CORNERSTONE MINISTRIES INVESTMENTS, INC.

Our office is at 2450 Atlanta Highway, Suite 904, Cumming, Georgia 30040.  

Our telephone number is (678) 455-1100 and our fax number is (678) 455-1114.  

Our Business

Cornerstone Ministries Investments, Inc. finances land and buildings for related party community housing projects, senior housing facilities, churches and other non-profit faith-based schools, and daycare facilities.  We began operations in 1985 as Presbyterian Investors Fund, Inc., a nonprofit corporation.  Cornerstone Ministries Investments, Inc. was organized as a for profit corporation in 1996.  The two were merged in December 2000.  We have an advisory agreement with Cornerstone Capital Advisors Inc.  Our advisor provides various managerial and administrative services to us and receives a management fee and a loan origination fee.  

At June 30, 2007, we owned approximately $158 million in real estate loans and joint venture investments, of which 81.9% were for community housing projects, 10.8% were for senior housing facilities and 7.3% for churches.  Over 73% of our revenues in 2006 came from our three largest borrowers and approximately 38.1% of our revenues in 2006 came from related parties.  Funding has come from $123.6 million in sales of bonds, $2.7 million in sales of mortgage participations, $5.7 million in sales of common stock and retained earnings and $20 million in senior debt financing.  

As of December 31, 2006 over 70% of our loan portfolio consisted of loans to our three largest borrowers.  Specifically, 41% of our loan portfolio consisted of loans to Wellstone, LLC and its affiliates, 21% of our loan portfolio consisted of loans to Senior Housing Services, Inc. and its affiliates, and 8% of our loan portfolio consisted of loans to Wellstone Retirement Communities I, LLC.  Certain of our current and former directors and officers, together with the chief executive officer of our advisor, own a controlling interest in Wellstone, LLC.  Also, our advisor manages Wellstone Retirement Communities I.  Therefore, approximately 49% of our loan portfolio as of December 31, 2006 consisted of loans to two related parties.  Although our loan to Wellstone Retirement Communities I was paid off during the first quarter of 2007, the outstanding principal balance of our loans to Wellstone, LLC and its affiliates increased from $62.0 million at December 31, 2006 to $76.1 million at June 30, 2007.  Loans to Wellstone LLC and its affiliates comprised approximately 49.3% of our loan portfolio (including real estate joint venture investments) and 41.4% of our total assets at June 30, 2007.  Total loans to related parties comprised approximately 54.8% of our loan portfolio (including real estate joint venture investments) and 46.0% of our total assets at June 30, 2007.  Our concentration of loans to related parties presents conflicts of interest.

Risk Factors

An investment in our securities involves risks.  You should carefully consider the risks described below before making an investment decision.  You should also refer to the other information contained elsewhere in this prospectus.  Any of the following risks could harm our business, results of operations and financial condition and an investment in our securities.  The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.

An investment in our securities involves a significant degree of risk due to factors such as:

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A large majority of our loan portfolio consists of loans to two organizations and their affiliates, so any failure on their part to make loan payments will have a significantly material negative effect on our financial performance;

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Approximately 54.8% of our loan portfolio (including real estate joint venture investments) and 46.0% of our total assets consists of loans to related parties, which presents conflicts of interest;  

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Many of the properties in which we take a security interest are suited only for a particular purpose, so it may be difficult to sell them if the borrower fails to make payments to us; and

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Some of our borrowers are in the early stages of development and therefore lack an established operating history, which makes it more difficult for us to analyze their creditworthiness.

Over 72% of our revenue in 2006 came from only three borrowers or entities they control, so any failure by them in making payments could create serious cash flow problems for us.  

In 2006, 36% of our revenues came from interest and fees on loans to Wellstone, LLC and its affiliates, 19.2% of our revenues came from interest and fees on loans to Senior Housing Services, Inc. and its affiliates, and 17.3% of our revenues came from interest and fees from a loan to Wellstone Retirement Communities I, LLC.  At December 31, 2006 41% of our loan portfolio (including real estate joint venture investments) consisted of loans to Wellstone, LLC and its affiliates, 21% of our loan portfolio (including real estate joint venture investments) consisted of a loan to Senior Housing Services and its affiliates and 8% of our loan portfolio (including real estate joint venture investments) consisted of a loan to Wellstone Retirement Communities I.  The loan to Wellstone Retirement Communities I was subsequently paid off, but Wellstone LLC and Senior Housing Services remain major borrowers.  As of June 30, 2007, loans to Wellstone, LLC and its affiliates comprised approximately 48% of our total loan portfolio (including real estate joint venture investments) and loans to Senior Housing Services and its affiliates comprised 21% of our total loan portfolio (including real estate joint venture investments).

Any adverse developments for these borrowers that make them unable to make timely payments to us could create serious cash flow problems for us and could keep us from paying interest and principal on our bonds and making dividend payments on our shares of common stock.  Any material default by these borrowers, if coupled with an inability to sell the properties that serve as our collateral for fair value in a timely manner, would threaten our solvency and could possibly force us to declare bankruptcy.  Since these large borrowers comprise a substantial portion of our business, we also face the risk that they will reduce their reliance on us as a funding source before we complete our planned shift back to church loans.  If this happens, we would be forced to find other borrowers to lend money to or find other projects to invest in.  If we could not find alternative investments in a timely manner, our ability to pay interest and dividends on our bonds and stocks could suffer in the interim.

A significant amount of our loan portfolio consists of loans to related parties, which presents conflicts of interest.

As of June 30, 2007 approximately 55% of our loan portfolio (including real estate joint venture investments) consists of loans to related parties.  Most notably, 48% of our loans on such date were to Wellstone, LLC and its affiliates.  Our CEO, Jack Wehmiller, indirectly owns a 18.75% interest in Wellstone, LLC.  Robert Covington, who serves as President/CEO of our advisor, indirectly owns 18.75% of Wellstone LLC.  Cecil A. Brooks and John T. Ottinger, Jr., who served as directors and executive officers of both us and our advisor until recently and who continue to maintain consulting relationships with our advisor, indirectly own an additional 37.5% of Wellstone, LLC.  None of these individuals owns a substantial interest in us or in the advisor.  Because of the foregoing affiliations, we and our advisor face conflicts of interests and could take actions that are beneficial to the related-party borrowers and detrimental to us.

We have experienced a significant deterioration in the lower income for-sale portion of our community housing project loan portfolio, which could lead to significant liquidity issues and losses if the current housing slowdown extends to other segments of our community housing business.  

As of June 30, 2007, approximately 83% of our loan portfolio (including real estate joint venture investments) was secured by community housing projects.  Many segments of the U.S. homebuilding industry are currently experiencing a decrease in demand for new homes and an oversupply of new and existing homes available for sale, primarily due to the unavailability of mortgages.  These factors have caused deterioration in a segment of our community housing project loan portfolio, mainly in for-sale housing for lower income buyers.  As of June 30, 2007, approximately $31.2 million of these loans were considered impaired.  The large majority of this balance represents loans to Wellstone Housing, LLC, a subsidiary of Senior Housing Services, Inc. which is considered a major customer because we derive more than 10% of our revenue from their loans.  Wellstone Housing’s community projects are almost entirely focused on for-sale housing to lower income buyers.  Wellstone LLC, which is a related party of ours, has guaranteed these Wellstone Housing loans because Wellstone LLC’s management was previously involved in managing and/or advising Wellstone Housing on these projects and Wellsone LLC’s board believes it is their responsibility to be involved in the eventual financial disposition of these projects.  Wellstone LLC, who specializes in housing for upper income buyers and is not currently experiencing a downturn in sales, is actively seeking to refinance its own housing projects and believes that the underlying collateral values of its projects are sufficient to accomplish this objective.  If Wellstone LLC is unable to refinance these projects, however, or if the housing downturn extends to upper income housing, we may experience significant liquidity issues and losses.

Our advisor faces conflicts of interest relating to our loans and investments, and such conflicts may not be resolved in our favor, which could adversely affect our investment opportunities and hence our ability to make interest and principal payments on our bonds and dividend payments on our shares of common stock.

We rely on Cornerstone Capital Advisors Inc. to identify suitable loan and investment opportunities.  Cornerstone Capital Advisors was recently formed and until recently was controlled by some members of our management.  Cornerstone Capital Advisors also manages Wellstone Retirement Communities I, LLC, which operated senior housing facilities until recently when the facilities were sold, and Wellstone Investment Fund, LLC, which makes investments in Wellstone LLC projects.  Cornerstone Capital Advisors expects to form, offer interests in, and manage other real estate programs and to make additional real estate investments.  Existing and future real estate programs may involve affiliates of Cornerstone Capital Advisors in the financing of properties that may be suitable for us.  Cornerstone Capital Advisors could direct attractive investment opportunities to other entities.  Such events could result in our making loans and other investments that provide less attractive returns, thus adversely affecting our ability to make interest and principal payments on our bonds and dividend payments on our shares of common stock.  

In addition, we may conduct business with other entities that are managed by Cornerstone Capital Advisors.  In fact, 8% of our loan portfolio at December 31, 2006 consisted of loans to Wellstone Retirement Communities I, LLC, although these loans have since been paid off.  Cornerstone Capital Advisor, as advisor to both us and Wellstone Retirement Communities I, LLC, had dual responsibilities as debtor and creditor with respect to these loans.  Other such inherent conflicts may arise in the future from our dealings with related entities, which conflicts may not be resolved in our favor.