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, 2004

                                       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:  $13,154,641

     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 28, 2005 the  aggregate
market value held by  non-affiliates  was  $5,111,217  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: 813,913 shares of common stock
as of March 28, 2005.

     Documents  incorporated  by  reference:  Portions  of  Issuer's  Form  SB-2
Registration Statement, No. 333-118613, effective November 1, 2004.

     Transitional Small Business Disclosure Format:  Yes____; No_X_


<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                                                    7
  Item 4. Submission of Matters to a Vote of Security Holders                  8

Part II:
  Item 5. Market for Common Equity and Related Stockholder Matters             8
  Item 6. Management's Discussion and Analysis or Plan of Operations           9
  Item 7. Financial Statements                                                20
     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         20
                   and Financial Disclosures.
  Item 8A. Controls and Procedures                                            20

Part III:
  Item 9. Directors, Executive Officers, Promoters and Control Persons;       20
                   Compliance with Section 16(a) of the Exchange Act
  Item 10. Executive Compensation                                             23
  Item 11. Security Ownership of Certain Beneficial Owners and                23
                    and Related Stockholder Matters
  Item 12. Certain Relationships and Related Transactions                     24
  Item 13. Exhibits and Reports on Form 8-K.                                  24
  Item 14. Principal Accountant Fees and Services                             25

Signatures                                                                    25
Certifications                                                                26
Exhibit 21 - Subsidiaries of Issuer                                           27
Exhibit 99.1 - Certifications Pursuant to Section 906 of the                  28
                        Sarbanes-Oxley Act of 2002
Exhibit 99.2 - Code of Ethics                                                 28
Exhibit 99.3 - CPA Letter of Consent                                          30



                                                                               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
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 we believe that the project will benefit people who need  assistance
in  purchasing  and/or  renting  a home or  apartment.  Less than 2% of our loan
portfolio is invested with  for-profit  sponsors and even though this percentage
may increase in 2005, it will remain a small part of our loan balance.

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.  Our  largest  loan is  approximately  $13,000,000,  for a community
housing project. The annual interest rate on all loans we made during 2002, 2003
and 2004 was 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 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, 2004.

<TABLE>
<CAPTION>
                                 Principal              %
          Borrower              Outstanding         Outstanding          Initial                Origination   Renewal
            Type                Dec 31, 2004        Dec 31, 2004          Term*        Rate        Fee*         Fee*
------------------------------ ------------------------------------------------------------------------------------------
<S>                              <C>                   <C>                <C>          <C>          <C>
Daycare/Schools                       $0                  0%              1 year       10%          10%         None
Churches                         $9,285,858             8.3%              1 year       10%           5%           5%
Senior Housing
 - Loans                         $9,286,352             8.3%              1 year       10%          10%         None
 - Real Estate Joint
Venture
Investments                      $56,945,936           51.1%              1 year       10%          10%         None
Family Housing Development       $36,007,454           32.3%              1 year       10%          10%         None
                                ------------          -----
                                $111,525,600          100.0%
                                ============          =====
<FN>
* Subject to underlying credit statistics

</FN>
</TABLE>

                                                                               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, 2004:

          Type of                 Principal Outstanding        % of principal at
            Loan                  at December 31, 2004         December 31, 2004
            ----                  --------------------         -----------------
Development and acquisition            $13,992,709                    12.5%
Construction                           $35,221,388                    31.6%
Semi-permanent                         $62,311,503                    55.9%
                                      ------------                   -----
                                      $111,525,600                   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  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 made for one year; 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 2004,  one loan in the
amount of $861,565 was partially refinanced by a commercial bank.

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.
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 loan to date has been
$13 million,  which was for a family housing  program.  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.

                                                                               4
<PAGE>

Semi-permanent  Loans.  These are often called  mini-perms or bridge loans. They
are  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. We make these
loans on an annual  renewal basis with an annual  renewal fee of up to 5% of the
outstanding  balance.  The loans are usually repaid by other forms of financing,
such as church bonds or conventional  loans. We will assist the borrower to find
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 2004,
nine  loans  totaling  $3,307,053  were  refinanced  and  three  loans  totaling
$12,868,341 were partially refinanced by outside lenders.

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 of 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,
2004,  there were four loans with a potential  total of  $31,592,300 in which we
have a guarantee.  The total amount  outstanding  and  therefore  guaranteed  at
December 31, 2004 was  $29,960,655.  The  guarantees  mature in 2005. 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)
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.


                                                                               5
<PAGE>

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.

Many of the  non-profit  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.  For the return of our  investment,  we rely
primarily  on the  value of the  property  to be  acquired  and  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
         ----                  ----------                    ----------
         1998                     10                        $ 7,446,100
         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

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, 2004,  which become
due or callable in 2005 and in later years:

                                  Number of loans              Principal
        Year                      due or callable           due or callable
        ----                      ---------------           ---------------
        2005                            41                   $108,576,363
        2006                            -0-                        -0-
        2007                            -0-                        -0-
        2008                            -0-                        -0-
        2009                             2                        638,850
        2010/thereafter                  2                      2,310,387
                                        --                   ------------
        Total                           45                   $111,525,600
                                        ==                   ============


                                                                               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 three loan  delinquencies  of more than 6 months.  At  December  31,
2004, one loan is past due more than 180 days; however, we have not placed it on
non-accrual  status  because  the  underlying  collateral  is  greater  than the
outstanding  loan  amount  and we  believe  that  we  will  receive  the  entire
outstanding  loan amount.  No  allowance  for  specific  impaired  loan loss was
recognized.  While we have never had to charge off a loan as  uncollectible,  we
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, 2004. See Item 12 and Note 18 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, 2004,  there is a $431,714  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 own
two  nearby  office  condominiums,  on which  there is a  mortgage  loan  with a
$170,655 balance as of December 31, 2004. They are leased to two tenants,  for a
total of $2,400 per month.  In our  management's  opinion,  the  properties  are
adequately insured.

Item 3. Legal Proceedings.

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

                                                                               7
<PAGE>

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

Based upon the  Exchange's  position in its December 3, 2004 letter,  securities
regulators  for  several  states  each  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 Exchange  approval  for listing.  Michigan  securities  regulators
issued  Orders of Denial  related to our  application  to register  our Series F
offering in that state and a Notice of Opportunity to Show Compliance,  to which
we have  responded.  We  disagree  with the actions  taken by Michigan  and will
administratively  appeal  its  decisions  if an  informal  resolution  cannot be
reached.

On February 4, 2005, the Texas State  Securities Board told us that, by February
11, 2005, either we sign an Agreed Cease and Desist Order and pay a $20,000 fine
or it would obtain an emergency  administrative  cease and desist order, without
our being  represented.  We chose to sign the  order  and we paid the fine.  The
order is that we "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."

As of March 28, 2005, we are not aware that any other state has  instituted  any
formal  proceedings  on this or any other issue related to any of our securities
offerings and we are not a party to any other pending legal proceedings.  We are
not aware that any of the properties covered by our mortgage loans is subject to
any pending legal proceedings or that any government  authority is contemplating
any  legal  proceedings  involving  us or any of those  properties,  other  than
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 2004.
o    The Issuer has no outstanding options,  warrants or securities  convertible
     into common  stock as of December 31,  2004.  There is an aggregate  27,572
     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 (No. 333-118613) in
     which the Issuer proposes to publicly offer 1,500,000  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 803 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 annual rates of 9% and 10%,  respectively
     on the $6.50 share price.  Earnings are the only restriction that may limit
     the ability to pay dividends in the future.

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

c) The Issuer  repurchased  33,772  shares of its common stock  during  November
2004.  None were  repurchased  in October or December  of 2004.  All shares were
repurchased  at $6.50 per  share.  The  repurchases  were not part of a publicly
declared plan to repurchase shares.

                                                                               8
<PAGE>

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,
                                         ---------------------------------------
                                            2004          2003          2002
                                         -----------   -----------   -----------
Revenues                                 $13,154,641   $10,923,548   $ 6,909,340
                                         -----------   -----------   -----------
Investor interest expense                  9,263,934     7,246,202     4,154,997
Loan loss expense                            257,000       375,000           -0-
Marketing expenses                         1,004,511       630,508       494,042
Salaries, payroll taxes, benefits          1,205,069     1,013,730       674,384
Operating expenses                           775,787     1,091,962       849,105
                                         -----------   -----------   -----------
   Total expenses                         12,506,301    10,357,402     6,172,528
                                         -----------   -----------   -----------
Operating income                             648,340       566,146       736,812
Income tax provision                         136,973        87,266       124,204
                                         -----------   -----------   -----------
Net income                               $   511,367   $   478,880   $   612,608
                                         ===========   ===========   ===========

Overview of operations
We have always focused on serving faith-based organizations, mostly churches and
their related schools.  We also offer specialized  programs for church and other
non-profit  sponsors of senior  housing and  affordable/moderate  income housing
programs.  Nearly all of our earnings prior to 2001 came from  financing  church
facilities.  During the last quarter of 2000, we began to realize  revenues from
investment in senior and affordable/moderate income housing projects. During the
last quarter of 2004, we began making loans to for-profit sponsors of affordable
and low-income  housing  projects.  Less than 2% of our assets are invested with
for-profit  sponsors and even though this  percentage  may increase in 2005,  it
will remain a small part of our loan portfolio.

We generate revenue from:
o    interest on loans
o    origination and renewal fees on loans
o    loan participation income
o    interest on securities
o    consulting fees

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

Participating loans (all related to senior housing facilities) are classified as
real estate  joint  venture  investments  if all of the  following  exist at the
inception  of the  loan:
o    The borrower does not have a substantial equity investment in the property.
o    The Company does not have recourse to substantial tangible, saleable assets
     of the borrower other than the underlying  collateral of the loan and there
     is no irrevocable letter of credit for a substantial amount of the loan.
o    There is no  take-out  commitment  for the full  amount  of the loan from a
     creditworthy,  independent third-party.
o    The facility does not have lease commitments which will provide  sufficient
     cash flow to service normal principal and interest loan amortization.

Comparison of Periods Ended 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


                                                                               9
<PAGE>

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 September 30, 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
                                                                     ===========

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.

                                                                              10
<PAGE>

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
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:

<TABLE>
<CAPTION>

                                             Loan Loss     Outstanding
                                             Allowance      Principal          %
                                           ---------      ------------        --
<S>                                        <C>              <C>               <C>
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%
                                           =========      ============        ==
</TABLE>

                                                                              11
<PAGE>

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
                                       ==========     ==========     ==========

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)
                                           ==========   ==========   ==========

                                                                              12
<PAGE>
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.
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
                                                   ==========         ==========

                                                                              13
<PAGE>

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)
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:

<TABLE>
<CAPTION>
<S>                                                                   <C>
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
                                                                      ============
</TABLE>

The increase in real estate loans and joint venture  investments made in 2004 is
due to the new registration  statement  becoming effective on March 26, 2004. We
did not have as much time in 2003 to originate new loans as we have had in 2004.
This trend should  continue in 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.

                                                                              14
<PAGE>

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
$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 $2,000,000.
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, 2002 and December 31, 2003
General.  Assets  increased from $71,776,839 at December 31, 2002 to $94,728,347
at December 31, 2003 for an increase of $22,951,508 or 32%. This increase was as
a result of the sale of Investor  Certificates  and Mortgage  Participations  of
$20,104,324  and  cash  provided  by  operations  of  $3,130,394,  decreased  by
dividends paid to common  shareholders.  With the additional  cash received from
the sale of Investor Certificates and Mortgage Participations and from operating
activities,  we originated new real estate loans and joint venture  investments,
net of  principal  payments  received,  of  $17,968,802,  purchased a new office
building for $532,040,  and invested an additional  $1,216,250 in bond holdings.
Total revenue  increased  for the year ended  December 31, 2003 by $4,014,208 or
58% from  $6,909,340  in 2002 to  $10,923,548  in 2003.  Net income for the year
ended December 31, 2003 was $478,880 compared to $612,608 in 2002.

Total real estate loans and joint venture  investments  outstanding  on December
31, 2003 was  $82,723,500  compared to  $64,754,698  on December 31, 2002 for an
increase  of  $17,968,802  or 28%.  This  increase  was a  result  of  sales  of
investment certificates and mortgage participation agreements and the subsequent
origination or  refinancing of real estate loans and joint venture  investments,
as follows:

New loan originations                                              $  3,375,747
Refinances on existing loans, net of principal received               4,363,037
New real estate joint venture investments made                       11,247,196
Decrease in existing real estate joint venture investments           (1,017,178)
                                                                   ------------
                                                                   $ 17,968,802
                                                                   ============

                                                                              15
<PAGE>

All other  assets  composed  primarily  of cash,  bond  holdings,  property  and
equipment,  and unamortized debt issue costs were $12,004,847 as of December 31,
2003.  Principal  and  interest  payable on Investor  Certificates  and Mortgage
Participation ("MP") Agreements increased $22,775,072 or 34% from $67,920,382 as
of December 31, 2002 to  $90,695,454  as of December  31, 2003.  The Company has
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,  which if approved,  should continue the  substantial  increase in
outstanding certificates and the investment in new loans.

Real estate loan and joint venture interest and fees earned. Interest income and
fees from real estate loans and joint venture investments  increased  $3,300,956
(+55%) from  $6,018,879 in 2002 to  $9,319,835 in 2003.  The increase was due to
the following items:

Increase in average outstanding principal                           $ 3,179,019
   ($76,076,836 - 2003; $42,683,771 - 2002)
Decrease in weighted average interest rate                             (119,514)
   (9.52% - 2003; 9.80% - 2002)
Increase in loan fees recognized                                        241,451
                                                                    -----------
                                                                    $ 3,300,956
                                                                    ===========

The increase in average  outstanding  principal is due to the addition of 10 new
real  estate  loans  and  joint  venture  investments  in 2003 and with  average
outstanding  principal of $8,043,100 and the refinancing of existing real estate
loans and joint  venture  investments  with  average  outstanding  principal  of
$6,411,469. Also, the 16 new loans from 2002 were outstanding all of 2003 versus
only part of 2002, increasing average outstanding principal by $18,938,496.

Loan  participation and other income. For the year ended December 31, 2003, loan
participation  and other income increased  $713,252 or 80% from $890,461 in 2002
to $1,603,713 in 2003. The increase is due to the following:


                                              2003         2002        Change
                                           ----------   ----------   ----------
Investment income                          $  350,071   $  502,842   ($ 152,771)
Loan participation and other income         1,253,642      387,619      866,023
                                           ----------   ----------   ----------
   Total                                   $1,603,713   $  890,461   $  713,252
                                           ==========   ==========   ==========

The Company's  investment income is from the purchase of 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 decrease
in  investment  income is due to the September 30, 2002 sale of an undivided 50%
interest in the Company's St. Lucie Co., FL bonds for $2,512,500.  In September,
2003,  the  Company  purchased  $2,500,000  in bonds,  which will  cause  future
investment income to increase substantially compared to its current level.

Loan  participation and other income increased in 2003 due to cash received from
a borrower upon the sale of the borrower's  senior housing facility in Largo, FL
in which the Company held a  participating  loan which was  classified as a real
estate joint venture investment.

Investor interest expense. Investor interest expense for the year ended December
31, 2003 was  $7,246,202,  an increase of  $3,091,205  or 74% compared to 2002's
expense of $4,154,997. The increase is due to:

Increase in average outstanding principal, including                  $2,755,102
   interest payable subject to compounding
   ($79,210,846 - 2003; $47,687,944 - 2002)
Change in weighted average interest percentage                            10,111
   (8.74% - 2003; 8.71% - 2002)
Increase in average outstanding Mortgage Participation                   325,992
                                                                      ----------
Agreement principal
   ($3,259,920 - 2003; $0 - 2002)                                     $3,091,205
                                                                      ==========

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.  Prior to 2003,  we had not
recognized an allowance for loan loss. Even though we have never incurred a loan
write-off,  we increased our loan loss  allowance  because of an increase in our


                                                                              16
<PAGE>

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  allowance  for loan loss  increase  that we made in 2003 is classified as a
collective loan loss  allowance.  A collective loan loss allowance is recognized
when the characteristics of a group of loans indicate that it is probable that a
loss exists even though the loss cannot be identified  with a specific loan. 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, 2003, one church loan with a carrying  amount of $242,621 was
considered  impaired due to non-payment of interest.  No specific  impaired loan
loss allowance was recorded because the carrying amount of the loan is less than
the  present  value of  expected  future  cash  flows  or the fair  value of the
collateral  on the loan.  No loans were  considered  impaired as of December 31,
2002.

As of December 31, 2003,  allowance for loan losses as a percent of  outstanding
loan principal by loan type:

                                             Loan Loss    Outstanding
                                             Allowance     Principal       %
                                             --------     -----------   -----
Family Housing Development Loans             $375,000     $25,013,068     1.5%
Church Mortgage Loans                           -0-        13,526,028       0%
Senior Housing Mortgage Loans                   -0-         9,794,001       0%
Real Estate Joint Venture Investments           -0-        35,732,713       0%
                                             --------     -----------   -----
  Total                                      $375,000     $84,065,810      .4%
                                             ========     ===========   =====

Marketing  expenses.  Total expenses for the marketing of investor  certificates
for the year ended December 31, 2003 were $630,508 compared to $494,042 in 2002.
The increase is due to:

                                             2003          2002        Change
                                          ---------     ---------     ---------
Debt issue cost amortization              $ 510,924     $ 345,191     $ 165,733
Compliance and registration                  26,016         3,968        22,048
Promotion expense                            22,938        62,044       (39,106)
Other marketing costs                        70,630        82,839       (12,209)
                                          ---------     ---------     ---------
       Total                              $ 630,508     $ 494,042     $ 136,466
                                          =========     =========     =========

Debt issue cost amortization expense increased due to investor  certificates and
mortgage participations sold since December 31, 2002. This expense will continue
to increase as new investor  certificates are sold.  Compliance and registration
costs are up due to expenses incurred on the current registration statement that
we have filed with the Securities and Exchange  Commission.  Promotion  expenses
and other marketing costs are down because we have had no investor  certificates
to sell since May, 2003.

Selling commissions paid to brokers for selling investor  certificates and costs
incurred to register  investor  certificates  are paid in cash and charged as an
expense over the term of the related  certificates.  The unamortized  balance is
classified as an asset on the Balance Sheet as  "Unamortized  debt issue costs".
The balance was  $1,772,631  and  $1,004,705  as of December  31, 2003 and 2002,
respectively.

Operating and personnel expenses.  Personnel expenses (salaries,  payroll taxes,
and benefits)  increased  $339,346 or 50% from $674,384 in 2002 to $1,013,730 in
2003. The increase is due to additional  employees hired to handle the Company's
growth in operations.

Starting in July 2003, the Company contracted with Cornerstone  Capital Advisors
("CCA") to provide all administrative  personnel services. The Company is paying
CCA for its expenses  (estimated at $1,100,000  over the next 12 months),  which
are  expected  to be similar to the  expenses  incurred  by the  Company  had it
continued its personnel  support under  previous  arrangements.  There is no fee
schedule  but the Company may elect to pay fees for good  performance,  which if
paid,  would be no more than 10% of the reimbursed  expenses for the previous 12
months.  The  Company  paid  $318,619 to CCA during  2003,  which is included in
2003's  personnel  expenses.  In  addition,  the  Board  of  Directors  approved
incentive  compensation  of $23,440  to CCA for its  performance  in 2003.  This
amount was accrued as a liability  and charged to personnel  expense in 2003 and
paid in 2004.  Prior to July 1, 2003,  the  employees  were paid directly by the


                                                                              17
<PAGE>

Company. On July 1, 2003, CCA hired all of our administrative  employees and has
billed us for the time spent on Company operations.

For the years ended  December  31,  2003 and 2002,  operating  expenses  were as
follows:

                                              2003         2002       Change
                                           ----------   ----------   ----------
a) Trust service/paying agent fees         $  162,566   $  129,046   $   33,520
b) Consulting fees                            142,794       30,403      112,391
c) Audit, accounting & tax services           102,846       85,725       17,121
d) Legal fees                                  99,186       60,201       38,985
e) Employee recruiting costs                   46,335          -0-       46,335
f) Depreciation & amortization                 56,695       20,628       36,067
g) Subsidiary registration  costs             113,473          -0-      113,473
h) Broker-dealer start-up costs                   -0-      129,885     (129,885)
i) Other operating expenses                   368,067      393,217      (25,150)
                                           ----------   ----------   ----------
Total operating expenses                   $1,091,962   $  849,105   $  242,857
                                           ==========   ==========   ==========

The changes are due to the following:

a)       Trust  service/paying  agent  fees  increased  due to the  increase  in
         outstanding investor certificates.
b)       Consulting  fees -  hired  financial  consultants  to  set up  mortgage
         participation  program,  set-up cash flow and financing models which we
         are  using to  manage  our cash and loan  investments,  and to  explore
         possible new industries  and  strategies  for our loan  business.  This
         expense  will  decrease  in future  periods as we do not expect to need
         this level of consulting in the foreseeable future.
c)       Audit,  accounting  & tax  services  - $8,155 is due to an audit of our
         subsidiary, Wellstone Communities, which was completed as part of their
         SB-2 filing with the Securities and Exchange Commission (see Note 12 on
         page  F-15  of the  financial  statements  for  further  details).  The
         remainder  is due to the  increase  in the size and  complexity  of our
         operations,  which has increased  the audit and  quarterly  review fees
         charged by our CPA.
d)       Legal fees increased as a result of our growth in operations  (50%) and
         due to work related to the set-up of the mortgage participation program
         (50%).
e)       Employee  recruiting  costs - increased due to the hiring of additional
         employees needed to handle our growth.
f)       Depreciation  &  amortization  - increased due to the purchase of a new
         office building and computers in 2003.
g)       Subsidiary  registration  costs - in the  fourth  quarter  of 2003,  we
         decided to suspend  Wellstone  Communities,  Inc's  (WCI)  registration
         statement and not go forward with the filing. We spent $113,473 on this
         filing,  which was charged to operating  expense.  Originally,  WCI had
         planned to issue up to  $50,000,000  in  preferred  stock to expand its
         operations and possibly  purchase a bank. It was  determined  that this
         may not feasible given the structure that we were using;  therefore, we
         decided to suspend the registration process.
h)       Broker-dealer  start-up  costs - in 2002, we spent $129,885 to set-up a
         broker-dealer  subsidiary.  We terminated  the effort when we concluded
         that under the rules of the National Association of Securities Dealers,
         it would not be feasible for a subsidiary to market our own securities.
i)       Other operating  expenses - decreased due to economies of scale that we
         have benefited from as our operations have increased.

Income tax  provision.  The income tax provision for the year ended December 31,
2003 was $87,266, compared to $124,204 for the year ended December 31, 2002. The
decrease was due to a decrease in pre-tax income, partially offset by a decrease
in tax-exempt  bond  interest.  The  Company's  effective tax rate for the years
ended  December  31,  2003  and  2002  was  15.4%  and  16.9%,  respectively.  A
reconciliation  of the Company's  effective  tax  provision  rate to the federal
statutory  rate is included in the  attached  "Notes to  Consolidated  Financial
Statements" (Note 10).

Dividends.  Dividends of $338,172 and $363,371  were  declared in 2003 and 2002,
respectively.  The Company does not intend to declare future dividends that will
create negative retained earnings.

Liquidity and Capital Resources
Cash flows from  operations.  Net cash provided by the Company's  operations for
the year ended  December 31, 2003 was  $3,130,394,  which compares to $79,684 in
net cash used by operations for the year ended December 31, 2002 for an increase
in net cash provided by operations of $3,210,078.  This difference was driven by
increases in depreciation and amortization  expense,  deferred taxes,  allowance


                                                                              18
<PAGE>

for loan  losses,  and investor and  mortgage  participation  interest  payable,
partially  offset by a decrease in net income and changes in accrued real estate
loan and joint venture interest and deferred loan fees.

Investor and mortgage  participation  interest payable  increased  $2,613,748 in
2003 due to an increase in outstanding debt and because approximately 25% of the
Investor  Certificate  holders who purchased  certificates in 2002 and 2003 have
elected to  reinvest  the  interest  due to them each year and not  receive  the
interest in cash until maturity.

Included  in the 2003 and 2002  changes in accrued  real  estate  loan and joint
venture  interest  and  deferred  loan fee amounts is $797,589  and  $675,019 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, 2003 and 2002 is as follows:

                                                         2003             2002
                                                       --------         --------
Family Housing Development                             $339,820         $572,662
Church Construction                                       8,684           65,009
Real Estate Joint Venture                               449,085           37,348
                                                       --------         --------
                                                       $797,589         $675,019
                                                       ========         ========

The amount for 2003  represents  interest  accrued and financed in 2003,  net of
payments  received in 2003 that were financed in previous  years.  2002's amount
represents  interest  accrued and financed in 2002, net of payments  received in
2002 that were financed in previous years.

The 2003  decrease  in family  housing net  financed  interest is due to a major
project in Mableton,  Georgia moving out of the  development  phase and into the
sales phase of the project  offset by four smaller new projects  that are now in
the development phase.

The  increase in real estate joint  venture net financed  interest is due to the
origination  of the  Lewisville,  Texas  loan in the  latter  part of  2002.  We
financed as part of the loan's principal the first four months' interest in 2003
(approximately  $295,000)  because the  facility  was being  renovated.  We have
received  monthly  interest  payments  thereafter.   Also,  another  project  in
McKinney,  TX started to finance interest payments in the fourth quarter of 2003
because they are now in the development phase of operations.

Cash flows from investing activities.  The Company used $18,646,233 in cash from
investing activities which is a decrease of $12,151,423 from $30,797,656 for the
year ended December 31, 2002. The decrease was due to the following:

<TABLE>
<CAPTION>
<S>                                                                  <C>
Decrease in real estate loans and joint venture  investments  made   ($ 6,940,993)
Increase in real estate loan and joint venture investment
   principal payments received                                         (9,536,881)
Increase in bonds purchased                                             2,500,000
Decrease in bonds redeemed or sold                                      1,317,500
Increase in fixed asset and real estate purchases                         508,951
                                                                     ------------
                                                                     ($12,151,423)
                                                                     ============
</TABLE>

The decrease in real estate loans and joint venture  investments made in 2003 is
due to fewer sales of investor certificates in 2003 versus 2002. Please refer to
the "cash flows from financing activities" section for additional information on
the decrease in investor certificate sales.

The  increase in principal  payments  received in 2003 was due to the pay-off of
the Largo, Florida senior housing real estate joint venture investment and large
pay-downs  on a senior  housing loan in Palm Bay,  Florida and a senior  housing
real estate joint venture investment in St. Petersburg, Florida.

The Company currently has commitments and applications  sufficient to invest its
excess cash on hand.

During 2003, the Company  purchased an office  condominium for $532,040 to house
its corporate offices and to provide additional office space for future growth.

                                                                              19
<PAGE>

Cash flows from financing activities.  For the year ended December 31, 2003, the
Company  raised  $20,104,324  from the  sale of new  Investor  Certificates  and
Mortgage Participation Agreements,  net of redemptions on existing certificates.
This  represents  a  decrease  of  $10,499,848  from  net  certificate  sales of
$30,604,172  for the year ended  December 31, 2002.  The decrease was due to the
sale of all available registered Investor  Certificates by May, 2003; therefore,
no certificates were available to sell during the last seven months of 2003. The
Company has filed a new registration  statement with the Securities and Exchange
Commission which, if approved,  will significantly  increase our future sales of
Investor Certificates. The percentage of Investor Certificates and MP Agreements
redeemed for cash compared to Investor  Certificates  and MP Agreements sold for
the years ended  December  31,  2003 and 2002 was 17.3% and 7.5%,  respectively.
Historically,  over 80% of Investor Certificate  maturities are re-issued as new
certificates;  however, until the new registration statement with the Securities
and Exchange  Commission is approved and we have new  certificates to issue, all
maturities will be paid in cash, which increased the percentage for 2003.

We have $9,672,380 in Investor Certificates coming due or redeemable upon demand
in 2004 that could be reinvested in new  certificates  or paid, at the option of
the  investor.  Our rate of  reinvestment  was over 80% from 1986 through  2002,
which  included  periods of higher  interest  rates  than those now  prevailing.
During  2003,  the  reinvestment  rate  dropped  to 47%  due to the  sale of all
available  Investor  Certificates in May, 2003. All  certificates  which matured
after that date were  redeemed in cash because the owners could not purchase new
certificates. We expect the historical reinvestment rate to continue if approval
of the present  offering is received by the Securities and Exchange  Commission,
even if there are  increases  in the current low interest  rates on  government,
bank and corporate debt.

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.

There were no changes in or  disagreements  with the Issuer's  certified  public
accountants.

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.

     (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.


                                                                              20
<PAGE>
                                    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                      73           Director, Chairman of the
10206 Big Canoe                                  Board, President, CEO
Jasper, GA 30143

John T. Ottinger                    50           Director, Vice President, COO,
923 Spring Glen Place                            Secretary and Treasurer
Suwanee, GA 30024

Ted Fox                             73           Director
10575 Big Canoe
Jasper, GA  30143

Henry Darden                        71           Director, Member of the
614 Beverly Dr.                                  Loan and Audit Committees
Brandon, FL  33510

Jack Wehmiller                      57           Director
7034 George Barnes Road
Murrayville, GA  30564

Richard McLaughlin                  72           Director
1510 Norwood Place
Clearwater, FL  33756

Irving B. Wicker                    79           Director, Member of the
132 Eswick Drive                                 Audit Committee
Prattville, AL 36067

Directors are elected for  three-year  terms.  Messrs.  Ottinger and Brooks will
serve until the annual meeting in 2005, Messrs. Darden, Fox and McLaughlin until
the 2006  meeting  and Messrs  Wehmiller  and Wicker will serve until the annual
meeting in 2007.

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 17 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 17 years of extensive
experience in church lending. He has been a director since 1996.

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.

                                                                              21
<PAGE>

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.

Richard  McLaughlin has been a director since 1996,  except for a period in 2003
that he served as director of our former subsidiary, Wellstone Communities, Inc.
He has worked in the real  estate  construction  and land  development  business
since 1962.  During his  career,  he has  developed  complete  subdivisions  and
constructed  approximately  600 homes.  Since 1977, Mr.  McLaughlin has been the
president and sole owner of Church Development  Services,  Inc., a consultant to
churches in the  design,  development  and  construction  of church  properties.
During the last 10 years, his company has consulted with more than 300 churches.

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
2005, 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'
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.


                                                                              22
<PAGE>

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 2003 and 2004:

<TABLE>
<CAPTION>
                                                                                 Annual compensation
                                                                                ---------------------
         Name and principal position                                            Year           Salary
         ---------------------------                                            ----           ------
<S>                                                                             <C>           <C>
         Cecil A. Brooks, Chairman of the Board, President and CEO              2003          $200,000
                                                                                2004           200,000
         John T. Ottinger, Vice president, Secretary, Treasurer and COO         2003           150,000
                                                                                2004           150,000
</TABLE>

Their services for 2004 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, 2004,  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                                  6,922                  *
923 Spring Glen Place
Suwanee, GA 30024
Ted Fox
10575 Big Canoe                                    6,083                 *
Jasper, GA 30143
Irving B. Wicker                                  5,845                  *
132 Eswick Drive
Prattville, AL 36067
Henry Darden                                      6,000                  *
614 Beverly Dr
Brandon, FL 33510

All directors and executive officers            27,572                 3.4%
as a group (5 Persons)
* less than one percent.
</TABLE>

                                                                              23
<PAGE>

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 $342,059 under this agreement in 2003 and $1,865,605
in 2004.  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.  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, Cornerstone Group Holdings, Inc.

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 1.3
            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 1.4 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.)


                                                                              24
<PAGE>
     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
            3.2 of  the  issuer's  Registration  Statement  on  Form  SB-2,  No.
            333-118613, filed August 27, 2004.)
     4.3    Form of Seven Day Redeemable  Bonds  (Incorporated by reference from
            Exhibit 3.2 of the issuer's Registration Statement on Form SB-2, No.
            333-118613, filed August 27, 2004.)
     4.4    Form of five-year term bonds (Incorporated by reference from Exhibit
            4.4 of  the  issuer's  Registration  Statement  on  form  SB-2,  No.
            333-118613, filed August 27, 2004.)
     4.5    Trust  Indenture  for Series B and C  Certificates  of  Indebtedness
            (Incorporated   by  reference  from  Exhibit  4.4  of   Registrant's
            Registration  Statement on Form SB-2, No.  333-93475,  filed January
            14, 2000.)
     4.6    Trust  Indenture  dated June 14, 2002  Registrant  (Incorporated  by
            reference from Exhibit 4.8 of the Issuer's Registration Statement on
            form SB-2, No. 333-91564, filed June 28, 2002.)
     21     Subsidiaries of the Issuer
     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
     99.3   CPA Letter of Consent

   (b) No report on Form 8-K was filed  during  the last  quarter  of the period
covered by this report.

Item 14.  Principal Accountant Fees and Services.

The Board of  Directors  selected  Robert N.  Clemons  CPA,  PA, an  independent
certified public  accounting  firm, as the auditors of the financial  statements
for the  fiscal  year  ended  December  31,  2004.  No member of this firm 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 Form  10-QSB's  and for  services  that are  normally  provided  by the
     accountant in connection with statutory and regulatory filings were $66,648
     and $67,724 for the years ended  December 31, 2004 and 2003,  respectively.

Tax  Fees - fees for tax services,  including preparation of our tax returns and
     tax-related matters were $3,126 and $4,500 for the years ended December 31,
     2004 and 2003, respectively.

All  Other Fees - fees for the preparation and review the financial  sections of
     our Form SB-2 Registration Statements were $5,969 and $34,146 for the years
     ended December 31, 2004 and 2003, respectively.

All  hours  expended  on the  accountant's  engagement  to audit  our  financial
statements  were  attributed  to work  performed by 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 28, 2005
                                  -----------------------------------------
                                   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.

                                                                              25
<PAGE>

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 28, 2005
-----------------------------------   Chairman of the Board of Directors
   Cecil A. Brooks

S/John T. Ottinger                    Vice President, Chief Operating Officer,        March 28, 2005
-----------------------------------   Chief Financial Officer, Secretary, Treasurer
   John T. Ottinger                   and Director (principal accounting officer)


*S/Ted Fox                            Director                                        March 28, 2005
-----------------------------------
   Ted Fox

*S/Henry Darden                       Director                                        March 28, 2005
-----------------------------------
   Henry Darden

*S/Jack Wehmiller                     Director                                        March 28, 2005
-----------------------------------
   Jack Wehmiller

*S/Richard McLaughlin                 Director                                        March 28, 2005
-----------------------------------
   Richard McLaughlin

*S/Irving B. Wicker                   Director                                        March 28, 2005
-----------------------------------
   Irving B. Wicker

By: *S/Cecil A. Brooks                , attorney-in-fact                              March 28, 2005
    -------------------------------
      Cecil A. Brooks
</TABLE>
                                                                              26

<PAGE>

           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.

                                                                              27


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

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

             Report of Independent Registered Public Accounting Firm

We have  audited  the  accompanying  balance  sheets of  Cornerstone  Ministries
Investments,  Inc.  as of  December  31,  2004,  2003 &  2002  and  the  related
statements of operations, changes in shareholder's equity and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audits.

We conducted  our 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 has determined that it
is not  required  to  have,  nor were we  engaged  to  perform,  an audit of its
internal control over financial  reporting.  An audit includes  examining,  on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  financial  position  of  Cornerstone  Ministries
Investments,  Inc. as of December 31, 2004, 2003 & 2002 and the results of their
operations,  changes in  shareholder's  equity and cash flows for the years then
ended in conformity with accounting  principles generally accepted in the United
States of America.

S/ Robert N. Clemons, CPA, PA
------------------------------
DeLand, Florida
March 17, 2005

                                                                             F-1

<PAGE>
<TABLE>

CORNERSTONE MINISTRIES INVESTMENTS, INC.
BALANCE SHEETS
December 31, 2004, 2003 and 2002
<CAPTION>

                                                                                                       (Consolidated - See Note 18)
                                                                                2004                 2003                  2002
                                                                            ------------         ------------          ------------
<S>                                                                         <C>                  <C>                   <C>
ASSETS
Cash and cash equivalents                                                   $ 15,162,659         $  4,389,851          $  1,500,499
Loan guarantee receivable                                                         71,000                 --                    --
Loans in process                                                                  30,873              118,504               359,020
Real estate loans, net                                                        54,278,585           47,877,277            40,138,493
Real estate joint venture investments, net                                    56,408,014           34,846,223            24,616,205
Bond holdings and accrued interest                                             4,013,733            4,001,333             2,734,162
Property and equipment, net                                                      812,221              873,101               320,337
Refundable income taxes                                                             --                 42,617                  --
Deferred tax asset, net                                                             --                   --                 274,233
Goodwill                                                                         450,997              450,997               450,997
Unamortized debt issue costs                                                   2,671,340            1,772,631             1,004,705
Real estate held for investment                                                  340,000              340,000               340,000
Other assets                                                                     168,513               15,813                38,188
                                                                            ------------         ------------          ------------

TOTAL ASSETS                                                                $134,407,935         $ 94,728,347          $ 71,776,839
                                                                            ============         ============          ============


LIABILITIES
Investor certificates and accrued interest                                  $120,603,157         $ 84,562,645          $ 67,920,382
Mortgage participations and accrued interest                                   7,220,198            6,132,809                  --
Accounts and other payables                                                      244,621              267,806               339,120
Common dividends payable                                                         266,287              169,087               168,640
Loan guarantee obligation                                                        175,000                 --                    --
Building mortgage                                                                602,369              180,194               189,226
Capital lease obligation                                                           7,941               13,632                  --
Deferred taxes payable                                                            70,357              171,443                  --
                                                                            ------------         ------------          ------------

TOTAL LIABILITIES                                                            129,189,930           91,497,616            68,617,368
                                                                            ------------         ------------          ------------

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; 819,351, 531,532 and 530,947 shares
  issued and outstanding                                                           8,194                5,315                 5,309
Paid in capital                                                                5,118,568            3,297,435             3,293,641
Retained earnings (deficit)                                                       91,243                1,229              (139,479)
Treasury stock                                                                      --                (73,248)                 --
                                                                            ------------         ------------          ------------

TOTAL SHAREHOLDERS' EQUITY                                                     5,218,005            3,230,731             3,159,471
                                                                            ------------         ------------          ------------

TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY                                                       $134,407,935         $ 94,728,347          $ 71,776,839
                                                                            ============         ============          ============
<FN>
SEE ACCOMPANYING NOTES                                                                                                           F-2
</FN>
</TABLE>

<PAGE>
<TABLE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
STATEMENTS OF OPERATIONS
For the years ended December 31, 2004, 2003 and 2002
<CAPTION>

                                                                                                       (Consolidated - See Note 18)
                                                                                    2004                2003                2002
                                                                                 -----------         -----------         -----------
<S>                                                                              <C>                 <C>                 <C>
REVENUES
Real estate loan and joint venture interest and fees                             $12,668,299         $ 9,319,835         $ 6,018,879
Loan participation and other income                                                  486,342           1,603,713             890,461
                                                                                 -----------         -----------         -----------

TOTAL REVENUES                                                                    13,154,641          10,923,548           6,909,340
                                                                                 -----------         -----------         -----------

EXPENSES
Investor interest expense                                                          9,263,934           7,246,202           4,154,997
Loan loss expense                                                                    257,000             375,000                --
Marketing expenses                                                                 1,004,511             630,508             494,042
Salaries, payroll taxes, and benefits                                              1,205,069           1,013,730             674,384
Operating expenses                                                                   775,787           1,091,962             849,105
                                                                                 -----------         -----------         -----------

TOTAL EXPENSES                                                                    12,506,301          10,357,402           6,172,528
                                                                                 -----------         -----------         -----------

Income Before Provision For Income Taxes                                             648,340             566,146             736,812

Income Tax Provision                                                                 136,973              87,266             124,204
                                                                                 -----------         -----------         -----------

NET INCOME                                                                       $   511,367         $   478,880         $   612,608
                                                                                 ===========         ===========         ===========

Basic and Diluted Earnings
 per Common Share                                                                $      0.72         $      0.92         $      1.16

<FN>
SEE ACCOMPANYING NOTES                                                                                                           F-3
</FN>
</TABLE>
 <PAGE>
<TABLE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended December 31, 2004, 2003 and 2002

The statements for the years ended December 31, 2002 and 2003 were part of a consolidated financial statement - see Note 18
<CAPTION>

                                               COMMON STOCK:                                   RETAINED
                                           --------------------      PAID-IN      PREFERRED    EARNINGS     TREASURY        TOTAL
                                             SHARES     AMOUNT        CAPITAL       STOCK      (DEFICIT)      STOCK        EQUITY
                                           --------    ---------    -----------    -------    ----------    ---------   -----------
<S>                                         <C>        <C>          <C>            <C>        <C>           <C>         <C>
BALANCE, DECEMBER 31, 2001                  528,725    $   5,287    $ 3,279,491    $  --      $ (388,716)   $    --     $ 2,896,062
Net income                                  612,608      612,608
Common stock issued                           2,222           22         14,150                                              14,172
Dividends declared                                                                              (363,371)                  (363,371)
                                           --------    ---------    -----------    -------    ----------    ---------   -----------
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
                                           ========    =========    ===========    =======    ==========    =========   ===========
<FN>
SEE ACCOMPANYING NOTES                                                                                                          F-4
</FN>
</TABLE>

<PAGE>
<TABLE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
STATEMENTS OF CASH FLOWS
For the years ended December 31, 2004, 2003 and 2002
<CAPTION>
                                                                                                       (Consolidated - See Note 18)
                                                                                     2004               2003               2002
                                                                                 ------------       ------------       ------------
<S>                                                                              <C>                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                       $    511,367       $    478,880       $    612,608
Adjustments to reconcile net income to cash
 from operations-
Depreciation and amortization                                                         889,723            567,619            365,819
Loss from sale of property and equipment                                                2,534               --                 --
Changes in-
Loans in process                                                                       87,631            240,516           (154,436)
Accrued bond interest, net                                                            (12,400)           (50,921)           (15,298)
Accrued real estate loan/joint venture interest and
  deferred loan fees                                                               (3,495,448)        (1,505,568)          (759,540)
Allowance for loan losses                                                             257,000            375,000               --
Deferred taxes                                                                       (101,086)           445,676            (30,755)
Refundable income taxes                                                                42,617            (42,617)              --
Investor and mortgage participation interest payable                                3,956,610          2,613,748           (327,523)
Loan guarantee payments                                                               104,000               --                 --
Accounts and other payables                                                           (23,185)           (14,314)           206,942
Other assets                                                                         (152,700)            22,375             22,499
                                                                                 ------------       ------------       ------------

NET CASH PROVIDED (USED) BY OPERATIONS                                              2,066,663          3,130,394            (79,684)
                                                                                 ------------       ------------       ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate loans made                                                            (14,682,118)       (16,377,539)       (18,785,460)
Real estate loan principal payments received                                        9,201,063          8,166,950          1,462,869
Real estate joint venture investments made                                        (31,367,707)       (14,180,666)       (18,713,738)
Real estate joint venture investment principal payments received                   12,124,111          5,553,021          2,720,221
Bonds purchased                                                                          --           (2,500,000)              --
Bonds redeemed or sold                                                                   --            1,283,750          2,601,250
Property and equipment purchased                                                       (9,915)          (591,749)           (74,311)
Proceeds from sale of property and equipment                                            1,400               --                 --
Real estate costs capitalized                                                            --                 --               (8,487)
                                                                                 ------------       ------------       ------------

NET CASH USED BY INVESTING ACTIVITIES                                             (24,733,166)       (18,646,233)       (30,797,656)
                                                                                 ------------       ------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Investor certificates sold                                                         36,748,967         18,444,677         33,099,017
Investor certificates redeemed                                                     (4,655,926)        (4,208,816)        (2,494,845)
Mortgage participation agreements sold                                              1,078,250          5,868,463               --
Debt issue costs paid                                                              (1,721,571)        (1,278,850)          (795,928)
Building mortgage proceeds                                                            440,000               --                 --
Building mortgage principal payments                                                  (17,825)            (9,032)            (7,968)
Capital lease principal payments                                                       (5,691)            (4,078)              --
Common stock issued, net of issuance costs                                          2,082,530              3,800             14,172
Common stock redeemed                                                                (258,518)              --                 --
Dividends paid                                                                       (324,153)          (337,725)          (344,066)
Treasury stock sold (acquired)                                                         73,248            (73,248)              --
                                                                                 ------------       ------------       ------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                          33,439,311         18,405,191         29,470,382
                                                                                 ------------       ------------       ------------

Net change in cash and cash equivalents                                            10,772,808          2,889,352         (1,406,958)
Cash and cash equivalents at beginning of period                                    4,389,851          1,500,499          2,907,457
                                                                                 ------------       ------------       ------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                       $ 15,162,659       $  4,389,851       $  1,500,499
                                                                                 ============       ============       ============

Supplemental Information-
  Interest paid during the period                                                $  5,333,638       $  4,643,972       $  4,499,470
  Income taxes paid during the period                                            $    182,500       $       --         $       --
Non-cash transactions-
  Fixed asset lease financing                                                    $       --         $     17,710       $       --
  Investor certificates matured and re-invested                                  $  3,309,314       $  3,800,364       $ 13,926,147
  Loan interest financed and included in loan principal                          $  1,498,830       $    797,589       $    675,019

<FN>
SEE ACCOMPANYING NOTES                                                                                                          F-5
</FN>
</TABLE>

<PAGE>

                    CORNERSTONE MINISTRIES INVESTMENTS, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The Company originates and purchases mortgage loans,  substantially all of which
are made to  faith-based  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  and low income 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 checking 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 not remote,
then interest  income is not  recognized  and interest  payments are credited to
outstanding loan principal.  Loan origination fees are deferred and amortized as
a yield  adjustment  over the lives of the  related  loans  using  the  interest
method. Amortization of deferred loan fees is discontinued when a loan is placed
on non-accrual status. Interest income and loan fees recognized from real estate
loans  and  senior  housing  loans  classified  as  real  estate  joint  venture
investments  are  reported as "Real estate loan and joint  venture  interest and
fees" in the accompanying Statements of Operations.

The Company  receives  monthly  interest  payments on its real estate  loans and
senior  housing  loans  (classified  as real estate joint  venture  investments)
except when the terms of a loan allow a borrower to finance  interest  payments.
Interest is financed in the following circumstances:
o     Family  housing  loans may  finance  interest  while the project is in the
      development  and pre-sales  phase,  which  normally  lasts 12 to 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


                                                                             F-6
<PAGE>

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

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

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

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

Bond holdings consist of tax-free local government  securities and church bonds.
The Company accounts for these investments  using SFAS No. 115,  "Accounting for
Certain Investments in Debt and Equity Securities",  and classifies the bonds as
"available for sale" securities. The bonds are recorded at cost and adjusted for
unrealized  holding  gains and losses.  Temporary  unrealized  holding gains and
losses  are  reported,  net  of  deferred  taxes,  as a  separate  component  of
shareholder's equity until realized.  If an unrealized holding loss is judged to
be other than temporary,  the cost basis of the security is written down to fair
value and included in earnings.

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

Real estate held for investment includes land which the Company owns and intends
to hold as an investment  for more than one year.  The assets are carried at the
lesser  of cost or fair  value as  required  by SFAS No.  144,  "Accounting  for
Impairment or Disposal of Long-Lived  Assets".  Impairment losses are recognized
when  the  carrying  amount  of a  long-lived  asset  is  determined  not  to be
recoverable and the carrying amount exceeds fair value.  Profit from real estate
sales is  recognized  when the  collectibility  of the sales price is reasonably
assured and the Company is not obligated to perform significant activities after
the sale to earn the profit. If either of these conditions  exists,  all or part
of the profit is deferred and recognized  using the  installment  sale method or
cost recovery method as prescribed by SFAS No. 66, "Accounting for Sales of Real
Estate".

                                                                             F-7
<PAGE>

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  facilities
which are owned by non-profit entities. Loan guarantees that originated prior to
January 1, 2003 have no obligation recognized in the financial  statements.  For
loan  guarantees that were originated or modified on or after January 1, 2003, a
loan guarantee  obligation is recognized based on the loan guarantees  estimated
fair  value.  The  Company  charges  the  loan  guarantee's  fair  value  to the
respective  borrower  as  compensation  for the  Company's  risk and  payment is
expected  within 30 days of the loan  guarantee's  origination  or  modification
date.  Unpaid  amounts are  classified as "Loan  guarantee  receivables"  in the
accompanying balance sheets. Loan guarantee  obligations are analyzed at the end
of each fiscal year and if the fair value of 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.

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 June 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 March 2004, the FASB's Emerging Issues Task Force (EITF)  finalized Issue No.
03-1,  The Meaning of  Other-Than-Temporary  Impairment  and Its  Application to
Certain Investments (EITF 03-1). The FASB has delayed the implementation of EITF
03-1  and has  begun  a new  project  to  address  the  issues  associated  with
other-than-temporary  impairment of debt and equity  securities.  The outcome of
this new project and its impact on the Company's  financial  position or results
of operations  cannot be  determined  at this time.

                                                                             F-8
<PAGE>

In January 2003, the FASB issued  Interpretation No. 46 (FIN 46),  Consolidation
of Variable  Interest  Entities  (VIEs),  an  interpretation  of ARB (Accounting
Research  Bulletin) No. 51. In December 2003, the FASB issued a revised  version
of FIN 46 (FIN 46R),  which  delayed the  effective  date of FIN 46 for all VIEs
until March 2004. This interpretation  requires the consolidation of entities in
which an enterprise absorbs a majority of the entity's expected losses, receives
a majority of the expected  residual  gains,  or both, as a result of ownership,
contractual or other financial  interests in the entity. FIN 46R and its various
interpretations have not materially impacted 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:

                                             2004          2003          2002
                                          ---------     ---------     ---------
Office Condominiums                       $ 795,034     $ 792,659     $ 252,922
Office Computers, Furnishings,
   Software & Equipment                     111,215       120,477        68,465
Vehicles                                     30,351        37,730        37,730
Capital lease - phone system                 17,710        17,710           -0-
Less: Accumulated Depreciation             (142,089)      (95,475)      (38,780)
                                          ---------     ---------     ---------
Property and equipment, net               $ 812,221     $ 873,101     $ 320,337

Depreciation expense                      $  66,861     $  56,695     $  20,628

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 and $4,919 and interest  expense was $1,839 and
$2,198 for the years  ended  December  31, 2004 and 2003,  respectively.  Future
yearly minimum lease payments as of December 31, 2004:

Year                                    Amount
                                        ------
2005                                     7,531
2006                                     1,256
                                        ------
 Total                                   8,787
Less interest portion                     (846)
                                        ------
Capital lease obligation                $7,941
                                        ======

Loan Commitments:
The Company makes loan  commitments in connection with certain real estate loans
and joint  venture  investments  that include  funding for project  development,
building construction,  renovations,  lease-up operations, financed interest and
other  amounts  that the  borrower  may draw  upon in  accordance  with the loan
agreement.  As of December 31,  2004,  the Company has  $7,560,130  in approved,
unused loan  commitments  for real estate loans and  $5,381,919  for real estate
joint venture investments.  The Company has no new loan commitments  outstanding
on December 31, 2004.

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;


                                                                             F-9
<PAGE>

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:

                                             2004            2003           2002
                                           ----------      ----------      -----
Management Fees                            $1,290,880      $  318,619      $ -0-
Loan Origination Fees                         574,725             -0-        -0-
Incentive Compensation Fees                       -0-          23,440        -0-
                                           ----------      ----------      -----
                                           $1,865,605      $  342,059      $ -0-
                                           ==========      ==========      =====

As of December 31, 2004, 2003 and 2002, the Company owed CCA $7,464, $93 and $0,
respectively  under the terms of this agreement.  Also, as of December 31, 2004,
the  Company was owed  $121,091 by CCA which  represents  2005  management  fees
advanced in 2004. The advance accrues  interest at 10% per annum. The advance is
included in "other assets" in the accompanying balance sheets.

Cornerstone Capital Advisors, Inc. - Office Lease
Effective  August 1, 2004,  the Company and CCA entered  into a lease  agreement
whereby  CCA  is  leasing  the   Company's   corporate   office   building   and
office/computer equipment in Cumming, GA. The lease payment is $5,000 per month.
The  initial  lease term ends on August  31,  2005,  after  which time the lease
converts to a month-to-month lease unless CCA notifies the Company of its intent
not to  renew  within  30 days  from  the end of the  initial  lease  term.  The
Company's  cost basis in the office  building and  office/computer  equipment is
approximately  $626,000.  For the year ended  December  31,  2004,  the  Company
received $25,000 from CCA under the lease agreement.

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

During 2003, the Company and Wellstone Communities,  Inc. (a formerly 100%-owned
subsidiary)  each entered into a service  agreement  with CDPO for the filing of
SB-2 Registration Statements. The $150,000 fee for these two agreements was paid
in 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.

                                                                            F-10
<PAGE>

In July,  2004, the Company  entered into a service  agreement with CDPO for the
filing of a new SB-2  Registration  Statement.  $75,000 was paid to CDPO in 2004
under this  service  agreement.  No amounts were owed to CDPO as of December 31,
2004, 2003 and 2002.

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

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

                                       2004            2003            2002
                                   ------------    ------------    ------------
Family housing development loans   $ 36,007,454    $ 25,013,068    $ 16,258,934
Church mortgage loans                 9,285,858      13,526,028      15,491,592
Senior housing mortgage loans         9,286,352       9,794,001       7,767,779
                                   ------------    ------------    ------------
   Total principal                   54,579,664      48,333,097      39,518,305
   Accrued Interest                     479,961         255,994         759,338

   Unearned Loan Fees                  (149,040)       (336,814)       (139,150)
   Allowance for loan losses           (632,000)       (375,000)            -0-
                                   ------------    ------------    ------------
   Total Real Estate Loans         $ 54,278,585    $ 47,877,277    $ 40,138,493
                                   ============    ============    ============

These loans mature as follow:  2005 - $51,630,427;  2006 - $0; 2007 - $0; 2008 -
$0; 2009 - $638,850; beyond 2009 - $2,310,387.  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.

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>
                                                 2004           2003           2002
                                             -----------    -----------    -----------
<S>                                          <C>            <C>            <C>
Current year interest financed               $ 1,158,109    $   805,525    $   637,671
Previous years' financed interest received      (119,874)      (457,021)           -0-
                                             -----------    -----------    -----------
Net financed interest                        $ 1,038,235    $   348,504    $   637,671
                                             ===========    ===========    ===========
</TABLE>

On December 31, 2004, the Company had significant credit risk  concentrations in
the following states:

Georgia  - $ 27,629,048
Florida  - $  9,531,034
Texas    - $ 10,380,772

Impaired loan disclosures for the years ended December 31:

                                               2004          2003        2002
                                             --------      --------    ---------
Number of impaired loans                            1             1      -0-
Carrying amount at year end                  $263,291      $242,621      N/A
Weighted average investment -
   year-to-date                              $252,956      $237,130      N/A
Impaired loan interest income                $ 24,312      $ 19,166      N/A

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

NOTE 5 - REAL ESTATE JOINT VENTURE INVESTMENTS
As of December 31,  certain of the Company's  mortgage  loans on senior  housing
facilities are classified as real estate joint venture investments, as follows:

                                                                            F-11
<PAGE>

Location                                2004            2003            2002
--------                                ----            ----            ----
McKinney, TX                       $  4,050,291    $  3,109,337    $  2,467,482
Largo, FL                                   -0-             -0-       5,295,454
St. Petersburg, FL                    4,582,344       3,684,620       4,223,000
Lewisville, TX                       10,617,954      10,286,004       8,756,513
Garland, TX                           6,421,006       5,905,556       4,231,789
Chattanooga, TN                       5,438,254       3,637,623             -0-
San Antonio, TX                      11,931,167       9,109,573             -0-
Winter Haven, FL                      5,942,402             -0-             -0-
Bryan, TX                             2,616,317             -0-             -0-
Edmond, OK                            5,346,201             -0-             -0-
                                   ------------    ------------    ------------
Total principal outstanding          56,945,936      35,732,713       8,693,373
Accrued interest                        329,195         301,565         281,134
Unearned loan fees                     (867,117)     (1,188,055)       (639,167)
Allowance for loan losses                   -0-             -0-             -0-
                                   ------------    ------------    ------------
Real estate joint venture
  investments, net                 $ 56,408,014    $ 34,846,223    $ 24,616,205
                                   ============    ============    ============

All of the loans mature in 2005.  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.

All of the  loans,  except  as noted  below,  are  secured  by  first or  second
mortgages.  Three facilities are partially secured by the respective  non-profit
borrower's 100% ownership  interest in the Limited  Liability  Companies ("LLC")
which own the  properties.  The  facilities  which are owned by the LLC's have a
first  mortgage from an outside lender  securing the property.  The location and
amount of the loans which are secured in this manner as of December 31, 2004 are
as follows:

Lewisville, TX - $ 9,284,620
Bryan, TX      - $ 1,282,984
Edmond, OK     - $ 3,337,251
                 -----------
Total            $13,904,855
                 ===========

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 September, 2003, the Company received $1,220,277 in loan participation income
from a borrower as a result of the borrower's sale of a senior housing  facility
in  Largo,  Florida  in which  the  Company  held a real  estate  joint  venture
investment.

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:

                                                 2004         2003        2002
                                              ---------    ---------   ---------
Current year interest financed                $ 520,335    $ 449,085   $  37,348
Previous years' financed interest received      (59,740)         -0-         -0-
                                              ---------    ---------   ---------
Net financed interest                         $ 460,595    $ 449,085   $  37,348
                                              =========    =========   =========

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


                                                                            F-12
<PAGE>

Company will be unable to collect all amounts due  according to the  contractual
terms  of a loan,  the  loan is  considered  impaired  and a loan  loss  will be
recognized  to the extent the  collateral's  fair value is less than the current
loan carrying amount.  No real estate joint venture  investments were considered
impaired as of December 31, 2004, 2003 and 2002.

NOTE 6 - ALLOWANCE FOR LOAN LOSSES
For the years  ended  December  31,  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
</TABLE>

Components of allowance for loan losses at December 31, 2004 and 2003:

                                        2004               2003
                                     ---------           --------
Collective loan losses-
  Historical experience              $    -0-            $   -0-
  Current credit risk assessment      632,000             375,000
                                     ---------           --------
  Total collective loan losses        632,000             375,000
Specific impaired loan losses             -0-                -0-
                                     ---------           --------
Total allowance for loan losses      $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 is due to
slower than expected  growth in the U.S.  economy.  This increase in credit risk
resulted in a $375,000  charge to loan loss expense in 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.  These factors
have  increased the family housing loan  portfolio's  credit risk as compared to
2003.

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

NOTE 7 - GOODWILL
The Company 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, 2004,  2003 and 2002,  Goodwill's fair value exceeded its
carrying value;  therefore,  no provision for impairment loss has been recorded.
No  goodwill  was  acquired  or  sold in any of the  years  presented  in  these
Consolidated 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


                                                                            F-13
<PAGE>

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, 2004, unamortized debt issue costs consist
of:

Costs incurred to register debt securities           $   714,241
Commissions paid on the sale of debt securities        3,832,827
Less: Accumulated Amortization                        (1,875,728)
                                                     -----------
                                                     $ 2,671,340
                                                     ===========

Amortization  expense was $822,862,  $510,924,  and $345,191 for the years ended
December 31,  2004,  2003 and 2002,  respectively,  and is included in marketing
expenses in the accompanying  Statements of Operations.  Estimated  amortization
expense for the next five years:

2005 - $804,621            2008 - $349,533
2006 - $722,791            2009 - $173,372
2007 - $621,023

<TABLE>
<CAPTION>
NOTE 9 - BOND HOLDINGS
Bond holdings at year-end consist of-                              2004               2003               2002
                                                                -----------        -----------        -----------
<S>                                                             <C>                <C>                <C>
St. Lucie Co., FL Subordinated Revenue Bonds:
         Maturity  7/1/2036                                     $ 2,325,000        $ 2,325,000        $ 2,325,000
         Maturity 10/1/2036                                       2,700,000          2,700,000          2,700,000
Undivided 50% interest sold to investor                          (2,512,500)        (2,512,500)        (2,512,500)
                                                                -----------        -----------        -----------
Net investment in St.Lucie Co., FL bonds                          2,512,500          2,512,500          2,512,500
                                                                -----------        -----------        -----------
Largo, FL Subordinated Revenue bonds:
         Matures 10/1/2033                                        2,500,000          2,500,000              -0-
Undivided interest sold to investors                             (1,225,000)        (1,225,000)             -0-
                                                                -----------        -----------        -----------
Net investment in Largo, FL bonds                                 1,275,000          1,275,000              -0-
                                                                -----------        -----------        -----------
Local Church Bonds, maturing 2003                                      -0-                -0-             58,750
                                                                -----------        -----------        -----------
Cost and fair value of bond holdings                              3,787,500          3,787,500          2,571,250
Accrued interest receivable                                         226,233            213,833            162,912
                                                                -----------        -----------        -----------
                                                                $ 4,013,733        $ 4,001,333        $ 2,734,162
                                                                ===========        ===========        ===========
</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 2004, 2003, or 2002.

Proceeds from the sale of undivided interests and the maturity of bonds were $0,
$1,283,750,  and  $2,601,250  for the years ending  December 31, 2004,  2003 and
2002, 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  $329,622,  $274,095,  and $407,903 for the years
ended December 31, 2004, 2003 and 2002, respectively.

NOTE 10 - INCOME TAXES
The net  deferred  tax  (liability)  asset in the  accompanying  balance  sheets
includes the following components as of December 31:

                                              2004         2003         2002
                                            ---------    ---------    ---------
Deferred tax assets                         $ 296,110    $ 196,917    $ 286,787
Deferred tax liabilities                     (366,467)    (368,360)     (12,554)
                                            ---------    ---------    ---------
Net deferred tax (liability) asset          ($ 70,357)   ($171,443)   $ 274,233
                                            =========    =========    =========

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


                                                                            F-14
<PAGE>

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, 2004,
2003, and 2002.

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
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:

                                2004          2003          2002
                             ---------     ---------     ---------
Current:   Federal           $ 203,501     ($332,464)    $ 108,308
            State               34,558       (25,946)       19,240
Deferred:  Federal             (91,183)      404,711        (2,840)
            State               (9,903)       40,965          (504)
                             ---------     ---------     ---------
                             $ 136,973     $  87,266     $ 124,204
                             =========     =========     =========

Reconciliation of the Company's income tax provision (benefit) rate to statutory
federal rates for the years ended December 31:
                                                  2004        2003        2002
                                                ------      ------      ------
Statutory federal rate                            35.0%       35.0%       35.0%
Effect of graduated federal rates                 (1.0%)      (3.1%)      (1.0%)
State taxes, net of federal benefit                3.7%        3.7%        3.7%
Effect of tax-free bond interest income          (17.3%)     (16.5%)     (20.6%)
Other, net                                          .7%       (3.7%)       (.2%)
                                                 -----       -----       -----
Effective tax provision rate                      21.1%       15.4%       16.9%
                                                 =====       =====       =====

Current  income taxes payable were $93,232,  $36,673 and $106,567 as of December
31, 2004,  2003 and 2002,  respectively  and is 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, 2004,
the Company had cash in excess of insured limits totaling $14,891,105.

Included in cash and cash  equivalents as of December 31, 2004, 2003 and 2002 is
restricted cash of $695,436,  $256,573 and $254,645,  respectively.  The cash is
restricted by various financing and bond custody arrangements and cannot be used
in the Company's operations.

NOTE 12 - INVESTOR CERTIFICATES
The Company has three types of certificates outstanding:
Access  certificates have no stated maturity and are due on demand.  The minimum
investment  amount is $100.  The  interest  rate is  determined  by the Board of
Directors  each quarter.  The directors may change the rate between  quarters if
market  conditions  warrant  such a change.  The  current  interest  rate is 4%.

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

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


                                                                            F-15
<PAGE>

Years to Maturity            2004                  2003                 2002
-----------------        ------------          ------------         ------------
On demand & 1 year        $11,948,840           $ 9,672,380         $ 12,588,839
2                          10,803,667             4,862,922              838,115
3                          34,885,514            10,803,667            4,938,456
4                          18,092,276            35,717,731           10,941,275
5+                         36,244,346            18,172,501           35,902,441
                         ------------          ------------         ------------
Total Principal          $111,974,643          $ 79,229,201         $ 65,209,126
                         ============          ============         ============

At December 31, 2004, 2003 and 2002,  accrued  interest  payable was $8,628,514,
$5,333,444,  and  $2,711,256,  respectively.  Interest  rates  for  certificates
outstanding at December 31, 2004 are:

4.0%  -  $1,781,391        7.5% - $ 1,953,422        8.5% - $   379,501
6.25% -  $3,651,845        8.0% - $ 3,854.729        9.0% - $63,781,456
7.0%  -  $  327,953       8.25% - $36,244,346

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. Since the approval date, the Company has
issued  $39,931,209 in new Investor  Certificates and $2,129,341 in Common Stock
(327,591 shares at $6.50 per share).

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.

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  senior
housing  loans owned by the Company and entitle the investor to a  proportionate
share of the interest earned on the collateral.  Interest is paid monthly to the
MP  investor  after the  Company  receives  interest  payments  on  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
$627,331  and  $325,992  for  the  years  ended  December  31,  2004  and  2003,
respectively.  MP  Agreement  principal  and  interest  outstanding  and related
collateral as of December 31, 2004:
<TABLE>
<CAPTION>

                                                            MP Amount               Total Collateral
                                                           Outstanding              Carrying Amount
                                                           -----------              ---------------
<S>                                                          <C>                       <C>
Winter Haven, FL senior housing loan; matures 5/1/05
   with two year extensions at the Company's option          $3,766,000                $5,817,035
Garland, TX senior housing loan; matures 12/1/05
   with a one year extension at the Company's option          3,396,500                $6,393,393
                                                            -----------
Total principal outstanding                                   7,162,500
Accrued interest payable                                         57,698
                                                            ------------
                                                             $7,220,198
                                                             ==========
</TABLE>

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

                                                                            F-16
<PAGE>

In December  2004, MP Agreements  collateralized  by the  Lewisville,  TX senior
housing  facility loan were  transferred  to MP Agreements  collateralized  by a
senior housing facility in Winter Haven, FL. All of the investors agreed to this
transfer.

In January  2005,  the Company  redeemed  $2,250,000  in MP Agreement  principal
collateralized by the Winter Haven, FL facility.

NOTE 14 - LOAN GUARANTEES
The Company is  guarantor  on four loans  secured by senior  housing  facilities
owned by  unrelated  non-profit  entities.  Certain  real estate  joint  venture
investments  and real  estate  acquisition  and  development  loans in which the
borrower  chooses  to secure  outside  financing  may  require  the  Company  to
guarantee  the loan as a condition of the extension of the loan by the financial
institution.  The  guarantee  is solely  limited to amounts  drawn under  credit
facilities  and only  covers  outstanding  principal  and accrued  interest  and
terminates upon maturity and principal  repayment.  Only upon an uncured payment
default  and upon  demand by the  financial  institution  would the  Company  be
required to perform under its  guarantee  obligations.  The  Company's  recourse
would be limited to  repossession  of the  underlying  collateral and subsequent
resale of the  facilities.  As of  December  31,  2004,  all  loans  which had a
guarantee were current based on their loan terms. Loan guarantees as of December
31, 2004:

<TABLE>
<CAPTION>
                                              Renewal/                                                 Current               Loan
                                             Origination       Maturity            Maximum            Principal           Guarantee
Location                                        Date             Date             Guarantee          Outstanding          Obligation
--------                                        ----             -----            ---------          -----------          ----------
<S>                                            <C>              <C>              <C>                 <C>                 <C>
Fort Pierce, FL                                5/31/04          4/15/05          $ 6,000,000         $ 6,000,000         $    60,000
Fort Pierce, FL                                8/15/04          2/15/05            4,445,000           4,445,000              44,000
Palm Bay, FL                                   12/31/02         12/31/05          13,800,000          12,547,134                 -0-
St. Petersburg, FL                             12/18/04         12/18/05           7,347,300           7,106,540              71,000
                                                                                 -----------         -----------         -----------
                                                                                 $31,592,300         $29,960,655         $   175,000
                                                                                 ===========         ===========         ===========
</TABLE>

NOTE 15 - PROFIT SHARING PLAN
During 2001,  the Company  established a Profit  Sharing Plan for its employees.
The Plan allows for entry into the plan after one year of service, and immediate
vesting of contributed amounts. All contributions were made at the discretion of
the  Company  after  approval  by the board of  directors.  For the years  ended
December 31, 2004,  2003, and 2002 the Company elected to contribute $0, $65,220
and $63,150,  respectively.  No further contributions are expected as all of the
Company's employees were hired by Cornerstone Capital Advisors in 2003.

NOTE 16 - BUILDING MORTGAGE
<TABLE>
<CAPTION>
                                                                                                  2004          2003          2002
                                                                                                --------      --------      --------
<S>                                                                                             <C>           <C>           <C>
Fidelity Bank - collateralized by rental office building                                        $170,655      $180,194      $189,226
   Interest rate equal to "prime + 1.5%",  currently 6.75%;  monthly principal &
   interest  payment of $1,723;  matures  March 1, 2006, at which time a balloon
   payment of $159,573 is due
Fidelity Bank - collateralized by corporate office building                                      431,714           -0-           -0-
                                                                                                --------      --------      --------
   Interest rate equal to "prime + 1.5%",  currently 6.75%;  monthly principal &
   interest  payment of $3,818;  matures  Sept. 1, 2009, at which time a balloon
   payment of $340,543 is due
Total principal outstanding at December 31                                                      $602,369      $180,194      $189,226

Interest expense for the years ended December 31                                                $ 23,898      $ 15,784      $ 16,951

</TABLE>
Estimated annual principal  payments:  2005 - $26,646;  2006 - $179,609;  2007 -
$19,680; 2008 - $21,050; 2009 - $355,384.

NOTE 17 - SERIES A CONVERTIBLE PREFERRED STOCK
In 2001, the Company  amended its Articles of  Incorporation  to provide for the
issuance of up to 235,000 shares of Series A Convertible  Preferred  Stock.  The
shares do not accrue  dividends  unless such dividends are declared by the Board

                                                                            F-17
<PAGE>

of Directors.  The shares entitle the preferred shareholder to have one vote per
share,  presently equal to the voting rights of Common shareholders.  Each share
is  convertible,  after 3  years,  into  shares  of  Common  Stock  based  on an
adjustable formula.

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

NOTE 18 - DISSOLUTION OF SUBSIDIARIES
In June 2004, the Company's board of directors approved an agreement to dissolve
Wellstone Financial Group, LLC ("WFG"), a 100%-owned subsidiary. In exchange for
the  Company's  ownership  interest  in WFG,  the  Company  redeemed  all of the
Company's Series A Preferred Stock owned by WFG. The fair value of the Preferred
Stock  and the  Company's  ownership  interest  in WFG were  both  estimated  at
$500,000;  therefore,  no cash was  exchanged.  As of June 30,  2004,  WFG is no
longer included in the Company's  financial  statements.  The transaction had no
effect on the Company's assets, liabilities, net income and earning per share of
common stock.  WFG was  dissolved  because the Company has been unable to retain
the type of specialized  employees  necessary to develop WFG's operations into a
long-term profitable venture.

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

NOTE 19 - EARNINGS PER SHARE
Basic earnings per share have been calculated as follows:

2002              Net Income                                            $612,608
----              Average Common Shares Outstanding                      529,833
                  Earnings per Common Share                                $1.16
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

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.

                                                                            F-18
<PAGE>
NOTE 20 - MAJOR CUSTOMERS
The  Company  received  more than 10% of its total  revenue  for the year  ended
December 31, 2004 from the following customers:

<TABLE>
<CAPTION>
                                     Amount        %        Description of Revenue Received
                                     ------        -        -------------------------------
<S>                                 <C>           <C>       <C>
Senior Housing Services, Inc.       $5,727,019    43.5%     Interest and fees from real estate joint
                                                              venture investments
Wellstone Housing Corp.              2,288,028    17.4%     Interest and fees from family housing
                                                              development loans
Sage Living Centers, Inc.            1,490,795    11.3%     Interest and fees from real estate joint
                                    ----------   -----        venture investments
                                    $9,505,842   72.2%
                                    ==========   ====
</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.

On December 31, 2004,  Senior  Housing  Services,  Inc  purchased the assets and
assumed all of Wellstone Housing Corporation's  liabilities,  which includes the
Company's real estate loans.

NOTE 21 - FINANCIAL INSTRUMENTS
The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments:

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

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

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

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

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,
2004 are:

                                                Carrying Amount      Fair Value
                                                ---------------      ----------
Financial assets:
  Cash and cash equivalents                      $ 15,162,659       $ 15,162,659
  Bond holdings                                  $  3,787,500       $  3,787,500
Financial liabilities:
  Investor certificates                          $111,974,643       $111,974,643
  Mortgage participations                        $  7,162,500       $  7,162,500
  Building mortgages                             $    602,369       $    602,369
  Capital lease obligation                       $      7,941       $      7,941
  Loan guarantee obligations                     $    175,000       $    175,000

                                                                            F-19