors who are not involved determine that the applicable  standard
of conduct has been met. We will pay reasonable  expenses,  including attorneys'

                                       24
<PAGE>
fees, incurred by directors or officers in advance of the final disposition of a
proceeding,  if they furnish written  affirmation of good faith belief that they
have met the applicable standard of conduct,  together with a written promise to
repay any advances if it is determined they are not entitled to indemnification.
Insofar as indemnification  for liabilities arising under the federal Securities
Act of 1933 (the "Act") may be permitted to directors,  officers and controlling
persons of the small business  issuer pursuant to the foregoing  provisions,  or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
expressed  in the Act and  is,  therefore,  unenforceable.  We  carry  insurance
against the liability of our officers and directors.

Code of Ethics

The  registrant  has  adopted a code of ethics  that  applies  to its  principal
executive officer,  principal financial officer, principal accounting officer or
controller,  or persons performing similar functions. A copy is attached to this
report as  exhibit  99.2.  The  registrant  will  furnish a copy to any  person,
without  charge,  upon request made to the  registrant at 2450 Atlanta  Highway,
Suite 904, Cumming, GA 30040.

Section 16(a) Beneficial Ownership Reporting Compliance

No directors, officers or beneficial owners of more than 10% of the registrant's
Common Stock was  required to file  reports as required by section  16(a) of the
Exchange Act during the two most recent fiscal years.

Item 10. Executive Compensation.

This summary compensation table shows all compensation paid to our two executive
officers during 2004 and 2005:
<TABLE>
<CAPTION>
                                                                         Annual compensation
    Name and principal position                                          Year          Salary
    ---------------------------                                          ----          ------
<S>                                                                      <C>          <C>
    Cecil A. Brooks, Chairman of the Board, President and CEO            2004         $200,000
                                                                         2005         $200,000
    John T. Ottinger, Vice president, Secretary, Treasurer and COO       2004         $150,000
                                                                         2005         $150,000
</TABLE>

Their  services for 2004 and 2005 were included in the  administrative  services
agreement  with  Cornerstone  Capital  Advisors,  Inc.  Neither  we nor CCA have
employment agreements with them or any other employees.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

The  following  table  shows the  beneficial  ownership  of our common  stock on
December 31, 2005, for shares owned by:

(i)  each of our directors and executive officers,

(ii) each  shareowner we know to own  beneficially 5% or more of the outstanding
     shares of our common stock and

(iii) all directors and officers as a group.

We believe that the beneficial owners of the common stock listed below, based on
information  they  furnished,  have sole  investment and voting power over their
shares, subject to community property laws where applicable.
<TABLE>
<CAPTION>
Name and address of                     Number of Shares       Percentage of  Total Common
Beneficial Owner                        Beneficially Owned     Stock Beneficially Owned
----------------                        ------------------     ------------------------
<S>                                           <C>                       <C>
Cecil A. Brooks                               2,722                     *
10206 Big Canoe
Jasper, GA 30143

John T. Ottinger                              3,072                     *
6020 Providence Lane
Cumming, GA 30040

Ted Fox                                       6,083                     *
10575 Big Canoe
Jasper, GA 30143
</TABLE>


                                       25
<PAGE>
<TABLE>
<CAPTION>
<S>                                           <C>                       <C>
Irving B. Wicker                              6,962                     *
132 Eswick Drive
Prattville, AL 36067

Henry Darden                                  6,000                     *
614 Beverly Dr
Brandon, FL 33510

All directors and executive officers         24,839                    2.8%
as a group (5 Persons)
</TABLE>

* less than one percent.

Item 12. Certain Relationships and Related Transactions.

We caused Wellstone  Communities Inc. ("WCI") to be incorporated on November 20,
2002, for the purpose of its initially being a wholly-owned  subsidiary and then
for it to raise  capital  from the sale of  preferred  stock and to invest  that
capital in ways not  feasible  for us and in owning a bank.  In  December  2002,
January 2003 and October  2003,  we  purchased a total of 136,250  shares of WCI
common stock for  $1,362,500.  WCI used our  investment to purchase  three loans
from us in 2003 for a total of  $971,003,  which was the  principal  balance  on
those loans at the purchase  date.  WCI decided not to go forward with its plans
and on June 30, 2004, it was  dissolved.  Its assets were  distributed to us and
its common stock cancelled.

During 2001, we formed Wellstone  Financial Group, LLC ("WFG").  At formation we
issued  500  shares of our  Series A  Convertible  Preferred  Stock  (valued  at
$500,000)  to WFG  in  exchange  for a 100%  ownership  interest.  WFG  assisted
non-profit entities to secure financing from banks, bond underwriters, and other
sources for retirement,  childcare,  churches, and church-related facilities. It
received consulting fees for completed  financings.  WFG had no revenues in 2003
or 2004. It was not able to retain the type of specialized  employees  necessary
to develop its operations into a long-term profitable venture. Therefore, it was
dissolved on June 30, 2004 and the preferred stock it owned was cancelled.

On July 1, 2003,  we  entered  into a  management  and  administrative  services
agreement with Cornerstone Capital Advisors,  Inc. ("CCA") for it to provide our
administrative,   management  and  executive  services.  The  agreement  is  for
renewable  one-year  terms and may be  terminated  by either party upon 60 days'
written  notice.  We do not have any  employees of our own and CCA is subject to
the supervision of our board of directors. Our two officers, Cecil A. Brooks and
John T.  Ottinger,  are also  officers  and  directors  of  Cornerstone  Capital
Advisors,  Inc.  We paid  CCA  $1,865,605  under  this  agreement  in  2004  and
$2,596,428  in 2005.  See Note 3 of the  "Notes  to  Financial  Statements"  for
additional disclosures about our agreement with CCA.

In June 2004, we engaged  Cornerstone  Direct Public Offerings,  LLC ("CDPO") to
provide  legal and  administrative  services for our Series F SB-2  Registration
Statement  filing with the Securities and Exchange  Commission.  The service fee
was $75,000.  In January  2005,  we amended the agreement and paid an additional
$20,000 to CDPO due to an increase in the amount of time needed to register  the
securities with the various state securities regulators.  Also, in January 2004,
we amended our previous service agreement that we signed in 2003 relating to our
Series E SB-2 Registration  Statement and paid an additional $25,000 to CDPO for
cost  over-runs  related  to the  length  of time  needed  for our  registration
statement  to  become  effective.  Two of our  directors'  serve on the Board of
Directors of Cornerstone Direct Public Offerings' majority owner, Foundation for
Christian Communities Development, Inc.

In December 2005, our two largest borrowers sold eight senior housing properties
to  Wellstone  Retirement  Communities  I, LLC ("WRC")  which is managed by CCA,
which also serves as our manager.  Two of our directors  are also  directors for
CCA. As a result of this transaction,  we received  $63,190,168 in loan and bond
holdings  principal  and  we  immediately  supplied  subordinated  financing  of
$37,901,607  at 9.5%  interest  and a two year  maturity to WRC to purchase  the
property.  Approximately  $10,151,000  in equity was  contributed  by  unrelated
accredited  investors  with the  remaining  $64,077,000  needed to purchase  the
properties supplied by third-party first mortgage financing.

During 2005,  two loans were made to  wholly-owned  subsidiaries  of Cornerstone
Group Holdings,  Inc ("CGH"). At the time that these loans were originated,  two
of  our  directors  were  also   directors  of  CGH.   Subsequent  to  the  loan
originations,  both of our directors  resigned from the board of CGH.  These two

                                       26
<PAGE>

loans were made at similar  terms to that of our loans  with  independent  third
parties and were approved by all of our  independent  directors.  As of December
31, 2005, the principal outstanding on these two loans was $1,384,404.

All material affiliated transactions and loans are made or entered into on terms
that  are  no  less  favorable  to us  than  those  that  can be  obtained  from
unaffiliated third parties and must be approved by a majority of our independent
directors who do not have an interest in the  transactions  and who were offered
access, at our expense,  to our lawyer or independent  legal counsel.  We do not
make loans to our officers or directors.

Item 13. Exhibits and Reports on Form 8-K.

     (a) (Item 601 of Regulation S-B)

     Exhibit
     Number                                    Description
     ------                                    -----------

     1.1           Sales  Agency  Agreement  with  Wellstone  Securities,   LLC.
                   (Incorporated  by reference  from Exhibit 1.1 of the Issuer's
                   Registration  Statement on Form SB-2, No.  333-118613,  filed
                   August 27, 2004.)

     1.3           Bond  Purchase  Agreement  (Incorporated  by  reference  from
                   Exhibit 1.2 of the  Issuer's  Registration  Statement on Form
                   SB-2, No. 333-118613, filed August 27, 2004.)

     1.4           Common Stock Purchase  Agreement  (Incorporated  by reference
                   from  Exhibit 1.3 of the Issuer's  Registration  Statement on
                   Form SB-2, No. 333-118613, filed August 27, 2004.)

     3.1           Amended and Restated Articles of Incorporation  (Incorporated
                   by reference  from  Exhibit 3.1 of the Issuer's  Registration
                   Statement  on Form SB-2,  No.  333-118613,  filed  August 27,
                   2004.)

     3.2           Amended and Restated  By-laws of the issuer  (Incorporated by
                   reference from Exhibit 3.2 of Issuer's Registration Statement
                   on Form SB-2, No. 333-118613, filed August 27, 2004.)

     4.1           Article III.A.,  page 1 of the Amended and Restated  Articles
                   of Incorporation  and Article III of the Amended and Restated
                   By-laws (Reference is made to Exhibits 3.1 and 3.2.)

     4.2           Form of Graduated Rate Bonds  (Incorporated by reference from
                   Exhibit 4.3 of the  Issuer's  Registration  Statement on Form
                   SB-2, No. 333-118613, filed August 27, 2004.)

     4.3           Form of five-year term Bonds  (Incorporated by reference from
                   Exhibit 4.3 of the  Issuer's  Registration  Statement on Form
                   SB-2, No. 333-118613, filed August 27, 2004.)

     4.4           Trust   Indenture  for  Series  B  and  C   Certificates   of
                   Indebtedness  (Incorporated  by reference from Exhibit 4.4 of
                   Issuer's Registration  Statement on Form SB-2, No. 333-93475,
                   filed January 14, 2000.)

     4.5           Trust  Indenture  dated  June  14,  2002   (Incorporated   by
                   reference  from  Exhibit  4.8  of the  Issuer's  Registration
                   Statement on Form SB-2, No. 333-91564, filed June 28, 2002.)

     4.6           Trust  Indenture  dated  April  29,  2003   (Incorporated  by
                   reference  from  Exhibit  4.6  of the  Issuer's  Registration
                   Statement  on Form  SB-2,  No.  333-104810,  filed  April 29,
                   2003.)

     21            Subsidiaries of the Issuer - the Issuer has no  subsidiaries;
                   therefore, no exhibit is attached.

     24            Power of Attorney (included in the Signatures section of this
                   report)

     99.1          Certifications  pursuant to Section 906 of the Sarbanes-Oxley
                   Act of 2002

     99.2          Code of Ethics

     (b) On November 15, 2005 the registrant filed Form 8-K, No.  001-32165,  to
     report a change in the registrant's certifying accountant.

Item 14.  Principal Accountant Fees and Services.

On November  2, 2005 the Board of  Directors  engaged  Berman  Hopkins  Wright &
LaHam, CPA's, LLP as the auditors of the financial statements for the year ended
December 31, 2005. Our previous independent  auditor,  Robert N. Clemons CPA, PA
was a sole  practitioner  who died  suddenly and  unexpectedly  on September 23,
2005, which necessitated the change.

No member of either firm mentioned above has a financial interest in Cornerstone
Ministries  Investments,  Inc. All of the services described below were approved
by our audit committee and the Board of Directors.

Audit Fees - fees for  services  rendered  in  connection  with the audit of our
annual financial statements,  the review of financial statements included in our

                                       27
<PAGE>

Form 10-QSB's and for services that are normally  provided by the  accountant in
connection  with statutory and  regulatory  filings were $52,571 and $66,648 for
the years ended December 31, 2005 and 2004, respectively.

Tax Fees - fees for tax services,  including  preparation of our tax returns and
tax-related matters were $3,440 and $3,126 for the years ended December 31, 2005
and 2004, respectively.

All Other Fees - fees for the preparation  and review of the financial  sections
of our Form SB-2 Registration  Statements were $0 and $5,969 for the years ended
December 31, 2005 and 2004, respectively.

All  hours  expended  on the  accountant's  engagement  to audit  our  financial
statements  were  attributed to work performed by Berman Hopkins Wright & LaHam,
CPA's, LLP and Robert N. Clemons CPA, PA's full-time, permanent employees.

                                   SIGNATURES

In  accordance  with Section  15(d) of the Exchange  Act, the Issuer caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

             CORNERSTONE MINISTRIES INVESTMENTS, INC. (Issuer)

             By  S/Cecil A. Brooks
                 ----------------------------------------        March 27, 2006
                 Cecil A. Brooks, Chief Executive Officer

Each person whose  signature  appears below  appoints  Cecil A. Brooks,  John T.
Ottinger,  or either of them,  his or her  attorney-in-fact,  with full power of
substitution and  resubstitution,  to sign any and all amendments to this report
on Form 10-KSB of Cornerstone  Ministries  Investments,  Inc., and to file them,
with all their  exhibits and other related  documents,  with the  Securities and
Exchange  Commission,  ratifying and confirming all that their  attorney-in-fact
and agent or his or her substitute or substitutes may lawfully do or cause to be
done by virtue of this  appointment.  In accordance  with the Exchange Act, this
report has been signed  below by the  following  persons on behalf of the Issuer
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
   Signature                                   Title                                       Date
   ---------                                   -----                                       ----
<S>                              <C>                                                 <C>
S/Cecil A. Brooks                Chief Executive Officer, President and              March 27, 2006
----------------------------     Chairman of the Board of Directors
   Cecil A. Brooks


S/John T. Ottinger               Vice President, Chief Operating Officer,            March 27, 2006
----------------------------     Chief Financial Officer, Secretary, Treasurer
   John T. Ottinger              and Director (principal accounting officer)



*S/Ted Fox                       Director                                            March 27, 2006
----------------------------
   Ted Fox


*S/Henry Darden                  Director                                            March 27, 2006
----------------------------
   Henry Darden


*S/Jack Wehmiller                Director                                            March 27, 2006
----------------------------
   Jack Wehmiller


*S/Irving B. Wicker              Director                                            March 27, 2006
----------------------------
   Irving B. Wicker


By: *S/Cecil A. Brooks,          attorney-in-fact                                    March 27, 2006
----------------------------
Cecil A. Brooks
</TABLE>

                                       28
<PAGE>

                                 CERTIFICATIONS

I, Cecil A. Brooks, certify that:

1. I have reviewed this annual report on Form 10-KSB of  Cornerstone  Ministries
Investments, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officers  and  I  am  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the  period  in which  this  annual  report  is being
     prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
     procedures  as of a date  within 90 days prior to the  filing  date of this
     annual report (the "Evaluation Date"); and

     c) presented in this annual report our conclusions  about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

     a) all  significant  deficiencies  in the design or  operation  of internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:  March 27, 2006               s/Cecil A. Brooks
                                    -------------------------
                                    Cecil A. Brooks, Chairman of the Board,
                                    President, Chief Executive Officer


I, John T. Ottinger, certify that:

1. I have reviewed this annual report on Form 10-KSB of  Cornerstone  Ministries
Investments, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officers  and  I  am  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the  period  in which  this  annual  report  is being
     prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
     procedures  as of a date  within 90 days prior to the  filing  date of this
     annual report (the "Evaluation Date"); and

     c) presented in this annual report our conclusions  about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

                                       29
<PAGE>

     a) all  significant  deficiencies  in the design or  operation  of internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 27, 2006         s/John T. Ottinger
                             ------------------------------
                             John T. Ottinger, Vice President, Chief Operating
                             Officer and Chief Financial Officer


           Supplemental Information to be Furnished With Reports Filed
       Pursuant to Section 15(d) of the Act by Registrants Which Have Not
             Registered Securities Pursuant to Section 12 of the Act

The report on Form 10-K is the only annual report sent or to be sent to security
holders covering the registrant's last fiscal year. No proxy soliciting material
has been sent or is to be  furnished  to security  holders  with  respect to any
annual or other meeting of security holders.


                                       30
<PAGE>

To The Board of Directors and Shareholders
Cornerstone Ministries Investments, Inc.

             Report of Independent Registered Public Accounting Firm

We have  audited  the  accompanying  balance  sheet  of  Cornerstone  Ministries
Investments,  Inc.,  as of  December  31,  2005 and the  related  statements  of
operations,  changes  in  shareholders'  equity and cash flows for the year then
ended.  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  audit.  The  financial   statements  of  Cornerstone
Ministries  Investments,  Inc. as of December  31, 2004 and 2003 were audited by
another  auditor  whose report dated March 17,  2005,  expressed an  unqualified
opinion on those statements.

We conducted  our audit 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 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,  and  evaluating the overall  financial  statement
presentation.  We believe  that our audit  provides a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  financial  position  of  Cornerstone  Ministries
Investments,  Inc.  as of December  31, 2005 and the results of its  operations,
changes  in  shareholders'  equity  and cash  flows for the year  then  ended in
conformity with accounting principles generally accepted in the United States of
America.



S/ Berman Hopkins Wright & Laham, CPAs, LLP
Winter Park, Florida
March 10, 2006

                                       F-1

<PAGE>

CORNERSTONE MINISTRIES INVESTMENTS, INC.
BALANCE SHEETS
December 31, 2005, 2004 and 2003
<TABLE>
<CAPTION>

                                                                                 (Consolidated-
                                                                                  See Note 17)
                                                       2005             2004          2003
                                                       ----             ----          ----
<S>                                                 <C>            <C>            <C>
ASSETS
Cash and cash equivalents                           $ 12,447,193   $ 15,162,659   $  4,389,851
Loan guarantee receivable                                     --         71,000             --
Loans in process                                         384,262         30,873        118,504
Real estate loans, net                               106,238,279     54,278,585     47,877,277
Real estate joint venture investments, net            14,865,860     56,408,014     34,846,223
Bond holdings and accrued interest                    14,315,771      4,013,733      4,001,333
Property and equipment, net                              762,135        812,221        873,101
Refundable income taxes                                       --             --         42,617
Deferred tax asset, net                                  143,837             --             --
Goodwill                                                 450,997        450,997        450,997
Unamortized debt issue costs                           2,748,855      2,671,340      1,772,631
Foreclosed real estate held for sale                     290,679             --             --
Real estate held for investment                          340,000        340,000        340,000
Other assets                                              72,220        168,513         15,813
                                                    ------------   ------------   ------------

TOTAL ASSETS                                        $153,060,088   $134,407,935   $ 94,728,347
                                                    ============   ============   ============


LIABILITIES
Investor certificates and accrued interest          $143,062,898   $120,603,157   $ 84,562,645
Mortgage participations and accrued interest           2,545,701      7,220,198      6,132,809
Accounts and other payables                              600,311        244,621        267,806
Common dividends payable                                 278,034        266,287        169,087
Loan guarantee obligations                               234,000        175,000             --
Building mortgages                                       578,309        602,369        180,194
Capital lease obligation                                   1,231          7,941         13,632
Deferred taxes payable                                        --         70,357        171,443
                                                    ------------   ------------   ------------

TOTAL LIABILITIES                                    147,300,484    129,189,930     91,497,616
                                                    ------------   ------------   ------------

SHAREHOLDERS' EQUITY
Series A Convertible Preferred Stock, no par
  value; 235,000 shares authorized, no
  shares issued and outstanding                               --             --             --
Common Stock, $0.01 par value; 10 million shares
  authorized; 891,914, 819,351 and 531,532 shares
  issued and outstanding                                   8,919          8,194          5,315
Paid in capital                                        5,570,992      5,118,568      3,297,435
Retained earnings                                        179,693         91,243          1,229
Treasury stock                                                --             --        (73,248)
                                                    ------------   ------------   ------------

TOTAL SHAREHOLDERS' EQUITY                             5,759,604      5,218,005      3,230,731
                                                    ------------   ------------   ------------

TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY                               $153,060,088   $134,407,935   $ 94,728,347
                                                    ============   ============   ============

</TABLE>

                                      F-2

<PAGE>

CORNERSTONE MINISTRIES INVESTMENTS, INC.
STATEMENTS OF OPERATIONS
For the years ended December 31, 2005, 2004 and 2003
<TABLE>
<CAPTION>

                                                                                 (Consolidated -
                                                                                  See Note 17)
                                                          2005           2004         2003
                                                          ----           ----         ----
<S>                                                    <C>           <C>           <C>
REVENUES
Real estate loan and joint venture interest and fees   $14,093,734   $12,668,299   $ 9,319,835
Loan participation and other income                      1,609,387       486,342     1,603,713
                                                       -----------   -----------   -----------
TOTAL REVENUES                                          15,703,121    13,154,641    10,923,548
                                                       -----------   -----------   -----------
EXPENSES
Investor interest expense                               11,638,145     9,263,934     7,246,202
Loan loss expense                                          100,000       257,000       375,000
Marketing expenses                                       1,082,967     1,004,511       630,508
Management and advisory fees                             1,445,264     1,205,069     1,013,730
Operating expenses                                         695,756       775,787     1,091,962
                                                       -----------   -----------   -----------
TOTAL EXPENSES                                          14,962,132    12,506,301    10,357,402
                                                       -----------   -----------   -----------
Income Before Provision For Income Taxes                   740,989       648,340       566,146
Income Tax Provision                                       163,362       136,973        87,266
                                                       -----------   -----------   -----------
NET INCOME                                             $   577,627   $   511,367   $   478,880
                                                       ===========   ===========   ===========
Basic and Diluted Earnings
 per Common Share                                      $      0.69   $      0.72   $      0.92
</TABLE>

                                      F-3
<PAGE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended December 31, 2005, 2004 and 2003

The  statement for the year ended  December 31, 2003 was part of a  consolidated
financial statement - see Note 17
<TABLE>
<CAPTION>
                                                                                             RETAINED
                                         COMMON STOCK:            PAID-IN     PREFERRED      EARNINGS     TREASURY         TOTAL
                                     SHARES        AMOUNT        CAPITAL       STOCK         (DEFICIT)      STOCK          EQUITY
                                  -----------   -----------    -----------   -----------   -----------   -----------    -----------
<S>                                   <C>       <C>            <C>           <C>           <C>           <C>            <C>
BALANCE, DECEMBER 31, 2002            530,947   $     5,309    $ 3,293,641   $        --   $  (139,479)  $        --    $ 3,159,471
Net income                            478,880       478,880
Common stock issued                       585             6          3,794                                                    3,800
Dividends declared                                                                            (338,172)                    (338,172)
Treasury stock acquired
  (11,269 shares)                                                                                            (73,248)       (73,248)
                                  -----------   -----------    -----------   -----------   -----------   -----------    -----------

BALANCE, DECEMBER 31, 2003            531,532   $     5,315    $ 3,297,435   $        --   $     1,229   $   (73,248)   $ 3,230,731
Net income                                                                                     511,367                      511,367
Common stock issued                   327,591         3,276      2,126,065                                                2,129,341
Common stock issuance costs paid                                   (46,811)                                                 (46,811)
Common stock redeemed                 (39,772)         (397)      (258,121)                                                (258,518)
Dividends declared                                                                            (421,353)                    (421,353)
Treasury stock sold
  (11,269 shares)                                                                                             73,248         73,248
                                  -----------   -----------    -----------   -----------   -----------   -----------    -----------

BALANCE, DECEMBER 31, 2004            819,351   $     8,194    $ 5,118,568   $        --   $    91,243   $        --    $ 5,218,005
Net income                                                                                     577,627                      577,627
Common stock issued                    95,962           959        622,797                                                  623,756
Common stock issuance costs paid                                   (18,514)                                                 (18,514)
Common stock redeemed                 (23,399)         (234)      (151,859)                                                (152,093)
Dividends declared                                                                            (489,177)                    (489,177)
                                  -----------   -----------    -----------   -----------   -----------   -----------    -----------
BALANCE, DECEMBER 31, 2005            891,914   $     8,919    $ 5,570,992   $        --   $   179,693   $        --    $ 5,759,604
                                  ===========   ===========    ===========   ===========   ===========   ===========    ===========
</TABLE>


                                      F-4
<PAGE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
STATEMENTS OF CASH FLOWS
For the years ended December 31, 2005, 2004 and 2003
<TABLE>
<CAPTION>
                                                                                                 (Consolidated-
                                                                                                  See Note 17)
                                                                     2005             2004            2003
                                                                     ----             ----            ----
<S>                                                              <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                       $    577,627    $    511,367    $    478,880
Adjustments to reconcile net income to cash
 from operations-
Depreciation and amortization                                       1,033,860         889,723         567,619
Loss from sale of property and equipment                                   --           2,534              --
Changes in-
Loans in process                                                     (353,389)         87,631         240,516
Accrued bond interest, net                                           (159,317)        (12,400)        (50,921)
Bond holdings principal discount amortization                          (2,241)             --              --
Accrued real estate loan/joint venture
  interest and deferred loan                                       (1,371,084)     (3,495,448)     (1,505,568)
Allowance for loan losses                                             100,000         257,000         375,000
Deferred taxes                                                       (214,194)       (101,086)        445,676
Refundable income taxes                                                    --          42,617         (42,617)
Investor and mortgage participation interest payable                5,090,277       3,956,610       2,613,748
Loan guarantee obligation, net of related receivables                 130,000         104,000              --
Accounts and other payables                                           355,690         (23,185)        (14,314)
Other assets                                                           96,293        (152,700)         22,375
                                                                 ------------    ------------    ------------

NET CASH PROVIDED BY OPERATIONS                                     5,283,522       2,066,663       3,130,394
                                                                 ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate loans made                                            (53,699,489)    (14,682,118)    (16,377,539)
Real estate loan principal payments received                       36,950,082       9,201,063       8,166,950
Real estate joint venture investments made                         (6,575,910)    (31,367,707)    (14,180,666)
Real estate joint venture investment
  principal payments received                                      13,892,309      12,124,111       5,553,021
Bonds purchased                                                   (12,683,580)             --      (2,500,000)
Bonds redeemed or sold                                              2,543,100              --       1,283,750
Property and equipment purchased                                      (13,157)         (9,915)       (591,749)
Proceeds from sale of property and equipment                               --           1,400              --
Foreclosed real estate additions                                       (4,127)             --              --
                                                                 ------------    ------------    ------------

NET CASH USED BY INVESTING ACTIVITIES                             (19,590,772)    (24,733,166)    (18,646,233)
                                                                 ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Investor certificates sold                                         20,100,246      36,748,967      18,444,677
Investor certificates redeemed                                     (2,767,779)     (4,655,926)     (4,208,816)
Mortgage participation agreements sold                              2,375,000       1,078,250       5,868,463
Mortgage participation agreements redeemed                         (7,012,500)             --              --
Debt issue costs paid                                              (1,048,132)     (1,721,571)     (1,278,850)
Building mortgage proceeds                                                 --         440,000              --
Building mortgage principal payments                                  (24,060)        (17,825)         (9,032)
Capital lease principal payments                                       (6,710)         (5,691)         (4,078)
Common stock issued, net of issuance costs                            605,242       2,082,530           3,800
Common stock redeemed                                                (152,093)       (258,518)             --
Dividends paid                                                       (477,430)       (324,153)       (337,725)
Treasury stock sold (acquired)                                             --          73,248         (73,248)
                                                                 ------------    ------------    ------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                          11,591,784      33,439,311      18,405,191
                                                                 ------------    ------------    ------------

Net change in cash and cash equivalents                            (2,715,466)     10,772,808       2,889,352
Cash and cash equivalents at beginning of period                   15,162,659       4,389,851       1,500,499
                                                                 ------------    ------------    ------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                       $ 12,447,193    $ 15,162,659    $  4,389,851
                                                                 ============    ============    ============

Supplemental Information-
  Interest paid during the period                                $  6,595,549    $  5,333,638    $  4,643,972
  Income taxes paid during the period                            $    105,000    $    182,500    $         --
Non-cash transactions-
  Fixed asset lease financing                                    $         --    $         --    $     17,710
  Investor certificates matured and re-invested                  $    151,412    $  3,309,314    $  3,800,364
  Loan interest financed and included in loan principal          $    966,250    $  1,498,830    $    797,589
</TABLE>

SEE ACCOMPANYING NOTES

                                      F-5
<PAGE>

                    CORNERSTONE MINISTRIES INVESTMENTS, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The  accompanying  financial  statements  include the  accounts  of  Cornerstone
Ministries  Investments,   Inc.  ("the  Company").   Previously,  the  Company's
financial  statements  included the accounts of two  wholly-owned  subsidiaries,
Wellstone  Communities,  Inc. and Wellstone  Financial Group, LLC. In June 2004,
the Company dissolved both subsidiaries. See Note 17 for additional disclosures.

The Company originates and purchases mortgage loans,  substantially all of which
are made to  non-profit  organizations.  The  Company  offers  specialized  loan
programs for churches,  non-profit  sponsors of senior  housing  facilities  and
either   non-profit  or  for-profit   sponsors  of   affordable/low   income  or
age-restricted  housing projects.  The Company also invests in other real estate
projects for the purpose of selling at a profit,  or leasing.  Substantially all
of  the  Company's  loans  and  investments  are  in  projects  located  in  the
Southeastern United States.

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

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

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

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

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

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

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

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

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

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

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

The Company normally  provides all or substantially all of the funding (directly
or  through  loan  guarantees)  for the  acquisition  and  development  of these
facilities,  which are owned by non-profit entities. The Company participates in
residual profits through loan participation agreements, which enable the Company

                                      F-6
<PAGE>

to receive  income  from the  borrower  when the  property  in which the Company
provided  financing is sold or refinanced with another lender. The participation
is between 25% and 33% of the  borrower's  gain.  Loan  participation  income is
recognized  when the borrower's sale or refinancing is completed and the Company
receives cash from the borrower.

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

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

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

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

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

Bond holdings consist of tax-free local government  securities and church bonds.
The Company accounts for these investments  using SFAS No. 115,  "Accounting for
Certain Investments in Debt and Equity Securities",  and classifies the bonds as
"available for sale" securities. The bonds are initially recorded at cost and if
the bonds are  purchased  for a discount  or premium  from their par value,  the
discount or premium is amortized to income over the bond's  remaining life as an

                                      F-7
<PAGE>

adjustment  to the bond's  yield.  The bonds are also  adjusted  for  unrealized
holding  gains and losses.  Temporary  unrealized  holding  gains and losses are
reported, net of deferred taxes, as a separate component of shareholder's equity
until  realized.  If an  unrealized  holding  loss is  judged  to be other  than
temporary,  the cost basis of the  security  is  written  down to fair value and
included  in  earnings  and the  amortization  of the  premium  or  discount  is
suspended.

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

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

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

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

The  Company  is  guarantor  on certain  loans  secured  by senior  housing  and
affordable  apartment  facilities which are owned by non-profit entities. A loan
guarantee  obligation is recognized based on the loan guarantees  estimated fair
value.  The  Company  normally  charges the loan  guarantee's  fair value to the
respective  borrower  as  compensation  for the  Company's  risk and  payment is
expected  within 30 days of the guarantee's  origination or  modification  date.
Unpaid  amounts  are  classified  as  "Loan   guarantee   receivables"   in  the
accompanying  balance sheets.  If the loan guarantee's fair value is not charged
to the respective  borrower,  deferred loan fees related to the borrower's  loan
with the Company are reduced by the guarantee's fair value. The reduced deferred
loan fees are  amortized to earnings over the life of the loan.  Loan  guarantee
obligations are analyzed at the end of each fiscal year and if the fair value of
the loan  guarantee  has  declined,  the carrying  amount of the  obligation  is
reduced and credited to earnings.

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

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

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

                                      F-8
<PAGE>

New Accounting Pronouncements:

In December  2004,  the FASB issued SFAS No.  123R,  Share-Based  Payment  (SFAS
123R).   This  standard   amends  SFAS  No.  123,   Accounting  for  Stock-Based
Compensation,  and supercedes APB Opinion No. 25, Accounting for Stock Issued to
Employees,  and its related implementation  guidance.  SFAS 123R establishes the
accounting for grants of stock options and other transactions in which an entity
exchanges its equity instruments for goods or services.  SFAS 123R requires that
companies  use a fair value  method to value  stock  options and  recognize  the
related  compensation  expense in net earnings.  The provisions of SFAS 123R are
effective for the first  reporting  period  beginning  after  December 15, 2005,
although  earlier  application  is  encouraged.  The  Company  does not have any
share-based payment obligations and does not expect this pronouncement to have a
material effect on our financial position or results of operations.

In May 2005,  the FASB issued SFAS No.  154,  "Accounting  for Changes and Error
Corrections" (SFAS 154), which replaces APB Opinion No. 20 "Accounting Changes",
and SFAS No. 3, "Reporting Accounting Changes in Interim Financial  Statements",
and changes the requirements for the accounting for and reporting of a change in
accounting  principle.  Opinion No. 20 previously  required that most  voluntary
changes in accounting  principle be recognized by including in net income of the
period of the change the  cumulative  effect of changing  to the new  accounting
principle. SFAS 154 requires that the new accounting principle be applied to the
balances of assets and  liabilities  as of the beginning of the earliest  period
for which  retrospective  application  is practicable  and that a  corresponding
adjustment be made to the opening  balance of retained  earnings for that period
rather than being  reported in the income  statement.  SFAS 154 is effective for
accounting  changes and  corrections  of errors made in fiscal  years  beginning
after  December  15,  2005.  The  adoption of SFAS 154 is not expected to have a
material impact on the Company's financial position or results of operations.

Recently,  the  FASB has been  very  active,  issuing  a  number  of  accounting
pronouncements  with various effective dates. These  pronouncements,  which were
not discussed above, do not have a material effect on our financial statements.

NOTE 2 - PROPERTY AND EQUIPMENT
At December 31, property and equipment is composed of:

                                      2005           2004            2003
                                    --------       --------        --------
Office Condominiums                 $797,554       $795,034        $792,659
Office Computers, Furnishings,
   Software & Equipment              129,625        111,215         120,477
Vehicles                              30,351         30,351          37,730
Capital lease - phone system          17,710         17,710          17,710
Less: Accumulated Depreciation      (213,105)      (142,089)        (95,475)
                                    --------       --------        --------
Property and equipment, net         $762,135       $812,221        $873,101

Depreciation expense                 $63,242       $ 66,861        $ 56,695

NOTE 3 - COMMITMENTS AND RELATED PARTY TRANSACTIONS

Leases:

During 2003, the Company entered into a capital lease for a new telephone system
at the Company's headquarters.  The lease was recorded at the asset's fair value
and is being amortized over three years using the straight-line method. Interest
expense is calculated based on the implied interest rate in the lease. The lease
payment,  including  principal,  interest  and  sales  tax,  is $672 per  month.
Amortization  expense was  $5,903,  $5,903 and $4,919 and  interest  expense was
$821,  $1,839 and $2,198 for the years ended  December 31, 2005,  2004 and 2003,
respectively. Future yearly minimum lease payments as of December 31, 2005:

Year                                Amount
----                                ------
2006                                $1,256
Less interest portion                  (25)
                                    ------
Capital lease obligation            $1,231


                                      F-9
<PAGE>

Loan Commitments:

The Company makes loan  commitments in connection with certain real estate loans
and joint  venture  investments  that include  funding for project  development,
building construction,  renovations,  lease-up operations, financed interest and
other  amounts  that the  borrower  may draw  upon in  accordance  with the loan
agreement.  For existing loans, the Company has $39,858,000 in approved,  unused
loan  commitments  for real estate  loans and  $1,613,000  for real estate joint
venture  investments  as of December  31,  2005.  The  Company  also has two new
approved  real estate loan  commitments  totaling  $5,150,000 as of December 31,
2005 which the Company expects to fund in the first quarter of 2006.

Related Party Transactions:

Cornerstone  Capital Advisors,  Inc. - Management and Advisory Service Agreement
Effective  July 1, 2003,  the Company  entered  into a  Management  and Advisory
Services  Agreement with Cornerstone  Capital Advisors,  Inc. ("CCA") to provide
loan management,  administration, and accounting; investor relations; marketing;
computer and management information systems administration;  record maintenance;
executive  management;  and bookkeeping and accounting  after June 30, 2003. The
agreement is for  renewable  one year terms and it may be  terminated  by either
party upon 60 days' written  notice.  The Company does not have any employees of
its own  and  CCA is  subject  to the  supervision  of the  Company's  board  of
directors. Two of the Company's directors serve on the CCA board of directors.

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

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

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

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

For the years ended December 31, the Company paid CCA as follows:

                                      2005            2004          2003
                                   ----------     ----------      --------
Management Fees                    $1,445,264     $1,290,880      $318,619
Loan Origination Fees               1,152,164        574,725           -0-
Incentive Compensation Fees               -0-            -0-        23,440
                                   ----------     ----------      --------
                                   $2,596,428     $1,865,605      $342,059

As of December 31, 2005,  2004 and 2003,  the Company owed CCA $73,365,  $7,464,
and $93, respectively under the terms of this agreement.

Cornerstone Capital Advisors, Inc. - Office Lease

Effective  August 1, 2004,  the Company and CCA entered  into a lease  agreement
whereby  CCA  is  leasing  the   Company's   corporate   office   building   and
office/computer equipment in Cumming, GA. The lease payment is $5,000 per month.
The  initial  lease term ended on August 31,  2005,  after  which time the lease
converted to a  month-to-month  lease.  The  Company's  cost basis in the office
building and office/computer  equipment is approximately $616,000. For the years
ended  December  31, 2005 and 2004,  the Company  received  $60,000 and $25,000,
respectively from CCA under the lease agreement.

                                      F-10
<PAGE>
Cornerstone Direct Public Offerings, LLC

The Company  has  contracted  with  Cornerstone  Direct  Public  Offerings,  LLC
("CDPO") to provide legal and other services for the filing of SB-2 Registration
Statements  with the  Securities and Exchange  Commission.  Two of the Company's
directors serve on the board of directors of CDPO's  majority owner,  Foundation
for Christian Communities Development,  Inc. The base service fee is $75,000 per
filing payable in installments during the filing process. For future filings the
Company  intends  to  use  CDPO  only  for  the  state  filing  portion  of  its
registrations,  which will reduce  CDPO's  service fee. The fee schedule has not
been  finalized as of December 31, 2005.  During 2003, the Company and Wellstone
Communities, Inc. (a formerly 100%-owned subsidiary) each entered into a service
agreement with CDPO for the filing of SB-2 Registration Statements. The $150,000
fee for these two  agreements  was paid in 2003. In January,  2004,  the Company
amended its service  agreement and paid an  additional  $25,000 to CDPO for cost
over-runs  related to the length of time needed for the  Company's  registration
statement to become effective.

In 2004, the Company  entered into a service  agreement with CDPO for the filing
of a new SB-2  Registration  Statement.  $75,000  was paid to CDPO in 2004 under
this service  agreement.  In January 2005, the Company amended the agreement and
paid $20,000 to CDPO due to an increase in the amount of time needed to register
the securities with various state securities regulators. No amounts were owed to
CDPO as of  December  31,  2005,  2004  and  2003.  See  Note 12 for  additional
disclosures on the Company's registration  statements and Note 17 for additional
disclosures on Wellstone Communities, Inc.'s registration statement.

Loans made to subsidiaries of Cornerstone Group Holdings, Inc.

During 2005,  two loans were made to wholly owned  subsidiaries  of  Cornerstone
Group Holdings,  Inc ("CGH"). At the time that these loans were originated,  two
of the Company's directors served as directors of CGH. Subsequent to the time of
the loan originations,  both of the Company's  directors resigned from the board
of CGH.  The two  loans  were  made at  similar  terms to that of the  Company's
third-party  loans. As of December 31, 2005, the principal  outstanding on these
two loans was $1,384,404.

Wellstone Retirement Communities I, LLC

In December 2005, the Company's two largest  borrowers sold eight senior housing
properties to Wellstone  Retirement  Communities I, LLC ("WRC") which is managed
by  Cornerstone  Capital  Advisors,  Inc.  ("CCA"),  which  also  serves  as the
Company's manager.  Also, two of the Company's  directors are directors for CCA.
As a result  of this  transaction,  the  Company  received  $60,677,668  in loan
principal and  $2,512,500 in bond holdings  principal.  The Company  immediately
supplied  subordinated  financing of $37,901,607 at 9.5% interest and a two year
maturity to WRC to purchase the property.  This loan is included in "Real estate
loans, net" on the accompanying  December 31, 2005 Balance Sheet.  Approximately
$10,151,000 in equity has also been contributed to WRC by independent accredited
investors  with the  remaining  $64,077,000  needed to purchase  the  properties
supplied  by  third  party  financing  as a  first  mortgage  on the  properties
purchased.

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

NOTE 4 - REAL ESTATE LOANS
At December 31, the Company had Real Estate Loans outstanding as follows:
<TABLE>
<CAPTION>

                                              2005             2004              2003
                                              ----             ----              ----
<S>                                       <C>               <C>              <C>
   Family housing development loans       $ 60,255,260      $36,007,454      $25,013,068
   Church mortgage loans                     8,971,537        9,285,858        13,526,02
   Senior housing mortgage loans            38,901,607        9,286,352        9,794,001
                                          ------------      -----------      -----------
      Total principal                      108,128,404       54,579,664       48,333,097
      Accrued Interest                         856,363          479,961          255,994
      Unearned Loan Fees                    (2,014,488)        (149,040)        (336,814)
      Allowance for loan losses               (732,000)        (632,000)        (375,000)
                                          ------------      -----------      -----------
      Total Real Estate Loans             $106,238,279      $54,278,585      $47,877,277
</TABLE>


                                      F-11
<PAGE>

These loans mature as follow: 2006 - $33,015,484; 2007 - $74,523,104; 2008 - $0;
2009 -  $589,816;  2010 and beyond - $0. Loan  maturity  may be  accelerated  in
accordance  with loan terms,  generally  upon certain  events of default such as
non-payment of scheduled payments or bankruptcy.

In 2005,  the Company  originated a loan with a  for-profit  entity that did not
have enough equity or subordinated debt to absorb all of its estimated  expected
losses. The Company is not considered the primary beneficiary since the entity's
equity  and  subordinated  debt is  sufficient  to absorb  the  majority  of its
estimated  expected losses.  The loan's carrying amount on December 31, 2005 was
$178,367.

Based on the terms of the loans, the Company allows borrowers with loans related
to certain family  housing and church  properties to finance  interest  payments
while  the  properties  are  in  the  development  and  construction   phase  of
operations.  For the years ended December 31, the net interest payments financed
were:
<TABLE>
<CAPTION>
                                                       2005         2004             2003
                                                       ----         ----             ----
<S>                                                <C>           <C>              <C>
Current year interest financed                     $1,398,731    $1,158,109       $805,525
Previous years' financed interest received           (798,079)     (119,874)      (457,021)
                                                   ----------    ----------       --------
Net financed interest                                $600,652    $1,038,235       $348,504
</TABLE>

On December 31, 2005, the Company had significant credit risk  concentrations in
the following states:

Georgia - $ 27,516,418
Florida - $ 15,213,215
Texas   - $ 42,396,129
South Carolina - $15,602,977

Impaired loan disclosures for the years ended December 31:
<TABLE>
<CAPTION>
                                                      2005       2004            2003
                                                      ----       ----            ----
<S>                                               <C>           <C>            <C>
Number of impaired loans                               4           1               1
Carrying amount at year end                       $3,854,226    $263,291       $242,621
Weighted average investment - year-to-date        $3,746,612    $252,956       $237,130
Impaired loan interest income                     $  357,959    $ 24,312       $ 19,166
</TABLE>

No  allowance  for specific  impaired  loan loss has been  recorded  because the
carrying  amount of the individual  impaired loans as of December 31, 2005, 2004
and 2003 was less than the present value of their expected future cash flows.

In December 2005, the Company  foreclosed on a church loan and  repossessed  the
land and  building  that  collateralized  the  loan.  The  foreclosed  asset was
recorded at the loan's  carrying  amount of $290,679  because the estimated fair
value of the  foreclosed  asset is  greater  than the  loan's  carrying  amount.
Therefore,  no loan loss expense was  recorded as a result of this  transaction.
The foreclosed asset is being held for sale by the Company.

NOTE 5 - REAL ESTATE JOINT VENTURE INVESTMENTS

As of December 31,  certain of the Company's  mortgage  loans on senior  housing
facilities are classified as real estate joint venture investments, as follows:

Location                           2005                2004           2003
--------                           ----                ----           ----
McKinney, TX                    $      -0-          $4,050,291     $3,109,337
St. Petersburg, FL               5,085,334           4,582,344      3,684,620
Lewisville, TX                     545,000          10,617,954     10,286,004
Garland, TX                            -0-           6,421,006      5,905,556
Chattanooga, TN                  5,715,991           5,438,254      3,637,623
San Antonio, TX                  2,197,781          11,931,167      9,109,573


                                      F-12
<PAGE>

Winter Haven, FL                       -0-           5,942,402            -0-
Bryan, TX                              -0-           2,616,317            -0-
Edmond, OK                         881,849           5,346,201            -0-
                               -----------         -----------    -----------
Total principal outstanding     14,425,955          56,945,936     35,732,713
Accrued interest                   446,971             329,195        301,565
Unearned loan fees                  (7,066)           (867,117)         (1,18)
Allowance for loan losses              -0-                 -0-            -0-
                               -----------         -----------    -----------
Real estate joint venture
  investments, net             $14,865,860         $56,408,014    $34,846,223


All of the loans mature in 2006.  Loan maturity may be accelerated in accordance
with loan terms, generally upon certain events of default such as non-payment of
scheduled payments or bankruptcy.

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

In 2005, the Company received $257,000 in loan participation income and $567,970
in loan  break-up  fees  from two  borrowers  as a result  of the sale of senior
housing  facilities  in  which  the  Company  held  real  estate  joint  venture
investments.

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

In accordance with loan terms,  the Company allows certain  borrowers to finance
interest  payments while their  facilities are in the construction or renovation
phase of operations.  For the years ended December 31, the net interest payments
financed were as follows:

                                                 2005         2004       2003
                                                 ----         ----       ----
Current year interest financed                 $500,584    $520,335    $449,085
Previous years' financed interest received     (134,986)    (59,740)        -0-
                                               --------    --------    --------
Net financed interest                          $365,598    $460,595    $449,085


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

One real estate joint  venture  investment  loan was  considered  impaired as of
December 31 2005. The impaired  loan's  carrying  amount as of December 31, 2005
and its  average  carrying  amount  for  2005  was  $6,084,377  and  $5,784,147,
respectively. A total of $565,438 in interest was earned in 2005 from this loan.
The loan's  collateral  is  appraised  at  $7,400,000;  therefore,  no loan loss
allowance has been established. No loans were considered impaired as of December
31, 2004 and 2003.

                                      F-13
<PAGE>
NOTE 6 - ALLOWANCE FOR LOAN LOSSES

For the years ended  December 31,  2005,  2004 and 2003, a summary of changes in
the allowance for loan losses by loan type is as follows:
<TABLE>
<CAPTION>
                                                                              Real Estate
                                                Family           Senior      Joint Venture
                                  Church        Housing          Housing      Investments      Total
                                  ------        -------          -------      -----------      -----
<S>                             <C>           <C>              <C>            <C>           <C>
Balance - 12/31/02              $      -0-    $      -0-       $      -0-     $      -0-    $      -0-
Loan loss expense                      -0-       375,000              -0-            -0-       375,000
Charge-offs                            -0-           -0-              -0-            -0-           -0-
Recoveries                             -0-           -0-              -0-            -0-           -0-
                                ----------    ----------       ----------     ----------    ----------
Balance - 12/31/03              $      -0-    $  375,000       $      -0-     $      -0-    $  375,000
Loan loss expense                      -0-       257,000              -0-            -0-       257,000
Charge-offs                            -0-           -0-              -0-            -0-           -0-
Recoveries                             -0-           -0-              -0-            -0-           -0-
                                ----------    ----------       ----------     ----------    ----------
Balance - 12/31/04                     -0-    $  632,000              -0-            -0-    $  632,000
Loan loss expense                      -0-       100,000              -0-            -0-       100,000
Charge-offs                            -0-           -0-              -0-            -0-           -0-
Recoveries                             -0-           -0-              -0-            -0-           -0-
                                ----------    ----------       ----------     ----------    ----------
Balance - 12/31/2005            $      -0-    $  732,000       $      -0-     $      -0-    $  732,000
</TABLE>

Components of allowance for loan losses at December 31:

                                         2005           2004             2003
                                         ----           ----             ----
Collective loan losses-
  Historical experience                $    -0-       $    -0-       $    -0-
  Current credit risk assessment        732,000        632,000        375,000
                                       --------       --------       --------
  Total collective loan losses          732,000        632,000        375,000
Specific impaired loan losses               -0-            -0-            -0-
                                       --------       --------       --------
Total allowance for loan losses        $732,000       $632,000       $375,000


Prior to 2003,  the  Company had no  allowance  for loan loss  activity.  In the
fourth  quarter of 2003, as part of the Company's  regular loan grading and risk
assessment  process,  it was determined that the family housing loan portfolio's
credit risk had increased over  historical  levels.  This increase was caused by
slower than expected new home sales.  The slow down in new home sales was due to
slower-than-expected  growth in the U.S.  economy.  This increase in credit risk
resulted in a $375,000  charge to loan loss expense in 2003.  For the year ended
December  31,  2004,  the Company  charged an  additional  $257,000 to loan loss
expense.  This  charge  is  due  to an  increase  in  the  family  housing  loan
portfolio's  outstanding  loan  principal,  slower than  expected new home sales
volumes at two  projects,  and an  increase  in the time that it has taken three
projects to finish the development  phase and start selling homes.  For the year
ended December 31, 2005, $100,000 was charged to loan loss expense.  This charge
was due to an increase in the principal outstanding on Family Housing loans.

The Company has never incurred a loan loss  charge-off;  therefore,  there is no
collective loan loss allowance related to the Company's historical experience.

NOTE 7 - GOODWILL

The Company adopted SFAS 142 "Goodwill and Other  Intangible  Assets"  effective
January  1,  2002.  Goodwill  associated  with  the  Company's   acquisition  of
Presbyterian  Investor's Fund, Inc. is carried at $450,997 and is not subject to
further amortization.  Goodwill is tested for impairment at the end of each year
using the present  value of expected  future  cash flows to  determine  its fair
value. At December 31, 2005,  2004 and 2003,  Goodwill's fair value exceeded its
carrying value;  therefore,  no provision for impairment loss has been recorded.
No  goodwill  was  acquired  or  sold in any of the  years  presented  in  these
financial statements.

NOTE 8 - UNAMORTIZED DEBT ISSUE COSTS

Unamortized  debt issue costs  consist of legal,  accounting,  and filing  costs
incurred to register the  Company's  debt  securities  and  commissions  paid or
accrued  on the  sale  of  debt  securities.  These  costs  are  amortized  on a
straight-line  basis over the period the associated  securities are outstanding,
generally five years. At December 31, 2005, unamortized debt issue costs consist
of:

Costs incurred to register debt securities           $   843,075
Commissions paid on the sale of debt securities        4,752,125
Less: Accumulated Amortization                       (2,846,345)
                                                     ----------
                                                     $2,748,855


                                      F-14
<PAGE>

Amortization  expense was $970,617,  $822,862,  and $510,924 for the years ended
December 31,  2005,  2004 and 2003,  respectively,  and is included in marketing
expenses in the accompanying  Statements of Operations.  Estimated  amortization
expense for the next five years:

2006 - $994,535            2009 - $344,275
2007 - $807,366            2010 - $ 81,756
2008 - $520,923

NOTE 9 - BOND HOLDINGS
<TABLE>
<CAPTION>
Bond holdings at year-end consist of-                 2005              2004                 2003
                                                      ----              ----                 ----
<S>                                                <C>               <C>                 <C>
St. Lucie Co., FL Subordinated Revenue Bonds:
    Maturity   7/1/2036                           $       -0-        $2,325,000          $2,325,000
    Maturity 10/1/2036                                    -0-         2,700,000           2,700,000
Undivided 50% interest sold to investor                   -0-        (2,512,500)         (2,512,500)
                                                  -----------        ----------          ----------
Net investment in St.Lucie Co., FL bonds                  -0-         2,512,500           2,512,500
                                                  -----------        ----------          ----------
Largo, FL Subordinated Revenue bonds:
    Matures 10/1/2033                              13,170,000         2,500,000           2,500,000
Undivided interest sold to investors               (1,195,600)       (1,225,000)         (1,225,000)
                                                  -----------        ----------          ----------
Net investment in Largo, FL bonds                  11,974,400         1,275,000           1,275,000
                                                  -----------        ----------          ----------
Local Church Bonds, maturing 2013                   1,955,821               -0-                 -0-
                                                  -----------        ----------          ----------
Cost and fair value of bond holdings               13,930,221         3,787,500           3,787,500
Accrued interest receivable                           385,550           226,233             213,833
                                                  -----------        ----------          ----------
                                                  $14,315,771        $4,013,733          $4,001,333
</TABLE>


The bonds are not traded on an exchange; however, management estimates, based on
discounted expected cash flows, that the fair value of the individual securities
approximates  their original cost.  Accordingly,  no unrealized holding gains or
losses have been recorded in 2005, 2004, or 2003.

The  local  church  bonds  are  recorded  net of  $58,179  in  unamortized  bond
discounts.  The face amount of the bonds is $2,014,000.  During 2005,  $2,241 in
bond discounts was credited to interest income.

Proceeds from the sale and maturity of bonds were $2,543,100, $0, and $1,283,750
for the years ending December 31, 2005, 2004 and 2003, respectively. No realized
gains or losses  were  recognized  in any year.  The Company  uses the  specific
identification method to determine realized gains and losses.

Tax-free  interest  income was  $347,583,  $329,622,  and $274,095 for the years
ended December 31, 2005, 2004 and 2003, respectively.

NOTE 10 - INCOME TAXES

The net  deferred  tax asset  (liability)  in the  accompanying  balance  sheets
includes the following components as of December 31:

                                           2005           2004           2003
                                           ----           ----           ----
Deferred tax assets                      $345,658       $296,110       $196,917
Deferred tax liabilities                 (201,821)      (366,467)      (368,360)
                                         --------       --------       --------
Net deferred tax asset (liability)       $143,837       ($70,357)     ($171,443)

The deferred tax  liabilities  result from the use of  accelerated  depreciation
methods for property and equipment and from using the installment method for tax
accounting.  The deferred tax assets result from tax versus financial  reporting
differences in accounting for allowance for loan losses and from  differences in
the  amortization of debt issue and start-up costs.  The Company  estimates that
future  taxable  income will be  sufficient  to realize the deferred tax assets;
therefore,  no  valuation  allowance  was  provided for as of December 31, 2005,
2004, and 2003.

During 2003, the Company's request with the Department of the Treasury to change
its tax accounting  method for loan fees to approximate its book treatment under
SFAS Nos. 65 and 91 was  approved.  As a result of this change,  the Company was
able to amend and request  refunds  from its 2000 and 2001 federal and state tax
returns  totaling  $286,953.  $244,336 of the requested  refunds was received in
2003 and the remaining  $42,617 was received in 2004.  In addition,  the amended

                                      F-15
<PAGE>

tax returns created a $481,154  federal net operating loss  carryforward  and an
$82,025 state net operating  loss  carryforward  that the Company used to reduce
its 2003 income tax liability.  Components of the Company's income tax provision
(benefit) for the years ended December 31:

                               2005            2004              2003
                               ----            ----              ----
     Current:   Federal      $328,478        $203,501        ($332,464)
                State          49,078          34,558          (25,946)
     Deferred:  Federal      (192,989)        (91,183)         404,711
                State         (21,205)         (9,903)          40,965
                             --------        --------         --------
                             $163,362        $136,973         $ 87,266


Reconciliation of the Company's income tax provision (benefit) rate to statutory
federal rates for the years ended December 31:

                                                2005       2004      2003
                                                ----       ----      ----
Statutory federal rate                         35.0%      35.0%      35.0%
Effect of graduated federal rates              (1.0%)     (1.0%)     (3.1%)
State taxes, net of federal benefit             3.7%       3.7%       3.7%
Effect of tax-free bond interest income       (15.9%)    (17.3%)    (16.5%)
Other, net                                       .3%        .7%      (3.7%)
                                               ----       ----       ----
Effective tax provision rate                   22.1%      21.1%      15.4%


Current income taxes payable were  $367,038,  $93,232 and $36,673 as of December
31, 2005, 2004 and 2003,  respectively,  and are included in "accounts and other
payables" in the accompanying balance sheets.

NOTE 11 - CASH CONCENTRATION RISK & RESTRICTED CASH

A cash  concentration  risk arises when the Company has more cash in a financial
institution than is covered by federal deposit insurance.  At December 31, 2005,
the  Company  had cash in excess of insured  limits  totaling  $12,228,304.  The
Company's policy is to place its cash  investments  with high quality  financial
institutions and has never experienced any loss on holdings in excess of insured
limits.

NOTE 12 - INVESTOR CERTIFICATES

The Company has three types of certificates outstanding:

Access  certificates have no stated maturity and are due on demand.  The minimum
investment  amount is $100.  The  interest  rate is  determined  by the Board of
Directors  each quarter.  The directors may change the rate between  quarters if
market conditions warrant such a change. The current interest rate is 4%.

Graduated  certificates  can be  redeemed  yearly  and have a five year  maximum
maturity.  The minimum  investment  amount is $500.  The interest rate increases
based  on  the  length  of  time  that  the  certificate  is  outstanding.   For
certificates sold prior to 2004 the rate starts at 7% and increases .5% for each
year the certificate is outstanding with a 9% maximum rate. Certificates (Series
E & F) sold in 2004 and  thereafter  have an initial  interest rate of 6.25% and
increase .5% for each year the certificate is outstanding  with an 8.25% maximum
rate.

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

The certificates are not  collateralized and no sinking fund is required to fund
redemptions at maturity.  All of the certificates  have been registered with the
Securities and Exchange  Commission  under the Securities Act of 1933. Five year
schedule of principal maturities for certificates outstanding at December 31:

Years to Maturity             2005                 2004                2003
-----------------             ----                 ----                ----
On demand & 1 year        $ 23,058,930         $ 11,948,840        $ 9,672,380
2                           34,507,886           10,803,667          4,862,922
3                           18,019,184           34,885,514         10,803,667
4                           35,638,069           18,092,276         35,717,731
5+                          18,083,041           36,244,346         18,172,501
                          ------------         ------------         -----------
Total Principal           $129,307,110         $111,974,643         $79,229,201

At December 31, 2005, 2004 and 2003,  accrued  interest payable was $13,755,788,
$8,628,514,  and  $5,333,444,  respectively.  Interest  rates  for  certificates
outstanding at December 31, 2005 are:

                                      F-16
<PAGE>

4.00% - $1,406,641         8.00% - $ 1,836,787         9.00% - $63,638,664
6.25% - $1,840,266         8.25% - $53,901,487
6.75% - $2,919,161         8.50% - $ 3,764,104

On April 29, 2003, the Company filed a Form SB-2  Registration  Statement  under
the Securities  Act of 1933 with the Securities and Exchange  Commission to sell
up to $40,000,000 of its Series E Investor  Certificates  along with $11,375,000
of its Common Stock. The  Registration  Statement was approved by the Securities
and Exchange Commission on March 26, 2004. The Company issued $39,931,209 in new
Investor  Certificates  and $2,129,341 in Common Stock (327,591  shares at $6.50
per share) from this registration.

On August 27, 2004, the Company filed a Form SB-2  Registration  Statement under
the Securities  Act of 1933 with the Securities and Exchange  Commission to sell
up to $20,000,000 of its Series F Investor Certificates along with $9,750,000 of
its Common Stock.  The Securities and Exchange  Commission  notified the Company
that it would not  complete a full  review of the  registration  statement.  The
registration  statement  became  effective  on  November 1, 2004 and the Company
started to sell securities registered in this statement in January 2005. For the
year ended December 31, 2005, the Company sold  $19,993,924 in certificates  and
$623,756 in Common Stock (95,962 shares at $6.50 per share).

The Company filed a new registration  statement with the Securities and Exchange
Commission   during  February  2006  with   $60,000,000  in  Series  G  Investor
Certificates  and $32,500,000 in Common Stock available for issuance.  The terms
of the  Series G  Investor  Certificates  will be  similar to the Series E and F
certificates.

NOTE 13 - MORTGAGE PARTICIPATION AGREEMENTS

In 2003, the Company began selling Mortgage Participation ("MP") Agreements. The
MP Agreements  have not been  registered  and  therefore,  are only available to
accredited investors.  The agreements are collateralized by specific loans owned
by the Company and entitle the investor to a proportionate share of the interest
earned on the collateral.  Interest is paid monthly to the MP investor after the
Company  receives  interest  payments on related the  collateralized  loans. The
agreements  have no stated maturity date.  Principal  payments are made when the
Company receives principal payments on the collateralized loans. Losses that the
Company may incur on the  collateralized  loans are shared  pro-rata with the MP
Agreement  holders.  The Company has the right but not the  obligation to redeem
the MP Agreements at any time. The MP Agreement  investors do not have the right
to sell or  repledge  their  interest  in the  underlying  collateral.  Interest
expense  related to MP Agreements  was  $494,709,  $627,331 and $325,992 for the
years  ended  December  31,  2005,  2004 and 2003,  respectively.  MP  Agreement
principal  and interest  outstanding  and related  collateral as of December 31,
2005:
<TABLE>
<CAPTION>
                                                        MP Amount        Total Collateral
                                                        Outstanding       Carrying Amount
                                                        -----------       ---------------
<S>                                                     <C>                 <C>
Bluffton, SC family housing loan;
  matures 4/15/07 with no available extensions          $2,525,000          $7,870,077
Accrued interest payable                                    20,701
                                                        ----------
                                                        $2,545,701
</TABLE>

The loan which  collateralizes  the MP Agreements is classified as a real estate
loan in the accompanying  balance sheets.  The total carrying amount is equal to
the loan's outstanding principal plus accrued interest.

In  2005,   the  Company   redeemed   $7,012,500   in  MP  Agreement   principal
collateralized  by the Winter  Haven,  FL and Garland,  TX senior  housing loans
because the loans on these facilities were paid off. In addition, $300,000 in MP
Agreement  principal on the Winter Haven and Garland  facilities was transferred
to Bluffton,  SC MP Agreement  principal  at the request of the  investors.  The
remaining  $2,225,000 in Bluffton,  SC MP Agreement  principal was received from
new accredited investors during the fourth quarter of 2005.

NOTE 14 - GUARANTEES

The Company is guarantor on three loans secured by senior housing and low income
housing  facilities  owned by  non-profit  entities.  Certain  real estate joint
venture  investments and real estate  acquisition and development loans in which
the  borrower  chooses to secure  outside  financing  may require the Company to
guarantee  the loan as a condition of the extension of the loan by the financial

                                      F-17
<PAGE>

institution.  The loan  guarantees  are solely  limited to amounts  drawn  under
credit  facilities  and cover  outstanding  principal  and accrued  interest and
terminates upon maturity and principal repayment or at project stabilization (as
defined by the agreement).  Only upon an uncured payment default and upon demand
by the financial  institution would the Company be required to perform under its
guarantee  obligations.  The Company's recourse would be limited to repossession
of the  underlying  collateral and subsequent  resale of the  facilities.  As of
December 31, 2005,  all loans which had a guarantee  were current based on their
loan terms. Loan guarantees as of December 31, 2005:
<TABLE>
<CAPTION>
                        Renewal/                                     Current        Loan
                      Origination      Maturity       Maximum       Principal     Guarantee
Location                  Date           Date        Guarantee     Outstanding    Obligation
--------                  ----           ----        ---------     -----------    ----------
<S>                      <C>           <C>          <C>            <C>             <C>
Charleston, SC           12/30/05       4/1/08       11,500,000     11,500,000      92,000
Beaufort, SC             12/30/05       4/1/08        8,850,000      8,850,000      71,000
St. Petersburg, FL       12/18/04      4/15/06        7,347,300      7,106,540      71,000
                                                    -----------    -----------    --------
                                                    $27,697,300    $27,456,540    $234,000
</TABLE>

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

NOTE 15 - BUILDING MORTGAGE
<TABLE>
<CAPTION>
                                                                           2005             2004             2003
                                                                           ----             ----             ----
<S>                                                                      <C>              <C>              <C>
Fidelity Bank - collateralized by rental office building                 $161,015         $170,655         $180,194
   Interest rate varies with a 7.5% maximum, currently 7.5%; monthly
   principal & interest payment of $1,723; matures March 1, 2006,
   at which time a balloon payment of $159,376 is due.
Fidelity Bank - collateralized by corporate office building               417,294          431,714              -0-
                                                                         --------         --------         --------
   Interest rate equal to "prime + 1.5%", currently 8.75%; monthly
   principal & interest payment of $4,322; matures Sept. 1, 2009,
   at which time a balloon payment of $351,211 is due.
Total principal outstanding at December 31                               $578,309         $602,369         $180,194

Interest expense for the years ended December 31                          $45,197          $23,898          $15,784
</TABLE>

Estimated annual principal  payments:  2006 - $176,997;  2007 - $17,437;  2008 -
$19,026; 2009 - $364,849.

NOTE 16 - SERIES A CONVERTIBLE PREFERRED STOCK

In 2001, the Company  amended its Articles of  Incorporation  to provide for the
issuance of up to 235,000 shares of Series A Convertible  Preferred  Stock.  The
shares do not accrue  dividends  unless such dividends are declared by the Board
of Directors.  The shares entitle the preferred shareholder to have one vote per
share,  presently equal to the voting rights of Common shareholders.  Each share
is  convertible,  after 3  years,  into  shares  of  Common  Stock  based  on an
adjustable formula.

During 2001, as part of the Company's  formation and initial  capitalization  of
Wellstone  Financial  Group,  LLC ("WFG"),  500 preferred shares with a value of
$500,000 were issued to WFG in return for a 100%  ownership  interest in WFG. In
June 2004,  WFG was  dissolved and all of the  outstanding  Series A Convertible
Preferred  Stock was redeemed from WFG in exchange for the  Company's  ownership
interest in WFG. See Note 17 for additional disclosures on this transaction.

                                      F-18
<PAGE>

NOTE 17 - DISSOLUTION OF SUBSIDIARIES

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

In June 2004, the Company's Board of Directors approved an agreement to dissolve
Wellstone  Communities,  Inc.  ("WCI"),  a  100%-owned  subsidiary.  The Company
received all of WCI's  assets in exchange  for its 136,250  shares of WCI Common
Stock. The fair value of this transaction was $1,265,268.  WCI's assets included
$1,046,340  in cash and a real estate  mortgage  loan with a carrying  amount of
$218,928.  The transaction had no effect on the Company's  assets,  liabilities,
net income,  and earnings per common share.  WCI filed a Form SB-2  Registration
Statement in 2003 and planned to issue preferred stock to expand its specialized
loan operations and possibly purchase a bank. The Company determined that it was
not feasible to go forward with the  registration  statement  given the proposed
financial structure;  therefore,  $113,473 in registration costs were charged to
earnings in the fourth quarter of 2003 and in 2004 WCI was dissolved.

NOTE 18 - EARNINGS PER SHARE

Basic earnings per share have been calculated as follows:

2003        Net Income                                   $478,880
----        Average Common Shares Outstanding             521,782
            Earnings per Common Share                    $   0.92
2004        Net Income                                   $511,367
----        Average Common Shares Outstanding             713,567
            Earnings per Common Share                    $   0.72
2005        Net Income                                   $577,627
----        Average Common Shares Outstanding             840,376
            Earnings per Common Share                    $   0.69

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

NOTE 19 - MAJOR CUSTOMERS

The  Company  received  more than 10% of its total  revenue  for the year  ended
December 31, 2005 from the following customers:
<TABLE>
<CAPTION>
                                           Amount        %        Description of Revenue Received
                                           ------       ---       -------------------------------
<S>                                      <C>            <C>       <C>
Senior Housing Services, Inc.            $6,838,279     43.5%     Interest and fees from real estate joint
                                                                    venture investments
Wellstone Housing, LLC                    3,127,450     19.9%     Interest and fees from family housing
                                                                    development loans
Sage Living Centers, Inc.                 2,326,118     14.8%     Interest and fees from real estate joint
                                          ---------     ----        venture investments and real estate loans
                                        $12,291,847     78.2%
</TABLE>

The major customers are not related parties.  Neither  organization  directly or
indirectly  controls,  is  controlled  by,  or is under  common  control  of the
Company. There is not common ownership interest,  officers, or directors and the
Company  does not have  the  power to  direct  or  significantly  influence  the
management or operating policies of these customers.

                                      F-19
<PAGE>

On December  31,  2004,  Senior  Housing  Services,  Inc formed a single  member
Limited Liability Company (Wellstone Housing,  LLC) and purchased the assets and
assumed all of Wellstone Housing Corporation's  liabilities,  which included the
Company's  real estate loans.  The total combined  revenue  received from Senior
Housing Services,  Inc. and Wellstone  Housing,  LLC for the year ended December
31, 2005 was $9,965,729 or 63.4% of the Company's total revenue.

NOTE 20 - FINANCIAL INSTRUMENTS

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

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

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

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

Building  mortgage  and  capital  lease  obligation  - Fair  value  approximates
carrying  value since stated rates are similar to rates  currently  available to
the Company for debt with similar terms and remaining maturities.

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

The estimated fair values of the Company's financial instruments at December 31,
2005 are:

                                       Carrying Amount       Fair Value
                                       ---------------       ----------
Financial assets:
  Cash and cash equivalents              $ 12,447,193       $ 12,447,193
  Bond holdings                          $ 13,930,221       $ 13,930,221
Financial liabilities:
  Investor certificates                  $129,307,110       $129,307,110
  Mortgage participations                $  2,525,000       $  2,525,000
  Building mortgages                     $    578,309       $    578,309
  Capital lease obligation               $      1,231       $      1,231
  Loan guarantee obligations             $    234,000       $    234,000


                                      F-20